Law360 (June 30, 2020, 9:30 PM EDT) -- Treasury Secretary Steven Mnuchin told House lawmakers on Tuesday he's open to releasing more guidance to clear up "any confusion" about agent fees sought by accountants and others who've helped small businesses apply for federal coronavirus relief loans, an issue that's spawned a wave of class action litigation against banks.
At a House Financial Services Committee oversight hearing, Mnuchin said he's aware that a number of banks participating in the Paycheck Protection Program have been sued for allegedly withholding agent fees, which the government has already said are supposed to come out of the loan processing fees that it pays to PPP lenders.
"What our guidance did say is that banks could pay agent fees out of the fees that they received," Mnuchin said. "That was intended to be based upon a contractual relationship between the agent and the bank, and to the extent there's any confusion on that, we'll look at clarifying that."
The comments from the secretary, who was testifying along with Federal Reserve Chair Jerome Powell on the government's efforts to limit economic damage from the COVID-19 pandemic, came in response to concerns expressed by Rep. Steve Stivers, R-Ohio, about the need for additional guidance from Treasury in light of the agent fee suits facing banks.
This litigation "takes advantage of the lack of clarity about how agent fees are supposed to be processed and how they work," Stivers said. "For example, banks don't have precise answers on where the fees were supposed to come from. Is an agreement between a bank and an agent required before any work on the application is completed or processed?"
Banks have emphasized the need for such agreements in fighting against agent fee suits, which have claimed anywhere from millions to potentially billions of dollars in owed fees and targeted lenders of many sizes that have participated in the $660 billion relief program for small businesses.
According to the banks in these cases, the program's rules and regulations don't automatically entitle the plaintiffs to fees; instead, they merely cap the size of agent fees and assign the lenders with responsibility for paying them if they're to be paid at all.
But plaintiffs have argued that the PPP rules create a mandate to pay when they state that agent fees "will be paid" by lenders from out of their loan processing fees.
At Tuesday's hearing, Stivers said he hopes Mnuchin does weigh in with a "clarifying FAQ" in an attempt to bring some certainty to this agent fees issue.
"I think it'll prevent some litigation, or at least allow for that litigation to move expeditiously and less costly through the process," Stivers told the secretary.
"We'll review that, thanks," Mnuchin replied.
--Editing by Janice Carter Brown.
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