Responsible Business Lending Coalition Voices Support for Strong Small Business Financial Protections in California
For immediate release: September 23, 2019
CONTACT:
Caitlin McShane
(415) 225-8855 | [email protected]
Statement on behalf of the Responsible Business Lending Coalition, a network of for-profit and non-profit lenders, investors, and small business advocates, in response to California’s proposed commercial financing disclosures.
Last year the State of California passed the first Truth in Lending law in the country to apply to small business financing. As the California financial services regulator finalizes requirements for commercial credit disclosures under the new law, the Responsible Business Lending Coalition (RBLC) is urging rulemakers to further strengthen proposed regulations and ensure they are
structured in a way to best support small businesses.
In October 2018 the RBLC inspired and helped pass the first Truth in Lending law in the country to apply to small business financing. CA SB 1235, authored by State Sen Steve Glazer (D-East Bay), passed by a bipartisan margin of 72-3 in the Assembly. The law requires financing companies to disclose the rate they will charge for the financing, just as they might see on a credit card or auto loan offer. Without this law, many financing companies charge small businesses effective APRs as high as 50% or 350% without ever disclosing these rates.
The RBLC — joined by tens of thousands of small businesses and more than 500 California small business lenders, fintech companies, advocacy and community organizations, small business service providers and community development financial institutions — urges the California Department of Business Oversight (DBO) to protect the state’s four million small businesses from predatory lending. We commend the DBO for its initial proposed regulations and believe incorporating these elements into the final regulations will ensure the full intent of the law is realized in its implementation. The RBLC’s full comment letter can be found here. Recommendations include:
The proposed regulations codify a business owner’s right to transparent pricing and terms, as outlined in the Small Business Borrowers’ Bill of Rights. The Responsible Business Lending Coalition developed the Small Business Borrowers’ Bill of Rights in 2015 representing a cross-sector consensus on the six fundamental rights that all small business owners seeking financing deserve (including transparent pricing and terms, nonabusive products, responsible underwriting, fair treatment from financing providers, brokers, and lead generators, inclusive credit access, and fair collection practices), along with the specific practices that financing providers, brokers and lead generators must abide by to uphold and protect these rights.
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Responsible Business Lending Coalition
The Responsible Business Lending Coalition (RBLC) is a network of non-profit and for-profit lenders, investors, and small business advocates that share a commitment to innovation in small business lending and serious concerns about the rise of irresponsible small business lending. The coalition created the Small Business Borrowers' Bill of Rights, the first cross-sector consensus on the rights that small business owners deserve and what financing providers, brokers and lead generators can do to uphold those rights. Since the creation of the Small Business Borrowers' Bill of Rights, nearly 60 small business lenders, brokers and lead generators have committed to uphold these rights, and nearly 50 advocacy and support organizations have endorsed them. For more information, visit www.borrowersbillofrights.org.
CONTACT:
Caitlin McShane
(415) 225-8855 | [email protected]
Statement on behalf of the Responsible Business Lending Coalition, a network of for-profit and non-profit lenders, investors, and small business advocates, in response to California’s proposed commercial financing disclosures.
Last year the State of California passed the first Truth in Lending law in the country to apply to small business financing. As the California financial services regulator finalizes requirements for commercial credit disclosures under the new law, the Responsible Business Lending Coalition (RBLC) is urging rulemakers to further strengthen proposed regulations and ensure they are
structured in a way to best support small businesses.
In October 2018 the RBLC inspired and helped pass the first Truth in Lending law in the country to apply to small business financing. CA SB 1235, authored by State Sen Steve Glazer (D-East Bay), passed by a bipartisan margin of 72-3 in the Assembly. The law requires financing companies to disclose the rate they will charge for the financing, just as they might see on a credit card or auto loan offer. Without this law, many financing companies charge small businesses effective APRs as high as 50% or 350% without ever disclosing these rates.
The RBLC — joined by tens of thousands of small businesses and more than 500 California small business lenders, fintech companies, advocacy and community organizations, small business service providers and community development financial institutions — urges the California Department of Business Oversight (DBO) to protect the state’s four million small businesses from predatory lending. We commend the DBO for its initial proposed regulations and believe incorporating these elements into the final regulations will ensure the full intent of the law is realized in its implementation. The RBLC’s full comment letter can be found here. Recommendations include:
- Mandatory disclosure of APR or Estimated APR for all small business financing products: As the only established metric that enables informed comparisons of the cost of capital over time and between products of different dollar amounts and term lengths, APR is a keystone of transparent disclosure. The RBLC has provided input to pair the flexibility companies have when calculating APR with appropriate accountability. To empower small businesses to comparison shop, disclosures must take place when a specific offer is first made, not as a final step before closing.
- Clarifying the disclosure responsibilities of brokers. Today, many small businesses obtain financing through brokers, who may have misaligned incentives to steer borrowers into the most expensive form of financing in order to obtain the highest fees. SB 1235 requires brokers present appropriate disclosures. The DBO should clarify the specific disclosure responsibilities of brokers, empowering small businesses to identify the most affordable and appropriate financing for them.
- Establish a public complaint portal to support monitoring. This portal will provide additional transparency and clarity so that small business owners know the reputations of the companies they are using.
The proposed regulations codify a business owner’s right to transparent pricing and terms, as outlined in the Small Business Borrowers’ Bill of Rights. The Responsible Business Lending Coalition developed the Small Business Borrowers’ Bill of Rights in 2015 representing a cross-sector consensus on the six fundamental rights that all small business owners seeking financing deserve (including transparent pricing and terms, nonabusive products, responsible underwriting, fair treatment from financing providers, brokers, and lead generators, inclusive credit access, and fair collection practices), along with the specific practices that financing providers, brokers and lead generators must abide by to uphold and protect these rights.
###
Responsible Business Lending Coalition
The Responsible Business Lending Coalition (RBLC) is a network of non-profit and for-profit lenders, investors, and small business advocates that share a commitment to innovation in small business lending and serious concerns about the rise of irresponsible small business lending. The coalition created the Small Business Borrowers' Bill of Rights, the first cross-sector consensus on the rights that small business owners deserve and what financing providers, brokers and lead generators can do to uphold those rights. Since the creation of the Small Business Borrowers' Bill of Rights, nearly 60 small business lenders, brokers and lead generators have committed to uphold these rights, and nearly 50 advocacy and support organizations have endorsed them. For more information, visit www.borrowersbillofrights.org.
