The Consumer Financial Protection Bureau (CFPB) announced Wednesday it would launch an inquiry into the small business financing market. The consumer watchdog plans to identify the credit needs of small businesses, particularly those owned by women and minorities, as well as the types of credit products being offered to small businesses by financial institutions.
“Small businesses fuel America’s economic engine, create jobs and nurture communities. Yet little is known about how well the lending market serves their financing needs,” CFPB Director Richard Cordray said. “This inquiry will help us learn how we can best fulfill our duty to collect and report information on small business lending.”
The group plans to study the sources that small businesses typically contact for credit, how lenders define and quantify small businesses and how lenders collect and examine information in the loan application process. The agency has called for comments from various consumer groups, bank and non-bank lenders, small businesses, regulators and other community development organizations.
The CFPB also seeks to bridge the information gap in the business lending process when it comes to the data being used by financial institutions in connection with credit applications made by small businesses, as well as address the privacy concerns related to the data collection.
While the CFPB estimates that small businesses access about $1.4 trillion in financing, current information about how small businesses engage with credit markets is incomplete or dated. The CFPB will assess the recent shift of lending from banks to online lenders, and how credit restrictions from the Great Recession are impacting small businesses today.
The CFPB’s request for information comes as legislators are re-examining many of the provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Act requires the CFPB to collect data about small business lending to help facilitate the enforcement of fair lending laws. Critics have called out the post-financial crisis legislation, saying it has made credit access more expensive for small business owners.
“Data show that there are 50 million fewer credit cards available since 2008, and the remaining options cost more now, hurting small businesses and struggling families,” said House Financial Services Committee Chairman Jeb Hensarling (R-TX).