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Americans for Financial Reform Urges Equity, Fairness in Small Business Lending

Consumer Group Pushes CFPB to Take Action on Equitable Lending

Andy Spears
2 min readJan 12, 2022
Photo by Tim Mossholder on Unsplash

In response to a proposed rule issued by the Consumer Financial Protection Bureau (CFPB) relative to small business lending, consumer advocacy group Americans for Financial Reform (AFR) is calling for continued action to ensure equity for businesses owned by women and people of color.

AFR’s letter to the CFPB indicates the organization is generally supportive of the new rule and finds it will improve equity in lending.

The proposed rule takes significant and vital steps to assess and enforce compliance with fair lending and anti-discrimination statutes, to identify community development small business capital needs, and to improve transparency in small business credit and lending markets. AFREF wholeheartedly supports the intent of the proposed rule and urges the CFPB to finalize the rule promptly with modest suggested improvements.

The response from AFR suggests that the status quo is problematic:

This lack of equitable access to small business credit and capital contributes to the racial wealth gap. Small businesses are important routes to wealth building. But persistent racial and gender structural inequalities and discrimination have suppressed entrepreneurship for women and people of color, costing communities of color billions of dollars in economic activity every year.

But continued inequitable access to credit and financing makes it more difficult for businesses owned by people of color to sustain, reinvest, and expand their businesses.

The response to the small business lending rule from AFR follows a letter from the Woodstock Institute that also called for a greater focus on equity in lending.

In its letter, Woodstock noted the specific challenges faced by people of color in the small business lending space:

The usurious rates charged by some non-bank lenders, . . . led us to develop a working hypothesis that in the small business loan market — similar to the consumer loan market — predatory, non-bank lenders target communities of color. Triple-digit interest rate loans to small businesses are analogous to triple-digit interest rate payday and title loans to individuals.

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Andy Spears
Andy Spears

Written by Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .

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