Sens. Cory Booker (D-N.J.) and Sherrod Brown (D-Ohio) sent a letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra praising the bureau’s final small business lending rule.
In the letter, Booker and Brown expressed their appreciation for the rule’s potential to bring transparency to small business lending, combat unlawful discrimination, and provide increased access to fair capital.
“The final rule issued by the CFPB is a significant step forward in promoting fair lending practices and dismantling barriers that hinder entrepreneurs, especially those from underserved communities,” the senators wrote. “By collecting and reporting data on small business credit applications, this rule will shed light on the challenges faced by women, minority, and other entrepreneurs in accessing capital.”
The letter highlighted recent findings from the Federal Reserve Board showing that when women-owned businesses applied for a line of credit, they were more likely to receive no funding at all rather than a partial or full loan. The Fed report also found that white-owned applicant firms are more than twice as likely to receive all the financing they sought compared with Black, Asian and Hispanic-owned firms and LGBTQ+-owned businesses were more likely to be denied loans and/or pay higher interest rates than average.
“Entrepreneurs from underserved communities often face steep obstacles in accessing capital, including outright discrimination,” the senators added. “This gap in startup capital puts minority- and women-owned small businesses at a severe disadvantage and increases their reliance on credit. At the same time, research has also documented how minority-, women-, and LGBTQ+-owned businesses are more likely to be denied loans and can pay steeper interest rates.”
The senators emphasized the role of credit in small business financing, underscoring that small businesses depend on lending from financial firms to raise capital.
“The success of our economy depends on the vitality and prosperity of small businesses. We commend the CFPB for finalizing this long overdue rulemaking to fulfill a statutory mandate from Dodd-Frank and look forward to the additional transparency and increased access to fair credit this rule will bring to small business lending,” the senators concluded.