Small Businesses Say JPMorgan Chase Rejected COVID-19 Payroll Relief

Two small businesses in Florida have filed a class action lawsuit against JPMorgan Chase over claims that the company denied payroll relief offered by the CARES Act.

The small businesses behind the JPMorgan Chase payroll relief class action lawsuit is KPA Promotions & Awards Inc. and Above & Beyond Preschool LLC.

They say they applied for financial assistance from the U.S. Small Business Administration’s Paycheck Protection Program through JPMorgan Chase.

However, they claim that their loan applications for the program were severely delayed because the financial institution unlawfully prioritized larger businesses.

They explain that they submitted payroll relief applications soon after the Payback Protection Program opened, but their loan applications were pushed off.

The plaintiffs say this caused financial injury, because it denied them the necessary funds to pay their employees and keep their businesses above water during the coronavirus crisis. They argue that they intended to use the loans to cover not only payment for employees, but to cover rent, operating expenses and other unavoidable business costs.

Allegedly, JPMorgan Chase was aware of the time-sensitive nature of the payroll relief program, and the need to process loans quickly and get funds in the hands of businesses. However, the lender allegedly put its own profits ahead of the needs of businesses by prioritizing large loans. The businesses claim that this practice not only harms borrowers, but violates the instructions set forth by lawmakers.

The companies explain that the federal government created the Paycheck Assistance Program to help businesses cope with the effects of the coronavirus.

The program reportedly provides funding that businesses can access through loans to pay employees during the coronavirus pandemic, even though they may have to close, or if their business has suffered.

Allegedly, the program names banks as the distributors of the program. Lawmakers reportedly gave the banks instruction to grant loans on a “first come, first serve” basis, in the interest of keeping the assistance equitable amongst applicants. However, KPA and Above & Beyond assert that JPMorgan Chase has not complied with these instructions.

The businesses argue that JPMorgan Chase instead prioritizes processing loan applications by larger businesses. The businesses note that JPMorgan Chase receives a commission on each loan, so they make more money on processing larger loans.

The larger size of the business allegedly also signals financial strength in the eyes of the bank, so the bank effectively prioritizes less risky loan applicants, say the businesses.

The JPMorgan Chase payroll relief application class action lawsuit supports this allegation by providing statistics on the loans approved by JP Morgan Chase, noting that large loans were approved more than small loans.

Allegedly, the average loan size recorded by JPMorgan decreased as time wore on, indicating that the bank prioritized larger loans.

According to the businesses, almost all of JPMorgan Chase’s 8,500 commercial and private banking clients received loans through the program, but only around 18,000 of 300,000+ small businesses who applied received the loans, indicating that the bank did not treat different applications for loans equally.

The two Florida businesses also say that this disparity existed not only in what loans were approved, but the whole loan application process provided to an applicant.

Allegedly, small business customers were directed to a buggy, ineffective online portal to submit applications, but private and commercial banking customers had a wildly different experience — as their loans were processed via an employee directly assigned to them, through whom the applicant was provided with “concierge treatment.” These applicants were reportedly never required to wait in virtual lines for loans, or have to wait to access an online portal for a loan application.

Allegedly, this difference in experience was specifically designed to discourage small businesses from applying for a PPP loan, by making the process as inconvenient, inaccessible and as difficult to navigate as possible.

Has your businesses suffered because of the COVID-19 pandemic? Share your experience in the comments below.

KPA Promotions & Awards Inc. and Above & Beyond Preschool LLC are represented by Alex R. Straus, Robert K. Shelquist and Rebecca A. Peterson of Lockridge Grindal Nauen PLLP; Benjamin Galdston of Berger Montague PC; Gregory F. Coleman, William A. Ladnier and Arthur Stock of Greg Coleman Law PC; and by Daniel K. Bryson, Scott C. Harris, and Patrick M. Wallace of Whitfield Bryson LLP.

The JPMorgan Chase Payroll Relief Application Class Action Lawsuit is KPA Promotions & Awards Inc., et al. v. JPMorgan Chase & Co., et al., Case No. 1:20-cv-03910, in the U.S. District Court for the Southern District of New York.

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