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You are here: Home / Business Advice / Small Businesses Suing Chase, Other Big Banks For Prioritizing Large PPP Loans To Make More Profit

Small Businesses Suing Chase, Other Big Banks For Prioritizing Large PPP Loans To Make More Profit

April 20, 2020 //  by Allie//  2 Comments

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In a process that has outraged Americans across the nation, JPMorgan, Chase, Wells Fargo, Bank of America, Bancorps, and other big banks are accused of frontloading the PPP loan queue with businesses seeking higher loans. This meant that millions of real small businesses didn’t get the money that they desperately need to pay their employees, rent, and other operating expenses. Keep reading to find out what the lawsuit alleges.

Related: BIG Companies Got PPP Loans Meant For REAL Small Businesses And It’s A Slap In The Face

Lawsuit Alleges Chase, Wells Fargo, Other Big Banks Shuffled PPP Loan Applications

Two companies in California have now filed a class-action lawsuit against JPMorgan Chase bank alleging unfair business practices.

The legal action is just one in a series of lawsuits taken against big banks like Wells Fargo, Bank of America, and Bancorps.

The loans are part of the United States government’s Paycheck Protection Program which was meant to help bridge the gap for small businesses so they would survive the coronavirus shut down.

The lawsuit which was filed on behalf of a cybersecurity firm and event planning company, accuses Chase Bank of prioritizing borrowers who were seeking larger loan amounts rather than processing the taxpayer-backed loan applications on a first-come, first-serve basis as advertised.

ruths chris steak house potbelly taco cabana ppp loans

Big Companies Took PPP Loans Meant For Real Small Businesses

Ruth’s Chris Steak House, which had annual sales in 2019 of $761 million received $20 million in taxpayer-backed PPP loans.

Potbelly got a $10 million taxpayer-backed forgivable loan from the program on April 10 as you can see in this regulatory filing. Potbelly had annual sales of $410 million last year.

It is worth noting that in the very same SEC filing that revealed its PPP loan, Potbelly revealed they had promoted Steven W. Cirulis to the roles of chief financial officer and chief strategy officer. The new role pays him a $425,000 yearly salary, temporarily reduced by 25% due to the coronavirus pandemic. Additionally, Cirulis was awarded a $100,000 sign-on bonus and is eligible for a year-end bonus worth up to 60% of his base salary.

Taco Cabana, owned by San Antonio-based Fiesta Restaurant Group LLC, received a $10 million in taxpayer-backed PPP loan which you can see in this SEC filing.

Facing public backlash, Shake Shack, who was recently granted a $10 million PPP loan, is returning the entire loan amount and reducing the executive team pay for an definite period as you can read (page 6) in this SEC filing. The announcement was made Sunday in an open letter by CEO Randy Garutti and Chairman/Founder Danny Meyer.

Other big companies like airlines, big hotels, large restaurants, construction companies, and investment firms are all accused of getting PPP loans meant for legitimate small businesses.

The Orlando Sentinel reported, “Hersha Hospitality Trust disclosed in investor filings that it has applied for taxpayer-backed loans for each of its 48 hotels.

“[Hersha Hospitality Trust] who owns the Ritz-Carlton Coconut Grove in Miami has applied for as many as 48 taxpayer-backed loans under an emergency program meant to help the nation’s smallest businesses hang on to their employees through the coronavirus pandemic.

The company also assured investors before they applied for the loans that it has enough money under a private line of credit with Citbank and Wells Fargo to survive into 2021, even under a “severely disrupted scenario.

A Maryland hotel company that did more than $1.5 billion in revenue last year has applied for more than 50 loans — and been approved for about 10 so far.”

ritz carlton miami ppp loans
Ritz-Carlton Coconut Grove in Miami

Here’s How Much Big Banks Like Chase Will Make On PPP Loans

Banks will be compensated a percentage of each approved loan amount as a processing fee.

The move means that Chase would collect larger processing fees — $6 BILLION in total — by front-loading the queue with businesses seeking higher loans, according to the lawsuit.

The lawsuit alleges that businesses seeking lower loans were deprioritized, so many small business applicants didn’t get the aid they were entitled to.

Here’s how much banks will receive for each loan they process, based on loan amount, according to the Small Business Administration:

How will PPP lenders be compensated?

Processing fees will be based on the balance of the financing outstanding at the time of final disbursement. SBA will pay lenders fees for processing PPP loans in the following amounts:

  • Five (5) percent for loans of not more than $350,000;
  • Three (3) percent for loans of more than $350,000 and less than $2,000,000; and
  • One (1) percent for loans of at least $2,000,000.

The loans are part of the $349 billion emergency Small Business Administration PPP loan program meant to help small businesses keep their doors open and Americans employed during the COVID-19 shut down.

The taxpayer-backed PPP loans are 100% forgivable if certain conditions are met, such as keeping employees on staff.

Can PPP loans be sold in the secondary market?

