Wells Fargo faces government investigations into its PPP loans
Wells Fargo on Tuesday disclosed that federal and state authorities are investigating its lending practices under a key small business relief effort to combat the economic damage from the novel coronavirus.
Wells Fargo did not offer details on the probes, saying only that government agencies are looking into loans it made through the government's $660 billion Paycheck Protection Program, or PPP, which offers forgivable 1% interest loans to businesses with fewer than 500 workers. The banking giant also said that some of the inquires have progressed to the formal stage. Wells Fargo made the disclosure in its quarterly earnings filing with the Securities and Exchange Commission.
Wells Fargo has come under fire for its limited participation in the government's small business relief program. Just days after the program launched last month, the company announced it would no longer accept applications, in part because the Federal Reserve had capped how many loans it could make as punishment for past banking practices.
The U.S. central bank in 2018 limited the amount of loans Wells Fargo can make after the bank was earlier revealed to have created millions of phony accounts, as well as committed a string of other consumer abuses.
At the time of the PPP's launch, Wells Fargo said it would limit the amount of money it loaned through the program to $10 billion and that it would lend only to companies with fewer than 50 employees or to non-profits.
A few days later the Fed announced it was lifting Wells Fargo's lending cap to accommodate more PPP lending, and Wells Fargo said it would resume issuing loans under the program.
A number of big banks have been accused of putting larger businesses ahead of smaller firms in order to boost their profits from administering PPP loans. Over 220 public companies have disclosed receiving PPP loans, including well known public companies like Shake Shack and AutoNation. The latter two and others later returned or canceled the funding amid public outrage that money from the small business program was going to larger businesses with other financing options.
In mid-April, CBS MoneyWatch reported that JPMorgan Chase had made a number of the largest PPP loans. Wells Fargo is the only big bank so far to disclose that its participation in the program is under investigation.