Wells Fargo is one of four banks sued in federal court over the Paycheck Protection Program. File Photo by Larry W. Smith/UPI
April 20 (UPI) -- A Los Angeles consumer firm filed separate class-action lawsuits against four banks connected with the Paycheck Protection Program, arguing its small business owners were passed over in the loan process for larger companies.
Stalwart Law Group argued in the lawsuits, filled in U.S. District Court in Los Angeles on Sunday, that its clients were denied loans because of a "rigged" process that penalized small businesses. Bank of America, JPMorgan, US Bank and Wells Fargo were named singularly in separate suits.
Congress dedicated $349 billion in emergency funds to small businesses to help keep employees on payrolls in a program that began April 3. The fund, though, ran out of money Monday, leaving many small businesses without a chance to apply for stimulus money.
The law firm said in its class-action suits that the banks shuffled the loans to accommodate bigger companies instead of on a first-come, first-served basis, leaving 90 percent of small businesses that applied for the loans empty-handed.
The lawsuit said that this application sleight of hand was done unbeknownst to the small business owners while the banks collected nearly $6 billion in fees for the reshuffling.
"Small businesses are the backbone of the American economy and these businesses and their employees have been hit hard by the COVID-19 pandemic," Stalwart lead plaintiff attorney Dylan Ruga said in a statement. "Once again, we see big banks prioritize corporate greed at the expense of its small business customers."
Amid the lawsuits, there has also been backlash against large chains taking up a large chunk of funds. Shake Shack, a large restaurant chain, among more than a dozen companies with hundreds of millions in annual revenues, said Sunday night it will give a $10 million PPP loan back to the government.
Shake Shack CEO Randy Garutti and founder Danny Meyer said in a statement on LinkedIn Sunday night the loan was open to businesses with no more than 500 employees per location and the burger chain has roughly 45 employees per restaurant.
They added that they thought applying for the funding was their "best chance" to avoid layoffs and furloughs of employees, but they didn't realize the funds would be used up so fast. And since they were able to get separate additional capital last Friday "through an equity transition in the public markets," they've decided to return the loan so restaurants "who need it most can get it now."
Congress is at a stalemate in deciding whether to refill the program, with Republicans wanting to put $250 billion more into it, while Democrats want funds for hospitals and local governments, as well.
