Bank of America is fighting back against critics who want to block the bank from prioritizing its own clients for loans to small businesses under the Coronavirus Aid, Relief, and Economic Security Act.
Part of the $2.2 trillion Cares Act allows small businesses to seek loans of up to $10 million so that they can keep their workers employed and pay certain bills while a large part of the economy is effectively shut down. The $350 billion small-business loan facility, called the Paycheck Protection Program, officially was launched last week but potential users were dismayed to find that banks gave preference to existing borrowers, effectively barring some small businesses from obtaining quick financial relief.
Last week, plaintiffs filed suit against
Bank of America
(ticker: BAC), claiming the bank “unlawfully prioritized” its existing borrowing clients, according to a complaint, first reported by Bloomberg, filed in Baltimore federal court. The bank amended its position late on April 3 to include clients that have deposits with it so long as they don’t have loans with another bank.
“Bank of America’s discriminatory practices are abhorrent and in violation of federal law,” plaintiffs wrote in an amended complaint. “In this time of national need, Bank of America’s discriminatory practices can only be described as corporate greed.”
Bank of America fired back Thursday, asking a federal judge to reject the plaintiffs’ request to block the bank from serving its own clients first, saying its actions are consistent with the text of the CARES Act.
Bank of America’s lawyers went on to note that it is doing what it thinks is best under a program with “untested guidelines and regulations that did not exist until last week.” It noted that other banks have prioritized applicants in other ways—either by geography, or the type and size of their business.
“BofA’s decision to prioritize lending to clients who do not have lending relationships with other banks is simply an effort to direct its resources quickly and efficiently,” Bank of America’s lawyers wrote. “Because lenders already have information about their existing clients, prioritizing those clients streamlines the application process, meaning more loans are processed faster,”
Since the program was launched last week, banks have received hundreds of thousands of loan applications. Earlier this week, President Donald Trump asked Congress to add $250 billion to the program.
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