On October 14, 2021, Jonathan Pompan was quoted in Bloomberg Law on small business loan rate disclosures. According to the article, merchant cash advance companies and prominent fintech lenders could be required by state authorities to provide far more transparency to small business borrowers.
Regulators in California and New York have proposed requirements for online lenders to disclose the cost of the financing small business borrowers apply for, such as interest rates and fees. Lawmakers in Connecticut, New Jersey, and North Carolina have introduced similar legislation.
As two of the largest markets in the United States to move first on the issue, California's and New York’s regulations will “set a benchmark for disclosure practices for all potential borrowers,” said Pompan. “At the federal level, a substantial focus has been on consumer borrowing and not small business.” That’s left a gap for many commercial borrowers, many of whom are individuals and minorities. “There’s no small business protection bureau,” he said.
The Consumer Financial Protection Bureau (CFPB) is emerging as a potential player in small business finance disclosure. The CFPB is already developing ways to measure fairness in small business lending and has embarked on a data-collection effort to better understand the financing terms women and minority small business borrowers receive.
“The open question then is, what’s next after that, and how will that data be used by policymakers and the bureau itself,” Pompan said.
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