Responsible Business Lending Coalition Endorses New York State Small Business Truth in Lending Act
For immediate release: March 12, 2020
CONTACT:
Caitlin McShane
(415) 225-8855 | [email protected]
Statement on behalf of the Responsible Business Lending Coalition, a network of nonprofit and for-profit lenders, investors, and small business advocates, in support of New York Assembly Bill A10118.
The Responsible Business Lending Coalition (RBLC) -- whose members have lent upwards of $250 million to over 4,100 small business owners across the State of New York -- proudly endorses A10118 and thanks Assemblyman Ken Zebrowski for his support of New York small businesses. The RBLC applauds the leadership of Assemblyman Zebrowski for introducing A10118, which will bring common-sense transparency standards to small business financing in the State of New York.
“We can learn from the subprime mortgage crisis and make sure similar problems do not harm our small businesses,” said Richard Neiman, Head of Public Policy at RBLC member organization LendingClub and former Superintendent of Banks of the State of New York. “With this law, New York will lead the nation in protecting small businesses.”
This historic bill builds upon the small business truth-in-lending legislation passed in California in 2018 on an overwhelming bipartisan basis. That law was inspired by the Responsible Business Lending Coalition’s Small Business Borrowers’ Bill of Rights. New York small business owners could save millions of dollars annually when empowered by the basic price transparency needed to navigate financial products in the marketplace. These savings could generate thousands of new jobs and new economic activity throughout the State of New York, as projected in California.
"Currently, there is no state or federal law requiring any disclosure for small business financing; leaving business owners in the dark about the true costs of these loans. The Small Business Truth in Lending Act will provide business owners with a simple and accurate disclosure when taking out a loan or other financing. This will allow small businesses to easily compare costs and terms of financing products to ensure that they are able to make an informed decision," said Assemblyman Ken Zebrowski.
The federal Truth in Lending Act, which requires transparency in consumer finance, does not apply to small businesses. In this regulatory gap, research by Opportunity Fund finds some small businesses paying annual percentage rates (APRs) averaging 94%, and as high as 350%, without these rates ever being disclosed to the borrower. More troubling, the average payment charged to these small businesses was approximately double what they could afford.
Research from the Federal Reserve has found small business are misguided by the lack of transparency in the market today, and that small business owners see APR as among the most helpful facts they could be provided. A10118 would require small business financing providers to offer common-sense disclosures, including annual percentage rates (APR), similar to what consumers rely on every day.
Linda MacFarlane, Chairwoman of the NYS CDFI Coalition said, “This is a great day for New York small businesses. We applaud Assemblyman Zebrowski for drafting legislation that will make it possible for the business owners in our state to make informed choices about the kinds of loans they take to grow and sustain their businesses. As community development lenders, the New York Community Development Financial Institutions (CDFIs) too often see the damage that has been done when business owners did not recognize the high interest rates and fees or severe prepayment penalties on loans that they have taken out. CDFIs are committed to offering loans in a fair, affordable and transparent manner. We are thrilled to see a bill that will cause other lenders to perform in the same way.”
“When obtaining capital, business owners should know the price they are being charged,” said Stephanie DeVane, Vice President of Entrepreneurship and Business Development for the National Urban League.
Anthony Gaddy, Co-Founder/President and CEO of the Upstate New York Black Chamber of Commerce also applauds Assemblyman Zebrowski’s legislation, “Our small businesses need access to capital that is fair and transparent, so they can make informed decisions about what’s right for them.”
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Responsible Business Lending Coalition
The Responsible Business Lending Coalition (RBLC) is a network of nonprofit 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. Over 100 small business lenders, brokers and lead generators, and advocacy organizations have endorsed these standards. Members of the Responsible Business Lending Coalition include Accion Opportunity Fund, Community Investment Management, Funding Circle, LendingClub, Opportunity Finance Network, Opportunity Fund, Small Business Majority, StreetShares, and the Aspen Institute. 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 nonprofit and for-profit lenders, investors, and small business advocates, in support of New York Assembly Bill A10118.
The Responsible Business Lending Coalition (RBLC) -- whose members have lent upwards of $250 million to over 4,100 small business owners across the State of New York -- proudly endorses A10118 and thanks Assemblyman Ken Zebrowski for his support of New York small businesses. The RBLC applauds the leadership of Assemblyman Zebrowski for introducing A10118, which will bring common-sense transparency standards to small business financing in the State of New York.
“We can learn from the subprime mortgage crisis and make sure similar problems do not harm our small businesses,” said Richard Neiman, Head of Public Policy at RBLC member organization LendingClub and former Superintendent of Banks of the State of New York. “With this law, New York will lead the nation in protecting small businesses.”
This historic bill builds upon the small business truth-in-lending legislation passed in California in 2018 on an overwhelming bipartisan basis. That law was inspired by the Responsible Business Lending Coalition’s Small Business Borrowers’ Bill of Rights. New York small business owners could save millions of dollars annually when empowered by the basic price transparency needed to navigate financial products in the marketplace. These savings could generate thousands of new jobs and new economic activity throughout the State of New York, as projected in California.
"Currently, there is no state or federal law requiring any disclosure for small business financing; leaving business owners in the dark about the true costs of these loans. The Small Business Truth in Lending Act will provide business owners with a simple and accurate disclosure when taking out a loan or other financing. This will allow small businesses to easily compare costs and terms of financing products to ensure that they are able to make an informed decision," said Assemblyman Ken Zebrowski.
The federal Truth in Lending Act, which requires transparency in consumer finance, does not apply to small businesses. In this regulatory gap, research by Opportunity Fund finds some small businesses paying annual percentage rates (APRs) averaging 94%, and as high as 350%, without these rates ever being disclosed to the borrower. More troubling, the average payment charged to these small businesses was approximately double what they could afford.
Research from the Federal Reserve has found small business are misguided by the lack of transparency in the market today, and that small business owners see APR as among the most helpful facts they could be provided. A10118 would require small business financing providers to offer common-sense disclosures, including annual percentage rates (APR), similar to what consumers rely on every day.
Linda MacFarlane, Chairwoman of the NYS CDFI Coalition said, “This is a great day for New York small businesses. We applaud Assemblyman Zebrowski for drafting legislation that will make it possible for the business owners in our state to make informed choices about the kinds of loans they take to grow and sustain their businesses. As community development lenders, the New York Community Development Financial Institutions (CDFIs) too often see the damage that has been done when business owners did not recognize the high interest rates and fees or severe prepayment penalties on loans that they have taken out. CDFIs are committed to offering loans in a fair, affordable and transparent manner. We are thrilled to see a bill that will cause other lenders to perform in the same way.”
“When obtaining capital, business owners should know the price they are being charged,” said Stephanie DeVane, Vice President of Entrepreneurship and Business Development for the National Urban League.
Anthony Gaddy, Co-Founder/President and CEO of the Upstate New York Black Chamber of Commerce also applauds Assemblyman Zebrowski’s legislation, “Our small businesses need access to capital that is fair and transparent, so they can make informed decisions about what’s right for them.”
###
Responsible Business Lending Coalition
The Responsible Business Lending Coalition (RBLC) is a network of nonprofit 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. Over 100 small business lenders, brokers and lead generators, and advocacy organizations have endorsed these standards. Members of the Responsible Business Lending Coalition include Accion Opportunity Fund, Community Investment Management, Funding Circle, LendingClub, Opportunity Finance Network, Opportunity Fund, Small Business Majority, StreetShares, and the Aspen Institute. For more information, visit www.borrowersbillofrights.org