Ahead of Small Business Saturday, U.S. Senator Bob Menendez (D-N.J.) today joined a Montclair small business owner and advocates to announce new bicameral legislation introduced last week to ensure small business borrowers have clear and accurate information about their financing options to help them make well-informed decisions.
The Small Business Lending Disclosure Act was introduced last Thursday by Sen. Menendez and Rep. Nydia M. Velázquez, the chairwoman of the House Small Business Committee.
The 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 also bolster the role of the Consumer Financial Protection Bureau in policing small business lending and bring enhanced transparency to small commercial loans.
“Prior to the COVID-19 pandemic, immoral lenders sought to prey on small businesses with unfair and unsustainable loans, Velázquez said. “Once we were in the midst of the worst public health crisis in over a century, these predatory lenders would take aim at business and entrepreneurs trying to stay afloat. This legislation is a critical step in extending many of the protections in consumer lending law to small firms, bringing needed transparency to small business credit markets and ensuring entrepreneurs understand their obligations and rights when they sign up for a loan.”
“It’s time to strengthen consumer protections for our small businesses, especially after what many of them had to endure to keep their doors open and employees paid during the pandemic,” Menendez said. “The lack of disclosure requirements leaves small business borrowers at risk of making decisions without access to the best information, and at the mercy of predatory lenders who go out of their way to take advantage of those in need of critical funds. I’m proud to join Congresswoman Nydia Velazquez in leading this effort to extends safeguards already required in consumer lending to the small business credit market.”
Small businesses make-up almost half of private sector jobs in the United States and play a key role in local communities. In recent years, online lending for entrepreneurs and small businesses has grown, 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 the bill, the Consumer Financial Protection Bureau (CFPB) would be granted the same oversight authority with respect to small business financing as the agency has with respect to consumer financial products and services. Moreover, small business lenders would need to make additional information readily available to borrowers including: the annual percentage rate; financing charges for loans; loan terms; payment amounts and collateral requirements.
This bill is co-sponsored in the House of Representatives by Rep. Ed Perlmutter (D-CO) and Rep. Maxine Waters (D-CA). In the Senate, is it co-sponsored by Senator Sherrod Brown (D-OH) and Senator Ben Cardin (D-MD).
To access more business news, visit NJB News Now.Related Articles: