Small business owners are suing several major banks, including Bank of America, JPMorgan Chase, U.S. Bank, and Wells Fargo, accusing the financial institutions of unfairly prioritizing larger loan applications under the Paycheck Protection Program (PPP). The plaintiffs allege that the banks manipulated the loan approval process to benefit high-dollar applicants, rather than processing applications on a first-come, first-served basis as intended by the government-backed initiative.
The lawsuits, filed on Sunday in the U.S. District Court for the Central District of California, claim that the banks concealed their actions of “reshuffling” applications to prioritize those that would generate more revenue for them. The plaintiffs argue that had the banks been transparent, they would have been able to submit their applications to other lenders processing loans more equitably.
The lawsuits cite data from the Small Business Administration (SBA) that suggests banks focused on processing larger loans first, leaving smaller businesses—those seeking loans of $150,000 or less—at the back of the line as the program neared its expiration. However, SBA data only offers limited visibility into specific loan details, making it difficult to determine exactly how many loans each bank processed on any given day.
In response to the allegations, JPMorgan declined to comment on the lawsuits but defended its actions. The bank pointed to its claim that it funded more than twice as many loans for small businesses compared to larger clients. JPMorgan’s statement emphasized that different departments within the bank handled loans for different customer segments, and the intent was to serve as many clients as possible.
Similarly, U.S. Bank rejected the claims, stating that the lawsuit is without merit. The bank argued that SBA data does not reflect its practices and reiterated its commitment to serving small businesses, adding that it would process loans quickly if additional funding became available.
Wells Fargo, which declined to comment on the litigation, stated that it was “working as quickly as possible” to assist small business customers in accessing PPP funds.
The Paycheck Protection Program, which had $349 billion set aside for loans, exhausted its funds last week, prompting Congress to consider additional relief measures. According to a recent survey from the National Federation of Independent Business, 80% of applicants are still awaiting financial assistance.
Meanwhile, a federal judge recently defended Bank of America’s controversial decision to limit the pool of eligible small businesses for PPP loans. The businesses that sued the bank have indicated plans to appeal the ruling.
