WASHINGTON– The Small Business Financing Disclosure Act has been introduced in Congress, legislation its backers say is designed to “protect small business borrowers from predatory lenders and small business financing options carrying unfair terms and conditions.
The legislation would also ensure safeguards already required in consumer lending, through the Truth in Lending Act and bolster the role of the Consumer Financial Protection Bureau (CFPB) in policing small business financing and bring enhanced transparency to small commercial originations, according to the two sponsors.
Co-sponsoring the bill in the Senate are
Sen. Bob Menendez (D-NJ), Ben Cardin (D-MD), Sherrod Brown (D-OH), and Ron Wyden (D-OR.). It is being co-sponsored in the House by Rep. Nydia (D-NY) and Rep. Maxine Waters (D-CA).
A coalition of consumer groups have expressed support for the legislation.
‘Preying on Small Biz’
“Predatory lenders often attempt to prey on small businesses in need, which is why we must have greater transparency around their lending practices and the loans they make available to small business borrowers. We must create an economy where hard-working Americans and small businesses can thrive,” Menendez said in a statement. “I am proud to be leading this legislation with Congresswoman Velázquez to help protect the more than 950,000 small businesses that call New Jersey home and the millions more that are the backbone of our nation’s economy.”
‘Lifeblood of Economy’
Added Velázquez, "Small businesses are the lifeblood of the American economy. But for too long, predatory lenders have taken advantage of businesses in need of capital by offering loans and similar products with unclear terms and exorbitant interest rates. This legislation is a critical step in extending many consumer lending protections to small firms, bringing needed transparency to small business credit markets and ensuring entrepreneurs understand their obligations and rights when they sign up for credit."
In announcing the new bill, the members of Congress noted more than 33-million small businesses employ nearly half the private workforce and “play a key role in the wellbeing of local communities.”
‘Enormous Interest Rates’
“In recent years, online lending for entrepreneurs and small businesses has grown,” they said in a statement. “While many of these financial products are fair and help meet entrepreneurs' capital needs, some carry enormous interest rates that can exceed 80% or even rise above triple digits without the rates being fully disclosed to borrowers.”
Under Menendez and Velázquez’s bill, the CFPB would be granted the same oversight authority with respect to small business financing as the agency has over consumer financial products and services. Moreover, the bill would require small business lenders to make additional information readily available to borrowers including: the annual percentage rate; financing charges for loans; loan terms; payment amounts and collateral requirements.
Make Sure You’re Receiving CUToday.info’s Free Daily Newsletter Headlines
Are you missing out on the latest news in credit unions? Missing the trends and developments you need to be aware of? We can help. Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more.
And it’s free!
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?
Please note and/or make your IT department or email administrator aware the emails