AOF Statement: Small Business Lending Disclosure Act
Statement by Luz Urrutia, CEO of Accion Opportunity Fund, the nation’s leading nonprofit Community Development Financial Institution small business lender, on introduction of the Small Business Lending Disclosure Act in Congress
Accion Opportunity Fund Applauds Introduction of Legislation to Increase Transparency in Small Business Lending
San Jose, Calif., Nov. 18, 2021 — I am delighted to see Rep. Nydia Velázquez and Sen. Bob Menendez introduce the Small Business Lending Disclosure Act of 2021, which will improve and enhance lending to small businesses that desperately need access to fair and transparent capital. This historic legislation extends the protections of the 1968 Truth in Lending Act (TILA) to small business owners, and it’s long overdue. These commonsense disclosures will help entrepreneurs to avoid debt traps that too often destroy their businesses, cost people their jobs, and undermine their communities.
Small businesses, especially firms owned by women and people of color, have been misled into accepting small business loans with Annual Percentage Rates (APRs) ranging from 94% to 350%, based on research conducted by Accion Opportunity Fund. We could end this unacceptable practice by including small businesses in the protections of the Truth in Lending Act, which requires lenders to provide transparent disclosure of their loan terms, fees, and, most importantly, Annual Percentage Rates. This monumental Act ensures that the “Mom and Pop” owners who make financial decisions for their small businesses every day have the protections and transparency standards necessary to make informed decisions. The bill is simple, but essential — much like the small businesses across this nation that turn our towns into hometowns, employing half of all Americans in the private-sector workforce.
We know this type of policy can work for small business owners as for American consumers that have benefited from these transparency standards for over 50 years. New York and California have already passed similar legislation on bipartisan grounds, but a state-by-state approach will not sufficiently protect our nation’s small businesses. We need clear and consistent federal protections for all small business owners.
Entrepreneurs in the U.S. faced an $87 billion annual market gap for loans less than $100,000 going into the pandemic, and structural barriers further hampered access to capital and relief for many entrepreneurs throughout the pandemic. As we work to rebuild our economy beyond the pandemic, we must ensure that our lending institutions are more transparent, equitable, and accountable, especially for small businesses, which are the nation’s job creators. This long-overdue bill supports the efforts of the small business community to advance our economy and the American workforce.
I commend Rep. Velázquez and Sen. Menendez for introducing this legislation, and I thank House Financial Services Committee Chairwoman Maxine Waters, House Consumer Protection and Financial Institutions Subcommittee Chair Ed Perlmutter, Senate Banking, Housing, and Urban Affairs Committee Chair Sherrod Brown, and Senate Small Business and Entrepreneurship Committee Chair Ben Cardin for co-sponsoring. I urge their fellow congressional members to pass the Small Business Lending Disclosure Act swiftly.
About Accion Opportunity Fund
Accion Opportunity Fund works to create an inclusive, healthy financial system that supports the nation’s small business owners by connecting entrepreneurs to affordable capital, educational resources, coaching, and networks. Through innovative partnerships and outreach strategies, we reach entrepreneurs of color, low-income entrepreneurs, and women, who often lack access to the financial services they need to build and grow their businesses. Accion Opportunity Fund Community Development is the lending arm of Accion Opportunity Fund, California Finance Lender license #6050609.