Thursday, November 19, 2020
A consensus is rising amongst federal district courts: the Coronavirus Support, Aid, and Financial Safety (CARES) Act doesn’t create an entitlement or non-public proper of motion to gather “agent charges” from PPP lenders.
The Jones Walker PPP Financial institution Litigation and Regulatory Process Power has been monitoring tendencies in litigation because the implementation of the Paycheck Safety Program (PPP). The Process Power recognized PPP agent-fee disputes as a litigation progress space, and reported on the first main resolution in agent-fee litigation in August 2020, through which a federal district courtroom in Florida held that the CARES Act and its implementing laws don’t require lenders to pay a portion of the mortgage processing charges they obtain from the Small Enterprise Administration (SBA) to brokers that helped debtors acquire PPP loans. See Sport & Wheat, CPA, PA, No. 20-05425 (N.D. Fla. Aug. 17, 2020.
On November 16, 2020, a federal district courtroom in California in Am. Video Duplicating Inc. v. Citigroup Inc., No. 20-03815 (C.D. Cal. Nov. 16, 2020) joined the rising refrain of courtroom opinions to carry that “the CARES Act doesn’t create an entitlement or non-public proper of motion to gather agent charges.”
In Am. Video, the plaintiffs sought agent charges from PPP lenders for aiding purchasers in securing PPP loans. The courtroom was confronted with the difficulty of whether or not the CARES Act entitled plaintiffs to claim a declare for agent charges. The choice turned on the interpretation of the interim last rule by the SBA, which was issued to supply steerage on the administration of PPP loans. See Interim Last Rule (IFR), 85 Fed. Reg. 20,811 and 20,816 (April 15, 2020). The IFR explains that the PPP was briefly added to the SBA’s Part 7(a) Mortgage Program, and it states, “This system necessities of the PPP recognized on this [IFR] briefly supersede any conflicting Mortgage Program Requirement” (emphasis added).
Because the courtroom identified, underneath the present Part 7(a) Mortgage Program, events should comply with agent charges utilizing a “Price Disclosure and Compensation Settlement,” in any other case referred to as a Type 159. See 13 C.F.R. § 103.5(a) (“Any Applicant, Agent, or Packager should execute and supply to SBA a compensation settlement . . . . SBA supplies the type of compensation settlement . . . for use by Brokers.”); see additionally SBA Type 159 (rev. Apr. 9, 2018).
The Am. Video courtroom agreed with different courts which have addressed the difficulty, together with the Sport & Wheat courtroom, concluding “that Type 159 doesn’t battle with the IFR as a result of . . . there may be nothing within the IFR that prohibits the SBA Administrator from requiring use of the shape (or the disclosure of agent charges) and the shape clearly states that it’s for use ‘each time an Agent is paid by both the [borrower] or the SBA Lender in reference to the SBA mortgage utility.’”
The Am. Video holding reinforces an interpretation of the CARES Act that’s favorable to lenders, echoing related courtroom choices together with Sanchez, PC v. Financial institution of S. Tex., No. 20-00139 (S.D. Tex. Oct. 14, 2020), Johnson v. JPMorgan Chase Financial institution, N.A., No. 20-4100 2020 (S.D.N.Y. Sept. 21, 2020), and Sport & Wheat, CPA.