Why Are Banks Taking 1% to 5% in Fees to Process No Risk Loans?

Some of the public companies, listed in order of their market value, who have received loans from the Paycheck Protection Program set up to help small businesses

For every Government backed loan transaction made, banks took in 1% to 5% in fees, depending on the amount of the loan, according to government figures. Loans worth less than $350,000 brought in 5% in fees while loans worth anywhere from $2 million to $10 million brought in 1% in fees.  Are there any ethical banks that are processing loans for free and waiving fees?

For example, on April 7, RCSH Operations LLC, the parent company of Ruth's Chris Steak House, received a loan of $10 million. JPMorgan Chase & Co., acting as the lender, took a $100,000 fee on the one-time transaction for which it assumed no risk and could pass through with fewer requirements than for a regular loan.

Banks handling the government's $834 billion loan program for small businesses made more than $10 billion in fees — even as tens of thousands of small businesses were shut out of the program, according to an analysis of financial records by NPR.

Loans are then funneled up to the SBA Administration to process. The banks took in the fees while processing loans that required less vetting than regular bank loans and had little risk for the banks, the records show. Taxpayers provided the money for the loans, which were guaranteed by the Small Business Administration.

One law firm, the Stalwart Law Group, filed five class action lawsuits this week — four in California and one in New York — alleging that banks processed clients with larger loans first because they stood to generate more money in fees. By the time the banks tried to process loans from their smaller clients, the lawsuit alleges, the program had run dry.

Banks dispute these allegations. JPMorgan said it handled the applications fairly.  Banks stood by the fees, telling NPR that the program had “significant vetting requirements” such as “collecting, personally examining, and storing data” that’s needed for the applications.

Some banks might now be waiving fees as this bad loan fee publicity has made its way through the media.  Do a page search for "fees" on this Bankrate page for more details on what each bank is doing.   There are 5 banks listed on this page that are waiving fees.

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