A Los Angeles law firm Monday sued nearly 5,000 banks and lenders in an effort to recover $3.85 billion allegedly collected unfairly by financial institutions as administrative fees during the first round of payment protection funding for small businesses.
According to the lawsuit, filed in Los Angeles federal court by the firm of Geragos & Geragos, thousands of financial institutions have served as go-betweens for the government and small businesses seeking loans under the coronavirus relief bill.
The complaint, which alleges unjust enrichment and unfair business practices, asks a federal court judge to rule that if a borrower was assisted by a financial services agent, that loan processor is entitled to part of the processing fee.
According to the lawsuit, the U.S. Treasury Department specified that agent fees "will be paid out of lender fees. The lender will pay the agent. Agents may not collect any fees from the applicant."
Full coverage of the COVID-19 outbreak and how it impacts you
"Defendants did not comply with the SBA or Treasury Regulations in distributing PPP (Paycheck Protection Program) funds," the suit states. "Instead, defendants either retained all of the agent fees or stated that they would only pay to the agent 50% of the required fees.
"As a result of the conduct of defendants, plaintiffs suffered financial harm, wrongfully lost the opportunity to collect compensation during unprecedented economic times and generally lost economic opportunities to conduct business due to decreased operating capital."
The firm is seeking class action status for the suit. Among the plaintiffs named in the court papers are Citibank, Wells Fargo, Chase, Live Oak Banking Co., U.S. Bank and Paypal Holdings Inc. The suit was filed on behalf of the American Video Duplicating consulting firm based in Valley Village, the Santa Ana law firm of Tush Law and the Torrance-based tax firm Cal State Financial.