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CPA Group Backs Accountants in PPP Legal Fight Against Banks

Aug. 19, 2020, 2:00 PM

CPA firms that helped small businesses secure billions in emergency relief this spring deserve to be compensated for their services, according to accounting’s largest professional organization.

It isn’t too late for banks to pay accountants, lawyers, and other consultants who acted as agents for those small businesses, said Erik Asgeirsson, the point person for the American Institute of CPAs’ response to the Paycheck Protection Program—the government-funded loans that helped small businesses cope with pandemic-triggered shutdowns.

“We just encourage the banks to work in a good faith manner to support the firms that played a critical role in helping their small business clients fill out those PPP applications,” said Asgeirsson, CEO and president of the AICPA’s business and technology arm CPA.com.

“They don’t need to make this so complicated,” he said.

His comments come after roughly 30 small CPA firms from across the country have sued dozens of banks over fees the accountants and others say they are owed based on their reading of Small Business Administration guidance for the program.

The class actions have targeted not just the credit union around the corner but some of the largest companies in the world, including Bank of America, Wells Fargo, Citigroup, and JPMorgan Chase. Bank of America and Chase both declined to comment, and the others couldn’t be reached for comment.

A federal judge Monday tossed a case filed by Sport & Wheat CPA PA—a small accounting firm near Pensacola, Fla.—because the firm didn’t have an agreement with the lenders named in the case and didn’t follow pre-existing SBA requirements for agents. Banks are hopeful that it’s a sign of how other judges will view the agents’ arguments. However, the judge agreed to allow the firm to refile its complaint.

In the meantime, a hearing is set for Friday in several cases filed against Chase—the largest PPP lender in the country—in New York’s Southern District.

The banks are seeking to dismiss the suits and have also asked for clarification on the regulatory guidance for how to determine who is a legitimate agent and when that agent relationship began.
Guidance from Treasury and the SBA released last week didn’t offer the clarity they had hoped for.

Treasury Sidesteps Dispute

Treasury and the SBA updated its frequently asked questions stating that disputes over the agent fees wouldn’t impact the government’s guarantee to cover the PPP loans or the fees that banks stand to earn for each loan. The guidance also referred back to previously issued rules, which say that agents can stand to receive nor more than 1 percent of the fees going to banks.

In short, the government won’t step into the fee dispute, leaving it to the banks and agents to sort it out on their own, said Chris Cole, senior regulatory counsel for the Independent Community Bankers of America, the industry voice for small, community lenders.

He contends banks will prevail because common law requires there to be an agreement between the bank and the agent before the agent provided any work for the borrower.

“Further clarification is needed and until that’s provided, both banks and agents will continue to raise questions on this issue,” said Ian McKendry, a spokesman for the American Bankers Association.

The AICPA, which coordinated with the banks and payroll processors during the frenzied application period, issued guidance in April that urged accountants to get a written agreement that the lender would pay the agent fee before helping the client. And if that failed, to help the client anyway.

The guidance was intended to encourage the banks and accountants to work together, not to be an excuse for the banks to avoid paying the agents, Asgeirsson said.

“We should be proud,” he said. “They all put tremendous resources forward to support gathering this data, submitting the applications, and getting funding. It wasn’t just the banks, it wasn’t just the firms, it wasn’t just the payroll companies.”

To contact the reporter on this story: Amanda Iacone in Washington at aiacone@bloombergtax.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com

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