Washington, D.C. – U.S. Senator Ron Wyden today with colleagues praised the Consumer Financial Protection Bureau (CFPB) for implementing changes to the Equal Credit Opportunity Act 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 in a letter to CFPB Director Rohit Chopra. “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.”
Highlighting the findings of the Federal Reserve Board, the senators underlined the disparities faced by minority- and women-owned small businesses when applying for credit. The findings show that women-owned businesses were more likely to receive no funding than receive a partial or full loan. Additionally, white-owned applicant firms were over twice as likely to receive all the financing they sought compared to Black, Asian, and Hispanic-owned firms.
“Entrepreneurs from underserved communities often face steep obstacles in accessing capital, including outright discrimination…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 continued.
The senators further emphasized the role of credit in small business financing, underscoring that small businesses depend on lending from financial firms to raise capital. When small business entrepreneurs face obstacles in accessing credit, they may struggle to operate or expand their businesses, especially in rural markets where the declining number of banks limits their ability to secure financing.
“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.
Along with Wyden, the letter is signed by U.S. Senators Cory Booker, D-N.J., and Sherrod Brown, D-Ohio, Ben Cardin, D-Md., and Dick Durbin, D-Ill.
The letter to the CFPB can be found here.
A web version of this release is here.
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