PPP loans can be sold in the secondary market. The SBA will not collect any fee for any guarantee sold into the secondary market.

The Paycheck Protection Program opened April 3 and was funds were exhausted in less than two weeks on April 16.

America’s Main Street Small Businesses Need SBA PPP Loans To Survive The Shut Down

small-businesses-coronavirus-locked-out-downtown-mckinney-landlord-mayor-george-fuller-laura-tye-3
Laura Tye was illegally locked out of her downtown McKinney, TX business a judge ruled.

Laura Tye, owner of Laura Tye Photography, is one of many American Main Street small businesses who applied for loans under the Small Business Administration’s Economic Injury Disaster Loan and Paycheck Protection Program.

Tye applied for a PPP loan through one of these big banks, but found out online last Thursday that the fund was depleted.

Tye owns Laura Tye Photography located in Downtown McKinney, Texas. A judge recently ruled Tye was illegally locked out by her landlord.

Her infant photography studio was deemed non-essential and she hasn’t had any revenue since the coronavirus shutdown occurred. A loan from the SBA would’ve helped small businesses like hers make ends meet until they could reopen.

Chase Reshuffled PPP Applications, Prioritized Bigger Loans Lawsuit Alleges

“Chase concealed from the public that it was reshuffling the PPP applications it received and prioritizing the applications that would make the bank the most money,” the lawsuit said.

Chase updated a statement to small business customers on its website on April 19, the day the lawsuit in California was filed. 

The statement from Chase Business Banking CEO Jennifer Roberts says, “I also understand that many of you are frustrated that you applied early in the process, but that SBA funding ran out before you could receive a loan. We want you to know that we are working to make sure as many of our Business Banking customers receive loans as possible. Our Chase Business Banking initial form went live on April 3rd. In the first hour more than 75,000 of our Business Banking clients completed our initial form – a number that grew significantly in the following days.”

chase-wells-fargo-big-banks-getting-sued-ppp-loans-small-business

Lawsuit Alleges Chase, Wells Fargo, Other Big Banks Shuffled PPP Loan Applications

Chase, Wells Fargo, Bank of America, Bancorp, and other big banks are accused of prioritizing bigger loan amounts according to lawsuits filed on behalf of America’s small businesses.

Here’s More on Metroplex Social:

  • BIG Companies Got PPP Loans Meant For REAL Small Businesses And It’s A Slap In The Face
  • Waze Now Lets You Find 30,000 Emergency Food Pantries Near You
  • 135 Emergency Foods You Can Get From The Grocery Store
  • Dallas County Is Now Requiring Everyone To Cover Their Face In Public
  • Texas Is Reopening Their Economy: Here’s What We Know So Far

What do you think? Tell us in the comments below.

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Category: Business Advice, CARES Act and PPP, Featured, Local News, Metroplex Life, Restaurants and BarsTag: bank of america, cares act, chase, dfw, potbelly, ppp, ruths chris steak house, sba, shake shack, small business, small business administration, taco cabana, wells fargo

About Allie

Hi, I’m Allie! A pioneer in viral storytelling, I've been helping local, national, and global brands since 2008. I’ve worked with hundreds of local business owners, PR professionals, and marketers. I've been featured on CBS, the Dallas Morning News, and various online publications. Born in Dallas, raised in the DFW metroplex.. I'm not afraid to speak my mind. You can email me at [email protected]

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Comments

  1. Jody Arias

    April 21, 2020 at 1:50 pm

    I am glad to hear I am not the ONLY Small Business that did not make it thru the “corrupt” Chase Application process!
    I submitted my application the very first day and never heard back???

    Then I find out how Chase funded all these big restaurant chains like Ruth Cris???

    Didnt Pres Trump initiate this finding to help Small Businesses stay alive?????

    How corrupt that system was with the big banks???

    How can I be added to the the lawsuit against Chase Bank?

    Reply
  2. Jolie Chu

    April 21, 2020 at 2:58 pm

    I finished applying PPP loan through Bank Of America as early as 10AM April the 3rd. They replied me on April the 5th that they received my application, tell me to wait to upload document and wait. April the 7th at 4:41 AM they posted the link to sign in to upload documents( 940 for 2019, 941 for this year ect, gross revenue for 2019 ect..) at 9AM April the 7th, I uploaded all documents. April the 8th, they changed the required documents, I uploaded more documents around 9 AM April the 8th. Then keep waiting as they instruct. Yesterday April 20th at 3: 24 PM, that told me to wait for the SBA to reopen the program so they can send my application to SBA. Because my application just for less then 60K, so it’s still in Bank of America’s closet, I do not know when SBA can see my application? While My staffs have no food on their tables, all big companies that have connection with Bank Of America received millions dollars, hundred thousand dollars ect..
    For 18 days, they still haven’t sent my application to SBA so far. I’m living in Houston Texas, I really want to join joint the lawsuit against Bank Of America

    Reply

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