Consumer protection group wants to boost transparency in small business loans

Consumer protection group wants to boost transparency in small business loans

Ting Shen / Bloomberg via Getty Images

The Consumer Financial Protection Bureau on Wednesday proposed a rule to increase the transparency of loans to small businesses.

If finalized, the federal agency rule would require lenders to collect and report more data on small business credit applications, including demographics and pricing and the reasons lenders refuse loans. Eh.

According to CFPB interim director Dave Yugio, the rules will help regulators learn more about how entrepreneurs try to access finance and what barriers may prevent them from doing so.

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Offer applies to a wide variety of loans, including term loans, lines of credit, credit cards and merchant cash advances. The public has 90 days to submit comments on the proposal.

“After home ownership, small business ownership is the primary means through which families and communities create wealth,” Yugio said. “Too often, the development of small businesses is starved for lack of access to responsible credit at a reasonable price. “

According to the CFPB, when policymakers do not have enough data to properly target credit, the COVID-19 pandemic has exposed negative economic impacts. The agency said many entrepreneurs were struggling to access the COVID relief funds available through the Paycheck Protection Program through some banks.

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

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