Last week, the US District Court for the Northern District of Florida ruled in favor of SBA lenders over the treatment of “agent fees” under the Paycheck Protection Program (PPP). The decision to dismiss the alleged class action lawsuit is the first decision on the matter after a number of similar lawsuits have been filed against other SBA lenders in response to the implementation of the PPP in recent months. In its decision to dismiss the lawsuit, the court stated succinctly:
The key first impression issue in this case is whether the plaintiff and others like them are eligible for some of the fees the federal government pays to lenders like the defendants who provide hundreds of billions of dollars in “loans” The Paycheck Protection Program (PPP) were hired. The short answer is “no”.
This lawsuit, Sport & Wheat CPA PA v Servisfirst Bank Inc., et al., No. 3: 20-CV-05425 (ND Fla. 2020), was filed by an accounting firm claiming it was entitled to “agent fees” for helping small businesses apply for PPP loans. The plaintiff did not claim that he or the borrowers had any arrangements with the SBA lenders to pay the plaintiff’s brokerage fees. Indeed, as the court found, “it is common ground that neither the plaintiff nor the borrower. . . have agreements with Defendants regarding payment for the work Plaintiff did in assisting borrowers in obtaining PPP loans by Defendants. Rather, the plaintiff’s main argument was based on the assumption that the Coronavirus Aid, Relief, and Economic Security (CARES) Act and its implementing rules require lenders to pay borrowers’ brokerage fees. The court found “no support in the clear text of the law or regulation” to support the plaintiff’s allegation.
In addition to building the PPP on the existing SBA credit program according to Section 7 (a), the CARES Act prescribes that the SBA administrator “will reimburse a lender Eligible to Grant a Covered Loan ”and sets the fees the lender has to pay for the loan. (Emphasis added). The law also provided that “[a]n Agent who assists an eligible beneficiary in preparing an application for a covered loan may not impose an excessive fee that of the established limits [SBA] Administrator. “(Emphasis added). In analyzing the CARES Act, the court found that” the different language Congress uses in ordering lenders to pay (“reimbursed”) and the limit on brokerage fees (“may not collect “) indicates the intention not to oblige lenders to pay agents fees.” Similarly, “the legal language doesn’t even speak who pays the broker’s fees; it only provides that the agent cannot charge anyone a fee that exceeds the amount set by the SBA administrator. the can be paid to agents, but the SBA has not otherwise ordered such payments to agents without a corresponding agreement. Since the court found nothing in the CARES Act or the SBA rules implementing the PPP to support the plaintiff’s allegation, the court looked to pre-existing SBA Section 7 (a) provisions for guidance and finally decided that these pre-existing rules were clear as they were the execution of an agreement between. required a lender and an agent before an agent can get any compensation.
This decision is a token of relief for SBA lenders across the country facing a wide variety of class action lawsuits.