Bill Overview
Title: Small LENDER Act
Description: This bill exempts certain financial institutions and transactions from the Consumer Financial Protection Bureau (CFPB) reporting requirements with respect to data about small business credit applications. Under the bill, the requirements apply only to financial institutions that originate at least 500 credit transactions to small businesses in each of the preceding two years. The bill further defines small businesses as those with annual revenue of $1 million or less. Currently, the CFPB has proposed a rule that the requirements apply only to financial institutions that originate at least 25 annual credit transactions to small businesses in each of the preceding two years. The rule further defines small businesses as those with annual revenue of $5 million or less.
Sponsors: Sen. Boozman, John [R-AR]
Target Audience
Population: People relying on small business credit from financial institutions
Estimated Size: 30000000
- The bill targets financial institutions that issue small business credit.
- It exempts institutions with fewer credit transactions, easing their regulatory burden.
- Small businesses defined by the bill are those with $1 million or less in revenue.
- The bill alters existing rules, which currently cover a broader array of institutions doing smaller volumes of transactions.
- Globally, numerous small businesses and the financial institutions serving them could be affected.
Reasoning
- The policy is aimed primarily at small financial institutions that provide loans to small businesses. By altering reporting requirements, it is expected to reduce administrative costs and burdens for these institutions.
- This should theoretically allow these institutions to provide credit more easily to small businesses, especially those at or below $1 million in revenues, due to reduced compliance costs.
- The effect on small businesses will vary depending on their location, access to these institutions, and reliance on small business loans for operations or growth.
- Not all individuals or businesses in this sector will be impacted equally; those tied to smaller lenders will likely see more benefits.
- Given the budget restrictions, the policy is unlikely to cause significant direct economic shifts but may incrementally improve credit access for eligible small businesses.
Simulated Interviews
Owner of a landscaping business (Rural Texas)
Age: 45 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- The reduced reporting requirements for my credit union could mean they have more resources to support small businesses like mine.
- I worry a bit about less oversight, but overall, anything that offers more flexibility in credit access is positive for us.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 7 | 6 |
Tech startup founder (Urban New York)
Age: 32 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 5/20
Statement of Opinion:
- This policy seems useful for businesses smaller than mine.
- I don't see much direct impact on my current funding model but could help new startups or smaller operations in the ecosystem.
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 |
Independent restaurant owner (Suburban Ohio)
Age: 54 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 20.0 years
Commonness: 12/20
Statement of Opinion:
- It's hard enough to get loans sometimes, so anything reducing red tape for my lenders sounds good.
- We really need more credit options to help us through slow seasons and cover unexpected costs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 9 | 6 |
Freelance web developer (San Francisco, California)
Age: 40 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 8/20
Statement of Opinion:
- I see the potential for this helping my colleagues who run larger operations or small agencies.
- For me personally, it doesn't change much as I don't rely on business credit.
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 |
Retired, board member of a community bank (Atlanta, Georgia)
Age: 60 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 9/20
Statement of Opinion:
- Our bank will benefit from fewer reporting constraints, potentially growing our business lending.
- This could drive local economic development indirectly, creating a better area to live in.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Fashion boutique owner (Miami, Florida)
Age: 28 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 15.0 years
Commonness: 11/20
Statement of Opinion:
- Reduced reporting can hopefully mean better loan terms or easier access.
- Anything that lets us reduce financial pressure helps my peace of mind and business growth.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Environmental NGO manager (Seattle, Washington)
Age: 37 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 0.0 years
Commonness: 15/20
Statement of Opinion:
- I'm more concerned about reduced oversight leading to potential abuses, though it's not directly relevant to my work.
- Understand the intent but cautious about lack of transparency.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Orchard farm owner (Rural Montana)
Age: 55 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 6/20
Statement of Opinion:
- Access to loans without heavy paperwork is always positive, helps us prepare for unpredictable seasons.
- I've seen loan approvals get bogged down due to extensive reporting requirements, this might help remedy that.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Coffee shop chain co-owner (Los Angeles, California)
Age: 42 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 7.0 years
Commonness: 13/20
Statement of Opinion:
- This might ease some of our banking relationships, especially with local community-focused lenders.
- Could help us allocate more funds to expansion rather than compliance.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 9 | 8 |
Freelance photographer (Chicago, Illinois)
Age: 29 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 7/20
Statement of Opinion:
- I can see how this helps other small business owners, which could indirectly support local economies.
- For my personal business use, I don't foresee immediate changes but potential benefits in reduced borrowing costs.
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 | 6 | 6 |
| Year 20 | 6 | 6 |
Cost Estimates
Year 1: $50000000 (Low: $30000000, High: $70000000)
Year 2: $55000000 (Low: $33000000, High: $77000000)
Year 3: $60500000 (Low: $36300000, High: $84700000)
Year 5: $66550000 (Low: $39930000, High: $93170000)
Year 10: $73205000 (Low: $43923000, High: $102487000)
Year 100: $80525500 (Low: $48315300, High: $112735700)
Key Considerations
- The policy targets financial institutions with fewer credit transactions, providing regulatory relief.
- Economic effects hinge on the extent to which exempted institutions pass on benefits to small businesses.
- Impact on competitive dynamics among financial institutions, as larger institutions remain under stricter reporting requirements.
- Consideration of the balance between regulatory oversight necessary for consumer protection and the need to promote access to credit for small businesses.