Court: Lender does not owe PPP fees to law firm

Courts Covid-19 SBA CARES Act

On December 15, the U.S. District Court for the District of Arizona issued an order dismissing an action against a California bank over whether a law 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, the law firm argued that it assisted a borrower in applying for a PPP loan from the bank and was therefore entitled to collect an agent fee. The court was unpersuaded and dismissed the action, concluding that the CARES Act—which created the PPP—“undermines, rather than supports” the law firm’s position. While “the statute affirmatively obligates the SBA Administrator to pay processing fees to lenders that make PPP loans,” it “does not create an affirmative obligation on the part of the SBA Administrator, or anybody else, to pay a fee to agents who assist borrowers in applying for PPP loans,” the court ruled. Instead, the statute “‘merely establishes that there can be a ceiling on the amount of such fees if they are collected.’” The court’s decision follows rulings issued by other federal courts, which have also dismissed similar agent fee actions (covered by InfoBytes here, here, and here). The order states that to date, every court that has addressed this question has concluded that PPP lenders do not have a mandatory obligation to pay fees to agents assisting borrowers with their PPP loan applications.