Citibank, JPMorgan Chase and other banks won’t have to face a federal lawsuit in New York brought by accounting firms who said they were stiffed out of fees for helping arrange pandemic relief loans to small businesses.
The U.S. District Court for the Southern District of New York Monday dismissed class actions alleging that the banks were required to share the government fees they received for processing Paycheck Protection Program loans with accountants and other loan agents that steered applicants their way.
“The Court holds that, absent an agreement between agent and lender, defendant banks are not required to pay agent fees under the text of the CARES Act or its implementing regulations,” Judge Jed Rakoff said in an order.
The accounting firms and a retired accountant involved in the cases argued that the CARES Act and longstanding Small Business Administration rules entitled them to receive up to 1 percent of the fees the government paid lenders for processing the PPP loans.
During arguments last month, Rakoff said he was skeptical of those claims because Congress, in creating the PPP as an SBA program, only mentioned fees to set a cap on them. He also noted there were no explicit fee-sharing agreements between lenders and third parties that helped arrange the pandemic relief loans.
The accounting firms said the banks refused to enter into agent fee arrangements and prevented borrowers from sharing information about who helped them prepare the application.
Monday’s ruling impacts six complaints that had been consolidated for pretrial purposes. The other bank defendants in the case are Signature Bank and MUFG Union Bank.
The case is Quinn v. JPMorgan Chase Bank, N.A., S.D.N.Y., No. 1:20-cv-04100, 9/21/20.