A trio of plaintiff companies recently filed a class action lawsuit against Bank of America, alleging that the bank knowingly misrepresented their Paycheck Protection Program (PPP) loans. The plaintiffs claim that BofA misled them by claiming that the pandemic-era forgivable PPP loans could be used to pay 1099 independent contractors, when those loans could only be forgiven if used to pay full-time employees.
In addition, the three plaintiffs allege that Bank of America required small businesses to seek loans larger than they needed. That pressure allegedly led to borrowers taking out loans in excess of the amounts that could qualify for forgiveness under the terms of the PPP.
According to the plaintiffs’ suit:
“Through its misleading marketing and business practices, Bank of America convinced thousands (and potentially millions) of desperate small-business owners trying to save their businesses from collapse in the midst of a global pandemic to obtain loan amounts far higher than would ever be forgiven, even though the only reason applicants were taking out these loans was because forgiveness was being offered.”
The suit alleges that Bank of America committed breach of contract, fraud, negligent misrepresentation, and various violations of consumer laws in California. The plaintiffs are seeking approval for class action certification that would include every California business that had its BofA PPP loan forgiveness denied due to payments made to 1099 workers and all other businesses in the state that BofA pressured into PPP loans that exceeded forgiveness levels.
The three California companies involved in bringing the lawsuit include Aurora Environmental Services, Brandamize, and Happy Puppy LA.
Bank of America has reportedly responded to the lawsuit by noting that borrowers had a responsibility to know and adhere to the Small Business Administration’s Paycheck Protection Program loan eligibility rules.