Wells Fargo coronavirus application rejection

A class action lawsuit has been filed against Wells Fargo’s response to the CARES Act, alleging the financial giant prioritizes corporate greed over helping small businesses in need.

Allegedly, Wells Fargo unlawfully prioritizes giving loans to those who already have a business checking account with the bank.

The Wells Fargo COVID-19 loans class action lawsuit was filed by Edward L. Scherer, the owner of a small business located in Texas. He says that he is a sole proprietor who qualifies for a Paycheck Protection Program (PPP) loan under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

However, Scherer claims that although he meets the requirements for a loan, he was unable to get one from Wells Fargo because he does not have a business checking account with the bank.

Providing background for his situation, the plaintiff explains that Congress and the President of the United States passed the CARES Act to help businesses deal with the economic hardships associated with the coronavirus pandemic.

As many businesses were forced to close, or experienced a steep drop in profits, the CARES Act was allegedly an attempt to help these businesses stay above water.

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Part of the Act was a $2 trillion stimulus package involving loans to small businesses, says Scherer. According to the plaintiff, the Act expands eligibility criteria for loans available through the Small Business Administration.

These loans are called the Paycheck Protection Program, and are designed to help small businesses cover eight weeks of business and payroll expenses. According to Scherer, many of these loans are intended to be forgiven.

The federal government gave lenders the power to exclusively make the funds available, and one of these lenders is Wells Fargo. However, Scherer says the bank is using the program by not helping small businesses as intended, but to boost its bottom line.

The Wells Fargo loan class action lawsuit states that to do this, Wells Fargo makes a practice of only accepting PPP loan applications from small businesses who have a business checking account with the bank, as of Feb. 15, 2020.

Scherer states that in many cases, these businesses who have checking accounts with the bank also have preexisting commercial loans with the bank.

Uncle Sam on money concept for Wells Fargo BankingAccording to the PPP discriminatory practices class action lawsuit, Wells Fargo knew or should have known that denying loans to small businesses because they did not have previous accounts with the bank is unlawful.

Allegedly, banks such as Bank of America have already received criticism from lawmakers for violating the law by implementing their own criteria for PPP loans.

U.S. Senator Marco Rubio reportedly challenged Bank of America’s similar discriminatory practices via Twitter, saying “The requirement that a #SmallBusiness not just have a business account but also a loan or credit card is NOT in the law we wrote & passed or in the regulations. This is a Bank of America requirement not a govt one. They should drop it. This money is 100% guaranteed by fed govt.”

A more formal criticism was also launched by Senator Ben Cardin, who admonished these practices by saying “Creating artificial barriers that block businesses from much-needed capital is redlining by another name.”

Scherer points to the SBA’s requirements for loan eligibility to show that he is indeed eligible for a PPP loan. The Wells Fargo CARES Act class action lawsuit notes the requirements for the PPP loans as put forward by the SBA include that the business have fewer than 500 employees, a sole proprietorship, or be a tax-exempt nonprofit, and were in operation on Feb. 15, 2020.

Allegedly, nothing in the CARES Act eligibility instructions allows banks to differentiate between eligible applicants on the basis of preexisting business with the bank. He also states that the Act does not permit lenders to make their own criteria for eligibility. Allegedly, if these actions had been permissible under the CARES Act, Congress would have made that clear.

Scherer says that Wells Fargo knowingly violated the law by putting its own profits ahead of helping small businesses, and ahead of compliance with federal law.

The plaintigff is represented by Salar Ali Ahmed of Ali S. Ahmed PC.

The Wells Fargo CARES Act Class Action Lawsuit is Edward E. Scherer v. Wells Fargo Bank NA, Case No. 4:20-cv-01295, in the U.S. District Court for the Southern District of Texas, Houston Division.

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  • MOHAMMAD JALALIAN October 27, 2020

    add me please.

  • LANITASHA HINTON May 27, 2020

    Add me please

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