Federal and state authorities have launched an investigation into Wells Fargo’s lending practices under the government’s small business relief effort, the Paycheck Protection Program (PPP).
Wells Fargo is one of several banks being sued over allegations of unfair practices in processing loans under the program. Lawsuits have also named Frost Bank, JPMorgan Chase, US Bancorp, and Bank of America. The banks have been accused of processing applications for larger loans more quickly than smaller loans.
Wells Fargo disclosed details of the investigation in its quarterly earnings filing with the Securities and Exchange Commission (SEC). The nation’s fourth largest bank said that some elements of the probe have already progressed to the formal stage.
Last month, just three days after announcing its participation in the PPP, the bank announced that it would stop accepting new loan applications under the program. The company said it made the decision in part because the Federal Reserve had imposed a cap on how many loans it could make as a penalty for its past blunders.
“Today, the company continues to operate in compliance with an asset cap imposed by its regulator due to actions of past leadership,” Wells Fargo CEO Charlie Scharf said in April. “We are committed to helping our customers during these unprecedented and challenging times, but are restricted in our ability to serve as many customers as we would like under the PPP.”
After it came to light that Wells Fargo had created millions of checking and credit card accounts without customers’ knowledge or permission, the Fed capped the amount of loans it could offer.
Upon announcing its participation in the PPP, Wells Fargo said it would limit the amount of money it loaned through the program to $10 billion. The emergency assistance would only be extended to companies with fewer than 50 employees or to non-profit organizations.
In an interview with Reuters, Wells Fargo spokesperson Manuel Venegas said that small businesses with fewer than 25 employees accounted for 90 percent of the applications and that median loan requests were under $110,000.
Without elaborating further, Wells Fargo said Tuesday in a regulatory filing that it has received "formal and informal inquiries from federal and state governmental agencies regarding its offering of PPP loans.”