Lender relief from agent fee disputes

Congress weighed in with another sign of relief for Paycheck Protection Program (PPP) lenders involved in legal battles over agent fee disputes by clarifying that none of these fees are owed. by lenders in the absence of a contract. The law on economic aid for small businesses, non-profit organizations and hard-hit sites (law on economic aid), enacted on December 27, 2020, now clarifies that, retroactively to March 27, 2020, a PPP ” Lender will only be responsible for paying fees to an agent for services for which the lender contracts directly with the agent.

With the enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, agent fee lawsuits quickly became the fastest growing category of PPP litigation in US federal courts. and were about to be consolidated in multidistrict litigation.

PPP agents, such as accountants, who helped a lender create and prepare a PPP loan application, have taken legal action claiming that lenders are illegally withholding fees owed to them for assisting with the application process. Many agents did not have a written agreement with lenders regarding compensation, and many banks took the position that no compensation is due without a written agreement. Agents, however, argued that the CARES Act and the Small Business Administration (SBA) 7 (a) Loan Program entitled them to fees even without a written agreement. Officers specifically reported the SBA provisional final rule, which establishes the maximum commission an agent can collect from a lender, and the PPP information sheet for lenders (PPP ISL), which provides, in part, that “[a]agent fees will be paid out of lender fees.

The courts have always ruled in favor of lenders on this issue. For example, in A m. Video duplication inc., No. 20-03815 (CD Cal. Nov. 16, 2020), a California federal district court ruled that “the CARES Act does not create a right or private right of action to collect agent fees.” See also Sport & Wheat, CPA, PA, n ° 20-05425 (ND Fla. August 17, 2020) (on first important decision in an agent fee litigation, in which a Florida federal district court ruled that the CARES Act and its regulations do not require lenders to pay a portion of the loan processing fees they receive from SBA to agents who have helped borrowers obtain PPP loans); Sanchez, PC v. Bank of S. Tex., n ° 20-00139 (SD Tex. 14 Oct. 2020); and Johnson, n ° 20-4100 2020 (SDNY September 21, 2020).

The Economic Assistance Act specifically amended section 7 (a) (36) (P) of the Small Business Act (15 USC 636 (a) (36) (P)) to provide: an agent for services for which the lender contracts directly with the agent.

This development, which echoes the consensus among federal district courts, should rule out or severely hamper pending agent fee claims against PPP lenders under federal law.

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