Class Action Claims Citibank Owes Fees to Agents Who Helped Paycheck Protection Program Applicants

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A proposed class action claims Citibank, N.A. and Citigroup Inc. have unlawfully refused to pay those who assisted Paycheck Protection Program (PPP) applicants.

The suit explains that under the Coronavirus Aid, Relief, and Economic Security (CARES) Act’s Paycheck Protection Program, small businesses could apply for federally backed, forgivable loans to help mitigate the financial toll caused by the COVID-19 crisis. The loans, the case states, were to be administered through private lenders, such as the defendants, who would be paid a “generous origination fee” by the federal government.

According to the case, attorneys, accountants, consultants, and others who assisted borrowers with preparing and filing PPP applications were to be paid a portion of a lender’s fee. Depending on the size of the loan, PPP agents could receive up to one percent of the loan amount, the case says.

The lawsuit alleges, however, that although Citibank has been paid an estimated $44 million in origination fees related to the PPP, the bank has refused to “complete the final step of the process” and pay PPP agents, including attorneys; accountants; consultants; employees who prepared applications on behalf of their employers; those who assisted lenders with originating, disbursing, servicing, liquidating, or litigating PPP loans; loan brokers; and any other individual or entity who represented an applicant in its business with the Small Business Administration.

The plaintiff, a California CPA firm, claims Citibank’s practice of refusing to pay agent fees was a “deliberate scheme from the beginning,” evidenced by the bank’s failure to provide “any systematic mechanism or process” to determine whether a borrower received assistance from an agent.

“It appears that this scheme was to claim ignorance of the existence of the agent as an excuse not to pay the agent its share of the compensation,” the complaint states.

The lawsuit claims Citibank’s conduct is a “blatant violation” of PPP regulations that’s allowed the bank to increase profits at the expense of agents.

“In the midst of an unprecedented economic/pandemic crisis,” the complaint argues, “this policy represents short-sighted profit-padding at best, and blatantly illegal conduct, at worst.”

The case looks to cover those who served as an agent and provided assistance to a client who prepared and submitted a PPP application to Citibank that resulted in a loan being funded under the program.

The lawsuit comes on the heels of several other cases filed against PPP lenders who allegedly refused to pay agents for their services.

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