Advocates are combating unfair small business
lending practices in Illinois and at the federal level

For Immediate Release:
December 20th, 2023

Rob Mayo | 312-368-0310 x 2024

Woodstock Institute applauds President Biden for vetoing a Congressional Review Act (CRA) resolution that would have prevented the Consumer Financial Protection Bureau (CFPB) from collecting small business lending data, which would have inhibited the Bureau’s ability to protect small businesses from fair lending violations.

The CFPB developed this data collection rule for lenders to small businesses as required by Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. There are scant data available on small business lending by banks while data on nonbank lenders to small businesses are practically nonexistent. Both types of institutions would be covered by the Section 1071 Rule.

Given the ample evidence of racial and economic disparities in access to small business lending from banks, including in Woodstock’s own research on the topic, the Section 1071 Rule would allow stakeholders to identify inequities and develop solutions for addressing them. Data provided under a similar rule through the Home Mortgage Disclosure Act (1975) has been an invaluable tool enabling advocates and government officials to address analogous disparities in mortgage lending.

In Illinois, Woodstock Institute is advocating for the passage of a bill that would require non-bank small business lenders to report data on each of their loans to a state-run database. Additionally, because of wildly varying interest rates in small business loans, Woodstock supports including annual percentage rate (APR) data in both federal and state data collection efforts. Such data will allow advocates to discern whether predatory lenders are taking advantage of racial disparities in business credit access by targeting triple-digit interest rate loans to communities of color. 

“Small businesses represent the economic and employment engine of our country, yet we have fallen short in providing them the same protections afforded to consumers and homebuyers in both the transparency of loan pricing and the collection of data that can help identify discriminatory lending practices. The President’s veto is a good first step in leveling the playing field for small business owners, and shows a commitment to ensuring lenders, advocates, and government can work together to make progress on this issue,” said Horacio Méndez, President and CEO of Woodstock Institute.

The CFPB issued a final rule implementing section 1071 in March 2023, but this has yet to take effect due to ongoing litigation