LOS ANGELES - Two California companies have filed a class action lawsuit accusing JPMorgan Chase bank of favoring large companies over smaller ones for COVAD-19 loans.
“Chase has once again, prioritized corporate greed at the expense of its small business owners,” said the lawsuit, filed by Cyber Defense Group, LLC and In the Mix Promotions, Inc.
Rules governing the federal Paycheck Protection Program (PPP) require applications to be processed on a first-come, first serve basis, according to the lawsuit, filed April 19. Chase gave top priority to larger loans so that it could receive larger processing fees, the suit alleges.
Chase could receive origination fees of 5% on loans up to $350,000, 3% on loans between $350,000 and $2 million and 1% on loans between $2 million and $10 million, the suit says.
“That means that Chase could make up to $17,500 for processing loans up to $350,000; up to $60,000 for processing loans between $350,000 and $2 million; and up to $100,000 for processing loans between $2 million and $10 million,” the complaint says.
Erich Timmerman, a JPMorgan Chase spokesman, declined to comment specifically about the lawsuit but said nearly 70% of the applications approved and funded were from businesses with less than $20 million in annual revenue.
Half of loans the loans funded were for less than $140,000, and more than 60% went to clients with fewer than 25 employees, Timmerman added.
The first $349 billion for the PPP loan program has already been depleted. On April 24, President Trump signed legislation that includes an additional $310 billion. The U.S. Small Administration will start accepting applications again on Monday (today), according to its website.
Businesses do not have to repay the loans if they keep employees on the payroll for eight weeks and use the loan money for payroll, rent, mortgage interest, or utilities, according to the SBA.
Cyber Defense Group, LLC v. JPMorgan Chase & Co., U.S. District Court, Central District of California 2:20 CV-0359