LOS ANGELES - Four class-action lawsuits were filed against the nation's biggest banks on behalf of small business owners in California who did not receive loans from the Paycheck Protection Program, PPP.
In response to the COVID-19 pandemic, Congress passed the CARES Act, which allocated $349 billion emergency funds for the small business loan program.
The program was launched April 3 to provide loans up to two and a half times of a business owners' monthly payroll. The loan program ran out of funds on April 16.
The PPP program was intended to provide loans up to two and a half times the total of a business owner's monthly payroll but ran out of funds Thursday, leaving most of the small business applicants empty-handed, according to the plaintiffs.
Consumer attorneys with Stalwart Law Group filed class-action lawsuits against JP Morgan Chase, Bank of America, Wells Fargo and US Bank on Sunday. The lawsuit alleges the banks "rigged" the loan process, and received nearly $6 billion in fees while hundreds of thousands of loan applicants did not receive any help.
The White House and Congress on Monday are trying to fashion another bailout package aimed at helping to mitigate the pandemic's economic and health consequences.
The new package would amount to roughly $470 billion in new spending, including $370 billion directed to small businesses. President Donald Trump said he hoped for a Senate vote on Tuesday.
"These loan applications should have been processed on a first-come, first-served basis. These banks reshuffled the applications and prioritized those that made the banks more money. We want to number one, hold the banks accountable for what they've done here.
These are the same banks that in 2008 were bailed out," said Dylan Ruga, one of the attorneys who filed the lawsuits.
One of the plaintiffs, Lou Rabon, is the CEO of Cyber Defense Group and said his business is struggling from the pandemic.
"We are suffering just like everyone else based on the diminished business that's being transacted across the country," said Rabon.
Rabon said he was timely with his application.
"It's important for small business owners such as myself to be represented when you've given all your business to a bank, a large commercial bank that fights for your business, and they made promises and at the time when a small business like mine needs the bank, they weren't there for me," said Rabon.
Jackie Keller, who runs NutriFit in West LA, a small business focused on delivering healthy customized meals, also applied for PPP, but got denied. She said her company is doing fine, but she wanted to be able to fund more workers.
"We're not desperate but we'd like to be able to do more with it for people who need work and it's a little discouraging," said Keller.
Nadine Weiss, who owns Complete Demolition, was also denied. Her company is a commercial subcontractor conducting soft demolition in office, medical and retail spaces.
"We're lucky we're an essential business but the fact of the matter is most people are closed and most people are really shutting down non-essential construction. Our business has gone down about 85%," said Weiss.
Weiss said she applied for PPP to help fund workers at this time who aren't working.
"Really I was only going to use PPP to give them [workers] salary that they don't get otherwise. It's really bothersome to me that I know a number of companies who have received the funds and they're the ones who already have lines of credit, and are already getting loans from banks," said Weiss.
Wells Fargo issued a statement regarding the lawsuit:
"We decline to comment on the lawsuit. Wells Fargo is working as quickly as possible to assist small business customers with the Paycheck Protection Program (PPP) in compliance with the regulations and guidance provided by U.S. Treasury and the SBA. We have mobilized thousands of employees and launched new technology to better assist customers seeking assistance via the Paycheck Protection Program."
US Bank issued the following statement:
"We are aware of the class-action lawsuit filed and we plan to vigorously defend ourselves as it is without merit. The cumulative industry data provided by the SBA is not reflective of U.S. Bank's practices or results. We continue to serve our small business customers and are prepared to process loans as quickly as possible should additional funds become available."
A Bank of America spokesperson said "we deny the allegations," and JP Morgan Chase & Co. is not commenting on the lawsuit.
The SBA officially ran out of money for the PPP last week. Negotiations have been ongoing since then to inject more money into the program.
CNS contributed to this story.