BALTIMORE–A federal judge has ruled financial institutions administering the SBA’s new Paycheck Protection Program cannot be sued by loan applicants.
The ruling, by U.S. District Judge Stephanie Gallagher of Baltimore, denied a motion for a temporary restraining order by a purported class of small businesses challenging Bank of America’s requirement that PPP applicants have a previous relationship with the bank and have no lending relationship with any other bank, according to Reuters.
As CUToday.info has reported, a number of financial institutions, including credit unions and CUSOs, have said they were looking to work with their own customers and members first, in part to ease the documentation requirements.
In the case, which was filed within days of the launch of the $349-billion PPP, the prospective class, represented by Rifkin Weiner Livingston, had argued that small businesses ineligible to apply for PPP loans through Bank of America would be irreparably harmed if they were shut out of the program, which offers funding on a first-come, first-served basis, Reuters further reported.
But in her decision, which relied heavily on a TRO opposition brief by BofA’s lawyers at Williams & Connolly, according to Reuters, Gallagher concluded that the statutory text of the Coronavirus Aid, Relief, and Economic Security Act does not indicate that Congress intended to allow private businesses to sue lenders. If lawmakers do want to confer that right, Judge Gallagher said, they will have to spell it out in an amendment to the CARES Act.
Additional Ruling
The judge also said that even if the law permitted such suits, Bank of America did not run afoul of the CARES Act by imposing eligibility requirements on applicants, as the statute specifies only that PPP applicants must show they were operating as of Feb. 15, 2020 and that they will use PPP funds to pay workers or meet mortgage, lease or utility obligations, Reuters further reported. The judge said the law does not preclude lenders from adding additional requirements, noting many banks besides BofA have required PPP applicants to meet particular criteria.
BofA Response
In a statement to the news organization, Bank of America said it remains “focused on processing the more than 300,000 applications we’ve received so far, seeking more than $45 billion in loans.”
Bank of America had earlier indicated it has deployed 3,000 employees to process PPP applications.