New Responsible Lending Policy Wins

On November 18, 2021 Rep. Nydia M. Velázquez, the Chairwoman of the House Small Business Committee, and Senator Robert Menendez (D-NJ) introduced the bicameral Small Business Lending Disclosure Act. This bill aims to protect small business borrowers from predatory lenders and loans carrying unfair terms and conditions and would ensure safeguards already required in consumer lending, through the Truth in Lending Act. The bill would bolster the role of the Consumer Financial Protection Bureau in policing small business lending and bring enhanced transparency to small commercial loans.

Carolina Martinez was quoted in the press release: “We are excited that Congresswoman Velázquez and Senator Menendez are working to close a loophole for small business lending. Many business owners act like consumers when it comes to lending and look at their financing options like they would a car loan or a mortgage. This bill is of special importance to entrepreneurs of color as they are more likely to find financing online, where most of the predatory lenders operate and tend to hide the true costs of their products.”

Currently the federal Truth in Lending Act (TILA) requires that only consumer creditors disclose critical financing information, including annual percentage rate (APR), in a clear and comparable format. Congress has not extended these disclosure requirements to small business loans and other credit products, leaving small businesses vulnerable to irresponsible lenders. This is particularly true for people of color, as minority small business owners are twice as likely to apply for high-cost and opaque credit products, some of them with APR rates as high as 350%. Help us call on Congress to pass legislation that would put safeguards in place to ensure small businesses can access credit safely with transparent loan terms.

Lastly, the The U.S. Department of Treasury released long-awaited guidance on the State Small Business Credit Initiative (SSBCI) — a $10 billion federal program to provide greater capital and resources to small business owners across the country. Eligible projects include: venture capital, loan participation, collateral support, and other capital programs. CAMEO and the Responsible Business Lending Coalition (RBLC) are encouraged by Treasury’s incorporation of small business borrower protections in its program guidelines—many of which draw from the coalition’s recommendations to the agency, and, more specifically, the Small Business Borrowers’ Bill of Rights.