Bank of America hits PPP borrowers with opaque fees
Bank of America refused to cancel some of the loans it gave to small business owners under the Paycheck Protection Program. An early Covid-era program that gave business owners money to cover payroll and other costs to help them stay afloat during the pandemic, loans were meant to be forgiven if they were used correctly. But Bank of America forced borrowers to use its own opaque portal, rather than that of the Small Business Administration, giving business owners limited recourse to appeal when their forgiveness applications were denied.
Now these business owners are faced with repaying loans they thought were converted into grants, and they’ve been hit with another surprise: the bank is taking a huge chunk of their payments in the name of “finance charges.” Bank of America told The Intercept the charges relate to interest that began to accrue when the loans were dispersed; uncancelled PPP loans, under SBA rules, should earn 1% annual interest.
But business owners say the bank hasn’t explained the charges on statements or elsewhere, and they haven’t been given information about how much interest they have to pay or the timeline for do so – leaving borrowers confused, demoralized and in the dark. . One business owner’s statement listed more than $700 on a $2,000 payment taken by Bank of America for a demarcated line only as “finance charges,” while another listed finance charges in excess of payment amount that was applied to the principal of the loan: out of a Payment of $569.79, $423.13 was taken as a finance charge.
The charges also don’t act like typical interest payments. According to multiple bank statements that six small business owners shared with The Intercept, finance charges vary widely from month to month, even for the same borrower: One business owner was charged $233.27 on a November statement and $10.36 the following month. On another statement, the entire payment of $238.47 was applied to finance charges and nothing was paid in principal, while the statements for the previous month and the following month only affected a portion from payment to finance charges. Another borrower’s fees keep going up each month, rather than going down as you might expect if he was paying the interest.
Bank of America spokesman Bill Halldin said the 1% interest began accruing as soon as borrowers received their funds, and for those whose loans were not canceled and are making payments, “their initial payments were applied first to accrued interest and then to principal,” he said. “The finance charge is the amount of their payment that has been applied to accrued interest.”
The SBA confirmed it. “If the borrower has not received full forgiveness due to an excess loan amount, then the borrower must repay the remaining balance with the 1% accrued interest,” spokesperson Christalyn Solomon said. from the agency in a press release. “The bank is correct that interest began to accrue from the date of disbursement. The SBA generally requires that 7(a) loan payments be applied first to accrued interest, then to principal.
Halldin did not explain why the charges are not listed as interest payments, why they are considered lump sums rather than added to the amount owed, or why they vary widely from month to month.
Because the bank listed the sums as finance charges on the statements, and not as interest payments, business owners assumed that Bank of America was charging additional fees, adding to their confusion and anger over to the whole process. “How is Bank of America allowed to charge a 3% fee on this and now they’re charging this ridiculous finance fee?” said Amy Yassinger, owner of event entertainment company Yazz Jazz in Illinois, who has a PPP loan with Bank of America that the bank has refused to forgive despite her claim that the bank itself helped her to applying for the loan and that she used the money only to pay employees when her work dried up.
The SBA has clarified that banks are not allowed to “charge small business fees,” especially since banks that have issued PPP loans have already been compensated for doing so. Together, PPP issuers were expected to earn $18 billion in government processing fees; in mid-2020, Bank of America in particular was provide earning $755 million, or 2% of his pre-pandemic earnings, assuming he would collect an average of 3% in fees on each government loan.
Mark Cobb, owner of Premier Pressure Washing & Concrete Cleaning in Georgia, only applied for a PPP loan because he’s been repeatedly assured – not just by the government, but by Bank of America itself – that he would be forgiven. But now that Bank of America has refused to cancel its $20,362 loan, it has had to start making payments. This was the statement in which Bank of America took $423.13 in finance charges on a recent payment of $569.79, leaving only $146.66 for principal.
“It’s crazy,” he said. “If I have to pay off this fucking loan, I want it all to go to principal.”
But he knows he has to keep making payments, even if a lot of it isn’t even going to pay off the loan. “I can’t afford to ruin my credit,” he said. “They got you. If you don’t pay him, they’ll come and get everything.
Cobb’s company has been pressure washing restaurant exteriors for 22 years. When the pandemic hit, work “stopped overnight,” he said. So when Bank of America, where he’s been banking since 1978, started sending him notifications asking him to apply for small business loans, he decided to apply for a PPP loan so he could keep paying the people who make the job for him, which he hires as 1099 contractors. “That’s what I did with the money – I paid them,” he said. In eight weeks, the money was spent.
Cobb said that when he applied for a PPP loan, contract workers were still covered under the terms of the program – it was only a week after receiving the money, he said, that the rules changed to exclude payments to 1,099 workers. But his pardon request was denied because he had used the money to pay 1,099 employees.
“They got you. If you don’t pay him, they’ll come and get everything.
“That doesn’t seem like a lot to a lot of people, but it is to me,” he said. “I would never have taken out a $20,000 loan…unless I had been assured multiple times that it was going to be forgiven.”
Cobb’s business has rebounded since the start of the pandemic, but is still depressed compared to before the crisis. “I don’t win at all technically; I’m just paying contractors right now,” he said. If he doesn’t, he knows that in the tight labor market, they will leave him and go work elsewhere.
Thus, the money taken from his payments as finance charges comes straight out of his empty pockets. “Six hundred dollars a month could be used to pay for a car, to pay off my mortgage,” he said. “It makes everything much tighter.” It also depresses his business: if he didn’t make PPP payments, he would have enough money to buy another rig and put another person to work, taking on more customers. “I turn down business all the time because I don’t have the money,” he said.
He would just like to sell his business and retire, but he knows he can’t with the loan hanging over him. “If I could file for bankruptcy and it wouldn’t ruin my credit, I would have done it already,” he said.
Cobb got no explanation of the finance charges in advance, so he contacted the bank about it. “I called so many times. It drives me crazy,” he said. One person told him the charge was for accrued interest, but he claims the calculations don’t add up and “none of them could really explain it”.
Yassiner, the owner of the Yazz Jazz, is still struggling to get her loan forgiven, but in January she made her first payment, and she’s been making regular payments ever since. Finance charges were taken from each, including $769.78 on a payment of $2,000.
“None of us want millions of dollars. We just want to fix this.
She says she did not receive a statement showing her payment and finance charges until May. “I started to panic,” she said. Her monthly payment was $885.86, but she decided to pay $2,000 a month in hopes of paying it back sooner. “I thought in 18 months it would be pretty much paid off,” she said. When she saw that instead so much was going towards finance charges, “it was just overwhelming,” she said. “I’m suffocating with this debt.” She received no explanation as to why and when these charges would be dropped.
Yassiner is among a group of small business owners who got their PPP loans through Bank of America and have not forgiven them. The solution they’re clamoring for, in any meeting they can get with members of Congress, is legislation that says small business owners who have been overfunded but used their loans properly should have them forgiven and converted. in grants. “None of us want millions of dollars. We just want this fixed,” she said. “We just want these forgiven.”
In the meantime, she must continue to pay, just like Cobb, or risk having an impact on her credit. “I try to do what I think is right,” she said. “But at the same time, I don’t want to give them any more money right now, because what’s the point?”