JPMorgan Chase, Citibank, U.S. Bank, and Wells Fargo Accused of Prioritizing Small Business Loans for Wealthiest Clients, to the Detriment of Small Business Owners

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (commonly referred to as the CARES Act) – a $2 trillion emergency spending bill designed to provide much-needed economic relief to individuals and businesses suffering as a result of the coronavirus pandemic – was signed into law.  Among the Act’s key provisions was the Paycheck Protection Program, pursuant to which $349 billion were allocated to the Small Business Administration to provide forgivable loans to small businesses for payroll, rent, mortgage payments, and other expenses.

By April 16, 2020, the small business loan program was out of money and no longer processing additional loan applications.  At the same time, almost 80% of the small business loan applicants were still awaiting an answer, according to the National Federation of Independent Business.

According to the New York Times and others, countless qualified small businesses were unable to participate in the loan program because major banks – such as JPMorgan Chase, Citibank, U.S. Bank, and Wells Fargo – unfairly prioritized processing their wealthiest clients’ loan applications before turning to other applicants.  At Chase, for example, allegedly virtually all private and commercial banking clients who applied for small business loans were successful, while fewer than 7% of retail banking customers were able to obtain loans.  The New York Times’ reporting also describes the two-tiered systems at Citi and JPMorgan used to prioritize wealthy commercial and private banking clients over smaller business customers.

Such allegations are contrary to the banks’ representations regarding application processing, as well as to the CARES Act’s requirement that loans be processed on a first-come, first-served basis.  It is suspected that the banks were motivated by maximizing their loan origination fees – which are tiered based on the loan amount, per the Treasury Department – rather than compliance with the law.

Finkelstein, Blankinship, Frei-Pearson & Garber, LLP is currently investigating JPMorgan Chase, Citibank, U.S. Bank, Wells Fargo, and other banks for potentially engaging in deceptive advertising, contractual interference, and unfair business practices.

Attorneys at Finkelstein, Blankinship, Frei-Pearson & Garber, LLP have successfully recovered tens of millions of dollars on behalf of consumers.  If you or someone you know was unable to obtain a small business loan because your bank prioritized wealthy loan applicants ahead of typical small business owners, please contact us to discuss your legal options.