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American Fintech Council Backs Legislation Promoting Transparency in Small Business Financing

The American Fintech Council (AFC), an industry association representing responsible fintech companies, has given full support for new legislation that will establish transparency and regulation in small business financing.

The council has commended Senator Bob Menendez and Representative Nydia Velazquez for introducing the Small Business Financing Disclosure Act of 2023. It has also urged swift passage of the bicameral bill in both houses of Congress.

The legislation aims to establish transparency and critical rules for small business lenders, empowering small business borrowers to make informed financial decisions. It aims to protect small business borrowers from predatory lenders and small business financing options carrying unfair terms and conditions.

Phil Goldfeder, CEO at the AFC, has backed the call for clarity to aid small businesses in making choices that foster growth and success.

“We applaud the sponsors of this bill for their commitment to protecting small businesses looking for the capital they need to help them realise their dreams.”

The recently introduced legislation seeks to extend the same level of consumer lending safeguards and protections found in the Truth in Lending Acts to small business lenders. It also requires crucial transparency for small business borrowers, including the disclosure of the annual percentage rate (APR), financing charges, and clearly identifiable loan terms and payment amounts.

Highlighting the significance of small businesses in the American economy, the congressional sponsors jointly stated that these enterprises employ nearly half of the private workforce as well as play a vital role in local communities.

They also acknowledged the growth of online lending options for entrepreneurs and small businesses. While many of these financial products are fair and beneficial, some carry exorbitant interest rates, often exceeding 80 per cent or even reaching triple digits, without full disclosure to borrowers.

Comparison shop

Armen Meyer, head of public policy at LendingClub and chairman of the AFC board’s policy committee, says transparency standards promote innovation by enabling small businesses to compare options.

“Commonsense transparency standards promote innovation by enabling small businesses to comparison shop. This groundbreaking bill will create healthy competition, which enables lower prices for small businesses and supports responsible lending.”

The American Fintech Council has joined forces with the Responsible Business Lending Coalition (RBLC), a cross-sector small business financing coalition. Together, they have rallied more than 80 local, state, and national business organisations and stakeholders to express gratitude to the bill’s sponsors and urge prompt passage in both the House and Senate.

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