Consumer protection agency looks to increase transparency for small business loans

Small Business

Ting Shen/Bloomberg via Getty Images

The Consumer Financial Protection Bureau proposed a rule Wednesday to raise transparency around loans for small businesses.

If finalized, the federal agency’s rule would require lenders to collect and report more data about credit applications from small businesses, including demographic and pricing data and reasons for which lenders deny a loan.

The rule would help regulators learn how entrepreneurs fare when trying to access financing and what barriers may prevent them from doing so, according to Dave Uejio, the CFPB’s acting director.

More from Personal Finance:
Worker shifts fall as delta variant weighs on small businesses
How to invest with the climate in mind
What to know about applying for rental assistance

The proposal applies to a broad range of credit, including term loans, lines of credit, credit cards and merchant cash advances. The public has 90 days to submit comment on the proposal.

“After homeownership, small business ownership is the primary means by which families and communities build wealth,” Uejio said. “Yet too often, small business development is starved for want of access to responsible, fairly priced credit.”

The Covid-19 pandemic exposed adverse economic effects when policymakers don’t have enough data to properly target credit, according to the CFPB. Many entrepreneurs struggled to access Covid relief funds, like those available through the Paycheck Protection Program, through certain banks, the agency said.

The bureau also announced Monday the creation of a web portal that small businesses can use to share stories with the regulator about applying for credit.

Articles You May Like

‘The Fed has made two major mistakes in its history,’ expert says. Here’s how those affect policy today
Mega Millions jackpot hits $1.1 billion — and the big winner could face these costly pitfalls
Hyundai considering hybrid vehicle production at $7.6 billion Georgia EV plant
Largest U.S. sportsbooks join forces to tackle problem gambling
Two fresh ways to play the weight loss and megacap tech hype