STATEMENT: Responsible Business Lending Coalition Applauds CFPB’s Groundbreaking Efforts to Expand Access to Responsible, Affordable Financing for Small Business Owners
For immediate release: April 3, 2023
CONTACT:
Lisa Marlow | Media Relations Manager
(202) 535-3229 | [email protected]
Washington, D.C., April 3, 2023 — Statement by Awesta Sarkah, Public Policy Director at Small Business Majority on behalf of the Responsible Business Lending Coalition, regarding the Consumer Financial Protection Bureau’s (CFPB) recent announcements that will benefit small business owners: the issuing of the final rule to implement Section 1071 of the Dodd-Frank Act and the determination that state commercial disclosure laws are not preempted by the federal Truth in Lending Act.
The Responsible Business Lending Coalition (RBLC) applauds the CFPB for taking important steps to ensure entrepreneurs have equitable access to responsible, affordable capital to start and grow thriving businesses by implementing a critical data collection rule and ensuring states have the authority to protect small business borrowers.
Promoting fair business credit access through data collection
No matter who they are, where they live, or how much they make, every business owner deserves access to responsible capital that will enable them to grow their venture. Currently, there is no comprehensive information about the amount of financing available to small businesses, who is receiving loans, and at what terms. Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires financial institutions to compile, maintain and submit to the Bureau certain data on applications for credit for women-owned, minority-owned and small businesses; however, implementation of this rule has been delayed for years. We are pleased this rule will now be implemented so the public will have critical information that will help address long-overdue funding gaps and improve responsible access to capital for small business owners, particularly those in underserved communities. Importantly, the rule will require non-bank finance providers, as well as banks, to report data on credit applications, decisions, and terms. By increasing transparency in the small business lending space, implementation of Section 1071 will facilitate better financing practices and better outcomes for America's small businesses.
Bolstering state efforts to promote responsible small business financing
Entrepreneurs need access to responsible, affordable capital that will help their business thrive, not force them out of business. Because the federal Truth in Lending Act’s (TILA) disclosure requirements only apply to consumer credit, some providers are misleading business owners to take on harmful debt with annual percentage rates (APRs) as high as 350% and opaque terms they don’t disclose to the borrower. These providers have argued they do not need to disclose important pricing information in states that have extended financial protections to small business financing. As a result of the CFPB’s recent determination, states can continue to pass laws that ensure financing companies must provide entrepreneurs with critical information about small business financing products, including APR.
The RBLC commends the CFPB for leading the way in promoting these standards and practices that will protect and promote thriving small businesses in communities across the country."
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About the Responsible Business Lending Coalition
The Responsible Business Lending Coalition (RBLC) is the leading cross-sector voice on small business financial protection. The coalition includes nonprofit and for-profit CDFIs, fintechs, 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 110 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, Camino Financial, Community Investment Management, Funding Circle, LendingClub, National Association for Latino Community Asset Builders, Opportunity Finance Network, Small Business Majority, and the Aspen Institute. For more information, visit www.borrowersbillofrights.org.
The Responsible Business Lending Coalition (RBLC) is the leading cross-sector voice on small business financial protection. The coalition includes nonprofit and for-profit CDFIs, fintechs, 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 110 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, Camino Financial, Community Investment Management, Funding Circle, LendingClub, National Association for Latino Community Asset Builders, Opportunity Finance Network, Small Business Majority, and the Aspen Institute. For more information, visit www.borrowersbillofrights.org.
