District court: Lender does not owe PPP fees to accountant without contract

Courts Covid-19 SBA Agent Lending CARES Act

On August 17, the U.S. District Court for the Northern District of Florida dismissed an action alleging an accounting firm is entitled to a portion of the fees paid by the Small Business Administration (SBA) to lenders making loans under the Paycheck Protection Program (PPP). According to the order, an accounting firm filed an action against a lender alleging the lender did not pay “agent fees” reportedly due to it under the PPP. The accounting firm argued that the PPP and its implementing regulation require lenders to pay agent fees “irrespective of whether there is an agreement between the agent or borrower and the lender to do so.” Moreover, the accounting firm asserted the fees were required based on “equitable principles [] under state common law,” because the lender was “aware of and benefitted from the work [the accounting firm] did on the borrowers’ PPP loan applications.”

The district court dismissed the action, concluding that the CARES Act—which created the PPP—and its implementing regulation do not “require lenders to pay the agent’s fees absent an agreement to do so.” According to the court, the CARES Act establishes a ceiling on fees an agent may collect in preparing an application for a borrower and the applicable interim final regulation (IFR) “simply explains that, if an agent is to be paid a fee, the fee must be paid by the lender from the fee it receives from the SBA.” The court noted that the SBA’s existing Section 7(a) lending requirements establish that fees charged by an agent require a “compensation agreement” to be provided to the SBA, and because these existing Section 7(a) program requirements “do not conflict with the IFR, they apply to agents who assist borrowers in obtaining loans under the PPP.” Because there was no contractual agreement between the parties, the court concluded that the financial institution had no legal obligation to pay the accounting firm agent fees. Lastly, the court rejected the state common law claims, concluding that the accounting firm did not establish that it directly conferred a benefit on the financial institution, noting that the SBA fees were “merely an incidental benefit of [the accounting firm]’s work for the borrowers.”