PNC Breaking Virus Relief Package Rules For Profit, Suit Says

By Mike LaSusa
Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.

Sign up for our Banking newsletter

You must correct or enter the following before you can sign up:

Select more newsletters to receive for free [+] Show less [-]

Thank You!

Law360 (April 23, 2020, 10:53 PM EDT) -- PNC Financial Services Group Inc. is profiteering off the COVID-19 pandemic by illegally prioritizing higher-dollar applications for virus-related government aid to reap larger processing fees, according to a proposed class action filed Thursday in California federal court.

The Lincoln Network Inc., a nonprofit that works on tech in government, sued PNC Financial Services Group and PNC Bank NA, claiming the Pittsburgh-based institution has "exploited the coronavirus crisis to line its pockets with hundreds of millions of taxpayer dollars while compounding the economic hardship suffered by small businesses and independent contractors."

"News reports have revealed that banks provided preferential 'concierge' treatment for their wealthiest clients, including a two-tiered system providing fast-track procedures for the bank's most valuable customers that avoided cumbersome and buggy online portals which ordinary mom and pop businesses were required to use," the Lincoln Network said.

The nonprofit claimed it applied for a loan of about $250,000 on April 3, the first day banks started accepting applications under the $349 billion Paycheck Protection Program included in last month's $2 trillion Coronavirus Aid, Relief and Economic Security, or CARES, Act.

The PPP, which is aimed at helping businesses keep workers on their payroll while operations are disrupted due to the pandemic, ran out of money last week but is poised for an infusion of more than $300 billion.

The Lincoln Network claims PNC violated the "first-come, first-served" rules of the PPP by delaying processing of its application in favor of speeding through other, larger applications from which the bank could earn greater fees.

The Lincoln Network claims this practice is systemic, and its suit seeks to represent anyone else in California that applied for a PPP loan through PNC and didn't get fair treatment. The nonprofit is seeking a court order directing the bank to abide by the relief program's rules in addition to an award of unspecified damages plus attorney fees and costs.

Other banks have also come under fire for alleged PPP rule violations.

A pair of small-business owners asked a Texas federal judge on Wednesday to block Wells Fargo from limiting eligibility for its federal coronavirus relief lending, seeking an emergency court order against the bank similar to one that Bank of America avoided last week.

Plaintiffs Edward Scherer of Texas and Donald Kowall of California urged U.S. District Judge David Hittner to issue a temporary restraining order that would suspend Wells Fargo NA's policy of allowing only its preexisting business checking clients to apply for a PPP loan.

According to the suit, the coronavirus relief bill doesn't permit banks to institute their own eligibility criteria beyond what is spelled out in the law and the loan program's implementing regulations, but Wells Fargo added the business checking account requirement anyway.

That bid for immediate court action against Wells Fargo came after a Maryland federal judge rejected a similar request from a group of small businesses suing Bank of America over its gating policy for the relief loan program.

Their proposed class action, which predates the Wells Fargo case, says that Bank of America is also unlawfully restricting access to the loan program by requiring applicants to be existing small-business checking clients that either are already borrowers at the bank or aren't borrowers elsewhere.

Yet when the businesses sought a temporary restraining order earlier this month to preemptively block Bank of America's policy, U.S. District Judge Stephanie Gallagher ruled that the CARES Act doesn't prohibit banks from setting additional eligibility criteria of their own. The judge also found the law contains no private right of action that would permit the suit against the bank.

The cases against PNC, Wells Fargo and Bank of America are part of a wave of class action litigation that has sprung up over banks' PPP lending practices. Earlier this week, for example, Wells Fargo and JPMorgan Chase were hit with separate lawsuits accusing them of "reshuffling" PPP loan applications so larger dollar-amount requests would get processed first and net the banks larger origination fees.

Benjamin Galdston of Berger Montague PC, who represents the Lincoln Network, told Law360 on Thursday that the suit against PNC deals with an "issue of national interest."

"We have a crisis of global proportions that is bringing this economy to the brink of failure, and this is the time when America needs its financial institutions to step up and do what Congress wants them to do, and do it in an ethical and law-abiding way," he said.

PNC didn't respond on Thursday to a request for comment.

The Lincoln Network is represented by Benjamin Galdston of Berger Montague PC.

Counsel information for PNC wasn't immediately available on Thursday.

The case is Lincoln Network Inc. v. PNC Financial Services Group Inc. et al, case number 3:20-cv-02824, in the U.S. District Court for the Northern District of California.

--Additional reporting by Jon Hill. Editing by Adam LoBelia.

For a reprint of this article, please contact

Hello! I'm Law360's automated support bot.

How can I help you today?

For example, you can type:
  • I forgot my password
  • I took a free trial but didn't get a verification email
  • How do I sign up for a newsletter?
Ask a question!