While small business optimism has been steadily rising post-election, surveys show that business owners are growing more anxious for the Trump administration to deliver on its promise to eliminate unnecessary regulations, slash taxes and revamp health care. Aside from tax and health care reform, when it comes to loosening the regulatory ties that bind small business owners, lawmakers have zeroed in on the small business loan sector.
Data from the Federal Reserve 2016 Small Business Credit Survey shows that small business owners are having trouble accessing the credit they need, and they are increasingly turning to online lenders. The credit challenges are due, in part, to the regulatory squeeze placed on banks and credit unions by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In just the last few months, policy makers and regulatory groups have been diving deeper into the small business loan market, launching inquiries and investigations in an effort to modernize financial laws, ensure fairness in the marketplace and promote economic growth. For small business owners and entrepreneurs, it’s crucial to be up-to-speed on what’s happening on Capitol Hill and how to weigh in on the matters at hand.
The Latest Investigations, Inquiries and Reports on Online Lending
- Last week, Congressman Emanuel Cleaver, II launched an investigation into online small business lending, a sector which is currently not subject to the same disclosure requirements and other regulations as consumer loans. Congressman Cleaver says the investigation is part of a broader effort to ensure economic growth. His letter to several emerging online lenders calls for company executives to share information about their products, fees and methods regarding disclosures.Meanwhile, the U.S. Treasury Department just issued a report on the effects of regulation with regard to access to capital. The report calls out “significant areas for reform” in the regulatory framework of the banking sector as well as the need for updating and eliminating regulations in an attempt to improve access to credit for small business owners while also maintaining high standards of consumer protection.
- Earlier this month, the U.S. House of Representatives passed the Financial CHOICE Act. The act would amend Dodd-Frank rules to increase bank lending while promoting economic growth and improving financing options for small businesses.
- While many policymakers are making the push to deregulate, critics say repealing certain aspects of Dodd-Frank will end up hurting financial institutions and the small businesses they serve. One such provision, Section 1071, creates rules which would require banks to report small business lending data; currently, the U.S. does not collect information on small business loan originations, meaning policy makers and banks have no measure of the small business lending market.
- Last month, the Consumer Financial Protection Bureau (CFPB) extended an inquiry into the small business finance market, calling for public comment to inform its work. A consumer watchdog created under the Dodd-Frank Act to oversee the consumer financial sector, the CFPB is aiming to identify the needs of small businesses, particularly women- and minority-owned businesses.
How Small Business Owners Can Weigh in on Regulatory Reform
- The CFPB has invited small business owners, consumer groups, bank and non-bank lenders, regulators and other community development organizations to weigh in on its efforts to collect data on the small business loan market. Respondents have until July 14, 2017, to submit a formal comment.
- Small business owners can weigh in on regulatory reform through the Small Business Administration’s Office of Advocacy. The office has created an online platform for small businesses to share their concerns.
- The SBA has also organized several roundtable discussions throughout the country where local entrepreneurs can speak directly to administrators about the federal agency regulations that are problematic for their businesses.