JPMorgan Chase is telling some customers applying for Paycheque Protection Program (PPP) loans that they might have more success applying elsewhere, CNBC reports. Chase’s warning came in anticipation of the $484 billion coronavirus-relief package that President Trump signed into law on Friday, $310 billion of which will replenish the PPP.
The bank has categorised applicants based on where they fall in its processing queue, and it sent an email to those still early in the process that, “your application is in Stage 1, with an extremely large volume of applications ahead of yours. We wanted to give you this information, so that you can decide if you would like to try applying with another lender.” Chase has received requests totalling $40 billion since the program kicked off in early April.
The initial $350 billion allocated to the PPP was depleted within two weeks, and many are concerned that will happen again, given the massive backlog of applications — that makes it important for banks to set clear expectations among applicants.
Banks are seeing a daily volume of $50 billion in applications — a level of demand the PPP would need nearly $1 trillion to satisfy. Some experts said the funding could last just days given the volume of existing applications banks already need to process. “The majority if not all of the funding Congress is considering right now is already exhausted,” per Nick Simpson, a spokesman with the Consumer Bankers Association.
The new funding allocates about a third of the funds to smaller lenders like community banks and credit unions, but they’re also backed up with applications: Smaller banks have said they’re doing an entire year worth of loans in one weekend. Meanwhile, it’s not clear at this point if Congress would supply a third round of funding — and without that, it’s likely that thousands of small businesses will still be left without access to relief loans.
While Chase’s approach isn’t a solution to these concerns, we think its transparency is a good move, as it will help temper customer expectations. The actual funding funneled through the PPP isn’t in banks’ control, but they’re still bearing the brunt of criticism around its shortcomings: Banks are the ones processing and disbursing the loans, and they stand to reap billions from the fees the Small Business Association will pay for facilitating them. Besides the huge volume of applicants, the PPP was initially touted as same-day loans, which has not borne out.
We’ve seen customer frustration over this manifest in lawsuits accusing some major US banks of prioritizing larger loan applicants to yield higher fees or processing their own customers first. Chase’s decision to set more realistic expectations thus can help tamp down on some of the feeling of mistreatment among customers. By anticipating this frustration and working to proactively mitigate it, Chase could draw less ire than if it overpromised fast loan facilitation or didn’t openly communicate about these issues.