November 22, 2021
Ahead of Small Business Saturday, U.S. Senator Bob Menendez (DN.J.) today joined a small business owner from Montclair and advocated announcing new bicameral legislation introduced last week to ensure borrowers of small businesses have clear and specific information about their financing options to help them. make informed decisions.
The Small Business Loan Disclosure Act was introduced last Thursday by Senator Menendez and Representative Nydia M. Velázquez, chair of the House Small Business Committee.
The bill seeks to protect small business borrowers from predatory lenders and unfair loans and would secure collateral already required in consumer loans, through the Truth in Loans Act. The bill would also strengthen the role of the Consumer Financial Protection Bureau in overseeing small business loans and bring greater transparency to small business loans.
“Before 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 were targeting businesses and entrepreneurs trying to stay afloat. This legislation is a crucial step in extending many of the protections of the Consumer Loans Act to small businesses, bringing the necessary transparency to small business credit markets and ensuring that entrepreneurs understand their obligations and rights when underwriting. to a loan.
“It’s time to step up consumer protection 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 are doing all they can to take advantage of those who need essential funds. I am proud to join Congresswoman Nydia Velazquez in leading this effort to extend collateral already required in consumer loans to the small business credit market.
Small businesses account for nearly half of private sector jobs in the United States and play a key role in local communities. In recent years, online loans for entrepreneurs and small businesses have grown, while many of these financial products are fair and help meet the capital needs of entrepreneurs, some carry huge interest rates which can exceed 80% or even exceed 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 power with respect to small business financing as the agency with respect to consumer financial products and services. In addition, small business lenders should make additional information available to borrowers, including: annual percentage rate; loan financing costs; Loan conditions; 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).
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