A federal judge in Baltimore has ruled against small businesses in a coronavirus-relief lawsuit.
Baltimore-based Profiles filed a class-action lawsuit April 3 against Bank of America on behalf of small businesses that say the bank blocked them from applying to the federal Paycheck Protection Program. The bank is an authorized lender in the $349 billion program that offers federally backed loans of up to $10 million to employers with fewer than 500 workers to help with payroll and other expenses during the pandemic.
In a written ruling Monday, Judge Stephanie A. Gallagher denied the plaintiffs’ request to stop the bank from imposing application restrictions. The businesses argued that restricting applicants that did not have a borrowing relationship with the bank was not permitted under the federal emergency legislation.
“The Court is certainly sympathetic to the economic harm that plaintiffs’ respective small businesses are enduring,” Gallagher wrote. “COVID-19 has wreaked havoc on this country, and the global economy... BofA’s rigid eligibility criteria have undoubtedly made it materially harder for some small businesses to access the PPP.”
But she found the CARES law does not allow for private parties to bring a lawsuit, saying “nothing in its text evidences Congress’s intent to enable PPP loan applicants to bring civil suits against PPP lenders, to enforce that right."
And she said the bank’s “conduct here does not run afoul of the CARES Act,” which does not prohibit banks from considering other information when deciding whether to accept applications or in what order to process them. Granting the plaintiffs’ request could “disincentive lenders from participating in the program altogether.”
Plaintiffs attorney Alan M. Rifkin said the plaintiffs will appeal and “continue to press their right to seek these critical funds.”
“The class action highlights serious shortcomings in Bank of America’s administering of the program which, by application, denied scores of small businesses throughout the country the right to access these critical funds at a time when those funds are desperately needed,” Rifkin said Monday.
Plaintiffs are calling on Congress, the bank and other lenders authorized to distribute funds to remove restrictions for small businesses that otherwise qualify for the loans.
Responding to the judge’s ruling, a spokesman said the bank remains focused on processing the more than 300,000 applications received so far, seeking more than $45 billion in loans.
Separately, Baltimore-based Howard Bank said Monday it has made 516 loans through the Paycheck Protection Program totaling $139 million since the program opened a week ago.
The commercial bank has become the Baltimore district market’s top lender in the number of such loans and No. 3 lender in total dollars, according to the Small Business Administration. The SBA said 4,692 loans totaling about $1.5 billion have been made in the Baltimore district.
“Whether they are borrowers, depositors or both we are focused on making sure our customers have the funds and support they need to keep their businesses operating during this crisis," said Mary Ann Scully, the bank’s chairman and CEO, in a statement.