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Banks Rake In $17 Billion In Fees For Small Business Relief Program


A second round of a federal loan program to help small businesses gave out more than $175 billion in just five days. The program now tallies more than $525 billion. Those loans do help small businesses, but the banks are winning, too. Bank fees for processing these loans now top $17 billion. NPR's Laura Sullivan has been looking into all of this, and she joins us now.

Hey, Laura.


CHANG: All right, wow, 17 billion. How have banks even managed to get so much in fees?

SULLIVAN: So this fee structure was set up by Congress, which allows banks to take fees of 1% to 5%, depending on the amount of the loan. So for example, a $200,000 loan will bring a $10,000 fee. A $10 million loan will bring a $100,000 fee for the one-time transaction. And this is really adding up for some of the nation's largest banks. JPMorgan Chase has so far made at least $290 million in fees; Bank of America more than $250 million; PNC Financial Services more than $140 million. This is just in the three weeks of the program.

CHANG: Very impressive. I mean, what do you banks actually do for that kind of money?

SULLIVAN: Well, for small community banks, they're saying, look, we really put the hours in on this one. They worked through the night for days on end to get hundreds of their customers loans. And the community bank loans were generally smaller, which means they brought in much lower fees for the same amount of work as the big banks. For the small banks, they said this was really about making new local connections, not a payday. But it is important to note that for both small and big banks, these loans required less vetting and carry far less risk than regular loans.

CHANG: Right. Now I understand that some of the big banks are claiming that they're not going to actually profit from these fees. Is that right?

SULLIVAN: So since we started reporting on this, a number of big banks have come forward and said they will not be, quote, "profiting from the loans." JPMorgan told me the fees will not, quote, "profit our bottom line." Bank of America said the fees will be used to, quote, "support small businesses." Citigroup also said, quote, "they're expanding lending." But none of the banks have been able to say exactly what they mean by that. Nobody seems to be suggesting that they will be returning the extra money or donating it to charity - except for Wells Fargo, but they were required to do that because of an agreement they have with the government after some problems in 2018.

CHANG: OK. Well, after the first round of loans, a number of small businesses filed class-action lawsuits against some of the largest banks, saying the banks prioritized big customers over smaller ones. Where do those lawsuits stand currently?

SULLIVAN: Right. So the allegation here is that the big banks worked larger loans first because they could get bigger fees. And those lawsuits are still ongoing. But the program this time did a better job at reaching small businesses. There were fewer multimillion-dollar loans, and loans worth less than $350,000 made up more than half of the program. This time, SBA set aside a portion of the money and also eight straight hours where only small banks could send an application, and the smaller banks were able, then, to make some headway.

CHANG: So given the amount of money that is involved here - which is now, as we said, more than $525 billion - what kind of oversight is even being planned for this program?

SULLIVAN: So the White House says it will be auditing all loans over $2 million, but it's unclear who's going to be doing those audits or when. The Treasury Department also put out new guidance saying big public companies - the kinds you saw a lot of in the first round - which have more access to other sources of funding, probably don't qualify for the program. And Treasury says they should give the money back by this Thursday. For the most part, though, this loan program has largely been based on the honor system of companies applying that they will submit accurate payroll information. The SBA has never been equipped to audit a program of this size. And at the moment, the SBA has only one data specialist on staff.


SULLIVAN: If even just 1% of the companies submitted false information, that would still amount to billions of dollars in fraud.

CHANG: That is NPR's Laura Sullivan.

Thank you, Laura.

SULLIVAN: Thanks so much, Ailsa. Transcript provided by NPR, Copyright NPR.

Laura Sullivan is an NPR News investigative correspondent whose work has cast a light on some of the country's most significant issues.