In many ways small business borrowers look and behave more like consumers than corporations, but small businesses don’t enjoy the compliance protections afforded to consumers. Protections like the Truth In Lending Act.
Now Congress has taken aim at fintech lenders who specialize in the small business category. In March 2017 Congressman Emanuel Cleaver asked the CFPB (Consumer Financial Protection Bureau) to “vigorously investigate whether fintech companies are complying with all anti-discrimination laws.” And in June he asked the CEOs of several small business fintech lenders to provide information on credit algorithms as well as their approach to protecting business borrowers from discrimination.
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As a compliance expert I agree with many of their points, especially the idea that small businesses deserve equal protection when it comes to lending practices. However, I don’t agree with this committee’s narrow definition, where they equate all “fintech lending” with “alternative lending” vehicles like payday loans. This is particularly troubling to me, because payday lending is a niche service that has been known to target minority groups with predatory pricing.
We’re looking forward to your comments regarding these investigations.Please don’t hesitate to reach out for a compliance check-up on your fintech lending products and services.