Class Action Alleges Prestamos CDFI Never Gave Borrowers Approved Paycheck Protection Program Funds

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A proposed class action alleges Prestamos CDFI, LLC has unlawfully failed to distribute Paycheck Protection Program (PPP) loans to SBA-approved small businesses and sole proprietors amid the COVID-19 pandemic. 

The 31-page complaint, filed on October 1 in Pennsylvania, claims that although Prestamos, a community development financial institution, has processed hundreds of thousands of PPP loans so far in 2021—vastly more than it processed in 2020—and reaped billions in fees, the lender has “flagrant[ly] disregard[ed]” its contractual obligations and failed to actually fund borrowers’ U.S. Small Business Association-approved loans. 

“Indeed, Plaintiffs and thousands of others each timely applied for PPP loans with Prestamos, had their loans approved by the SBA and assigned PPP loan numbers, and yet never received their PPP loan funds,” the suit alleges. 

At the onset of the COVID-19 pandemic, Congress passed the Coronavirus Aid, Relief and Economic Security Act, which established the Paycheck Protection Program to provide hundreds of billions in potentially forgivable, SBA-guaranteed loans to small businesses and sole proprietors in a quick and efficient manner. In exchange for processing the loans, participating lenders were entitled to receive fees payable by the SBA, the suit says. The loans were intended to provide up to eight weeks of payroll costs, including benefits, and could be used to pay interest on mortgages, rent, and utilities. 

The case states that Prestamos processed in 2020 935 PPP loans and reportedly pulled in $1.3 million in fees. After the SBA substantially increased the fees lenders would receive for processing PPP loans made in 2021, Prestamos, the filing says, “exponentially expanded its PPP lending,” issuing 494,415 PPP loans totaling more than $7.6 billion through May 31. 

According to the suit, Prestamos has issued in 2021 “more PPP loans than any other lender,” and more than the total number of PPP loans made this year by Bank of America, PNC Bank, TD Bank and Wells Fargo combined. Per the complaint, Prestamos has reportedly pulled in nearly $1.2 billion in fees this year as a result of its PPP lending. 

“Taking into consideration the incredible demand for PPP loans less than $50,000.00 by sole proprietors, independent contractors, self-employed individuals and other underserved small businesses together with the more lucrative fee schedule, Prestamos saw an opportunity to generate enormous amounts of lender fees by booking a high volume of PPP loans under $50,000.00,” the lawsuit alleges, stating the defendant contracted with third-party Blueacorn, who’s neither a bank nor a lender and cannot therefore make PPP loans, in 2021 to help identify borrowers to whom Prestamos could make PPP loans and aid in the paperwork process. 

The suit alleges that although the PPP application period ended on May 31, 2021, and that the life cycle of a PPP loan application should take only a few business days, Prestamos continued to receive “huge advances” through the Paycheck Protection Program Liquidity Facility as recently as between June 30 and July 30. 

The plaintiffs, consumers from Sacramento, California and Reading, Pennsylvania who respectively own an in-home healthcare business and food catering business, claim to have not received their PPP loan funds despite timely and properly submitting the requisite documentation.

The lawsuit looks to represent all persons and entities in the United States who, in 2021, timely applied for PPP loans with Prestamos as the lender and who had their loans approved by the SBA but did not receive the PPP loan proceeds. 

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