The historic coronavirus bailout package directed $349 billion to small businesses hammered by lockdowns and closures. Such business owners were told that cash would be doled out on a first-come, first-serve basis.
But some big banks reportedly gave their wealthiest clients a different option: To skip the line.
JPMorgan Chase, Citibank, and US Bank gave their richest patrons privileged access to the loans, the New York Times reported on Wednesday, citing six bank employees and industry professionals who spoke on condition of anonymity. The Times described the bank practices as "two-tiered," with a "concierge" treatment given to wealthier clients.
Fewer than 7% of Chase's retail-banking customers — which includes small business owners — received aid by the time the Paycheck Protection Program (PPP) ran out of money, just two weeks after it began, according to the Times. Nearly all of its private and commercial clients received one, however, the Times reported.
Patricia Wexler, a spokesperson for Chase, told Business Insider that Times' reporting was false and that the bank didn't prioritize richer clients. Its department serving smaller clients — which she defined as companies with no more than around $20 million in annual revenue — began doling out loans first, she said.
"All of our lines of business started working with their clients around the same time," she said. "Our line of business that serves smaller clients ... started first, and in the end was able to fund more than twice as many applicants than the rest of the firm combined."
The percentage of Chase's big business clients that received loans far exceeded the percentage of small businesses, according to the Times, but Wexler told Business Insider the bank didn't prioritize richer clients.
"We worked as quickly as possible in a race against time, volume, and manual processes," she said. "The vast majority of the PPP loans Chase secured went to our smaller business clients."
Wexler didn't answer follow-up questions about Chase's prioritization practices, instead directing Business Insider to the bank's FAQ page for small-business loans.
At US Bank, employees were overwhelmed by tens of thousands of small-business loan requests, according to the Times. The bank formed a dedicated team that processed applications for its richest clients. For poorer applicants, employees had to individually process the documents. The team that focused on richer customers "processed applications much faster than rank-and-file workers could, according to a person familiar with the bank's operations," the Times said.
David Palombi, a US Bank spokesperson, said the Times report is "absolutely not accurate."
"Our initial process for submitting loans for funding was a digital one that focused on single owner, simple business structures," Palombi wrote in an email to Business Insider. "Later we stood up a parallel process to accept applications from more complex businesses that could not apply digitally."
"It was intended to reach more types of business customers, not to provide any type of special treatment," he added.
Citi's private bank, which services clients with at least $25 million in their account, did not require its customers to use an online portal to file a request for aid, according to the Times. Instead, they filed the necessary documents with a banker who personally submitted their request.
By the end of the first week of the program, retail bank customers had to submit their name and contact information on Citi's website. "The bank then reached out to some, but not all, of those customers to invite them to submit full applications," the Times said. "Thousands of people never got to apply."
A spokesperson for Citi told the Times that the bank made 6,573 loans under the program, for a total of $1.1 billion. Five loans, worth a total of $25 million, went to private bank clients. An additional 470 went to commercial clients, but the amount of those loans was not disclosed.
After originally declining to comment, a Citi spokesperson told Business Insider that the bank "strongly disagree[s]" with the Times' reporting.
"There was no preferential treatment at all," spokesperson Drew Benson wrote in an email. "Businesses with a smaller set of eligible clients were able to process applications manually," he said, referring to Citi's clients with at least $25 million in their account.
All other clients used a digital portal, Benson said, "so we could process a higher volume of applications as quickly as possible."
via Business Insider