The Responsible Business Lending Coalition’s policy priorities draw from the principles of the Small Business Borrowers’ Bill of Rights, which identifies six fundamental rights that all small business owners seeking financing deserve. Key priorities for policy action include:
- The Right to Transparent Pricing and Terms: The federal Truth in Lending Act, which requires transparent disclosures in consumer finance, does not apply to small businesses. Today, small businesses are inhibited in making informed choices and may overpay for credit, impacting their ability to grow and hire and leading some to struggle and close. Research has found that small business owners are paying triple-digit APRs for high-cost financing products, with monthly loan payments amounting to twice their available income on average.
- The Right to Fair Collections Practices: Some small business finance providers are using an abusive collections tool called a confession of judgment, which requires borrowers to agree in advance to lose any dispute with a lender. Media reports have highlighted a troubling rise in small business borrowers falling prey to this legal action with little recourse—resulting in the loss of not only a borrower’s business, but their life savings as well.
- The Right to Inclusive Credit Access: Currently, there is no comprehensive information about how much small business lending is happening, who is receiving loans, and at what terms. In addition to implementing the proposed small business data collection requirements mandated by Section 1071 of the Dodd-Frank Act, the Responsible Business Lending Coalition recommends that data collection should include APR and term length, and the category of collateral requirements.
Recent Policy Successes
- Small Business Borrowers’ Bill of Rights: Bipartisan resolution in support of the Small Business Borrowers’ Bill of Rights introduced in the U.S. House
- The Right to Transparent Pricing and Terms: Small business lending disclosure law passed in California
- The Right to Fair Collections Practices: Bipartisan bill banning the use of Confessions of Judgment for business loans introduced in the U.S. House and Senate