Banking groups are asking federal regulators’ clarification on when they’re obligated to pay agent fees to companies that helped small businesses seek pandemic relief loans, a request that comes amid a flurry of recent class actions alleging they withheld payments.
The Treasury Department and the Small Business Administration should clarify that a lender is required to pay only if it has a contractual relationship with a small business loan applicant’s agent, the American Bankers Association and state bankers’ associations said in a letter sent Friday.
“Our members have expressed concerns about the line being blurred between an agent providing a legitimate service to the borrower” to get a loan processed, and agents initiating the relationships “without lender consent” and seeking payment after the fact, the bankers’ groups said.
Banks across the country stand to reap billions in fees from the U.S. government for serving as the conduit to push out federal aid to the nation’s struggling small businesses beginning in April.
Now, Bank of America, Fifth Third Bank, JPMorgan Chase, and many other banks are facing claims they owe 20% of the fees they were paid for issuing Paycheck Protection Program loans.
In many cases, the agents, including accountants, lawyers and consultants, say banks denied them payment because the bank had no preexisting knowledge of the agent until a claim for payment was sent.
Existing PPP guidance doesn’t explicitly state how the agent-borrower-lender fee had to be structured.
The banking groups cited in their letter June 30 congressional testimony by Treasury Secretary Steven Mnuchin, who said the agency would clarify the issue.
--With assistance from Amanda Iacone