Bill Overview
Title: Promoting Fair Lending to Small Businesses Act
Description: This bill requires the Consumer Financial Protection Bureau (CFPB) to require reports from and conduct periodic examinations of certain nondepository business lenders. Specifically, the CFPB must assess these lenders' compliance with fair lending laws, obtain information about compliance systems or procedures, and detect risks to small businesses and to minority- and women-owned businesses. Under the bill, nondepository lenders include financial institutions that are not banks or credit unions but that are required to report under certain fair lending laws.
Sponsors: Rep. Velazquez, Nydia M. [D-NY-7]
Target Audience
Population: Small business clients of nondepository lenders
Estimated Size: 33000000
- The legislation targets nondepository business lenders, which indirectly affects small businesses who interact with these lenders.
- A significant proportion of U.S. businesses qualify as small businesses and may seek loans from nondepository lenders.
- Nondepository lenders serve minority- and women-owned businesses, specifically falling under fair lending scrutiny, thereby impacting these specific business categories.
- Considering that small businesses are a significant source of employment and service in communities, their wellbeing directly impacts broader population segments.
Reasoning
- The policy aims to improve the lending environment for small businesses, particularly minority- and women-owned businesses, by increasing scrutiny on nondepository lenders. This is likely to impact business owners directly dealing with such lenders.
- A significant segment of U.S. small businesses access loans from non-traditional lenders, making the legislation relevant to many stakeholders.
- The budget implies limited direct intervention but increased regulatory oversight, which may lead to long-term changes in lender practices.
- Considering the diversity among small businesses, the policy effects will vary based on factors like business size, industry, and location.
Simulated Interviews
Small business owner - retail (Chicago, IL)
Age: 45 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 12/20
Statement of Opinion:
- I think this policy might help ensure fairer treatment from some of these lenders.
- More transparency is always good but I am worried about the immediate impact on application times for loans.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 8 | 5 |
| Year 20 | 8 | 5 |
Tech start-up founder (San Francisco, CA)
Age: 38 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- This legislation sounds like it could make lenders more cautious, which might be bad for fast-growing businesses.
- However, fair lending is crucial for market fairness.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Restaurant owner (Dallas, TX)
Age: 55 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 20.0 years
Commonness: 10/20
Statement of Opinion:
- I have faced biases in lending; hopefully, this pushes for equality.
- If this helps reduce discriminatory practices, it's a win.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 7 | 4 |
| Year 5 | 7 | 4 |
| Year 10 | 8 | 4 |
| Year 20 | 9 | 4 |
Freelancer - Digital Marketing (Miami, FL)
Age: 29 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- Any new requirement could complicate and delay loan processes.
- Still, protecting fair practices in lending is essential.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Consultant - Minority-Owned Businesses (New York, NY)
Age: 62 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 5/20
Statement of Opinion:
- This is a necessary step towards equity in entrepreneurship.
- I believe this will encourage more minority business ventures.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Agricultural Supplier (Rural Kansas)
Age: 41 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 20/20
Statement of Opinion:
- This policy doesn't really affect my business much.
- I appreciate measures for others but see no direct benefit.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Entrepreneur - Sustainable Goods (Portland, OR)
Age: 34 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 15.0 years
Commonness: 6/20
Statement of Opinion:
- If this act helps regulate and enforce fair lending, it aligns with my values.
- Long-term, the goal is more ethical business practices.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
Barber shop owner (Atlanta, GA)
Age: 50 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 13/20
Statement of Opinion:
- Ensuring fair access to funds supports local businesses like mine.
- Hopeful about better credit terms in the future as a result.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
Retail photography business owner (Seattle, WA)
Age: 37 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 20.0 years
Commonness: 9/20
Statement of Opinion:
- I feel vulnerable to unfair terms with these lenders.
- The act sounds like a safeguard, but changes will take time.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 8 | 5 |
| Year 20 | 9 | 5 |
IT Solutions Provider (Los Angeles, CA)
Age: 47 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 14/20
Statement of Opinion:
- Any policy ensuring a level playing field is a positive step.
- Impact might be indirect for my business but important for the sector.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 8 | 6 |
Cost Estimates
Year 1: $80000000 (Low: $70000000, High: $90000000)
Year 2: $65000000 (Low: $60000000, High: $75000000)
Year 3: $65000000 (Low: $60000000, High: $75000000)
Year 5: $70000000 (Low: $65000000, High: $80000000)
Year 10: $0 (Low: $0, High: $0)
Year 100: $0 (Low: $0, High: $0)
Key Considerations
- The policy may enhance fair lending practices, reducing discrimination in lending to small businesses, especially minority- and women-owned businesses.
- Investment in technology to handle increased data might lead to longer-term efficiencies.
- Public perception of improved fair lending practices could lead to increased trust in nondepository lenders.