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COVID-19

Wells Fargo imposed illegal condition for COVID-19 business loans, suit says

Daniel Rice  

Daniel Rice  

(April 17, 2020) - Wells Fargo Bank NA violated the federal coronavirus-related stimulus legislation by giving priority for small business loans to applicants with a preexisting business checking account, a proposed class-action lawsuit has alleged.

Scherer v. Wells Fargo Bank NA, No. 20-cv-1295, complaint filed, 2020 WL 1864840 (S.D. Tex. Apr. 11, 2020).
 
Small-business owner Edward L. Scherer filed suit April 11 in the U.S. District Court for the Southern District of Texas, saying Wells Fargo imposed an unlawful condition for business loans in violation of the Coronavirus Aid, Relief and Economic Security Act, Pub. L. 116–136.
 
The $2 trillion stimulus bill allocated $349 billion for a new Small Business Administration loan program, known as the Paycheck Protection Program, 15 U.S.C.A. § 636(a), to provide businesses with government-guaranteed loans to temporarily cover payroll and other expenses during the COVID-19 crisis.
 
The SBA announced April 16 that the PPP funding has been exhausted. A notice on the agency’s website says it “is currently unable to accept new applications … based on available appropriations funding.”
 

Improper loan condition, suit says

According to Scherer’s complaint, he operates a sole proprietorship in Harris County, Texas, is a small business as defined by SBA guidelines and meets all CARES Act requirements for a PPP loan.
 
Scherer, who is represented by Houston solo attorney Salar Ali Ahmed, alleges he is not eligible to apply for a loan through Wells Fargo because the bank has accepted applications only from those businesses that had a Wells Fargo business checking account as of Feb. 15.
 
Wells Fargo acted unlawfully by imposing conditions for PPE loans, even though such criteria is not specified in the federal legislation, the suit says.
 
Scherer alleges the bank’s funding condition appears directed toward boosting its balance sheet by supporting preexisting business customers, many of which already had loans through Wells Fargo.
 
”In this time of critical and severe national need that the U.S. government recognized and immediately acted upon, Wells Fargo’s discriminatory practices can only be described as corporate greed, highly offensive and illegal,” the complaint says.
 
Scherer seeks injunctive relief and damages on behalf of a proposed nationwide class of small businesses that were ineligible to apply for Paycheck Protection Program funding through Wells Fargo because they do not have a preexisting relationship with the bank.

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