Marketplace lending platforms have taken advantage of the fact that many were in attendance in DC for a gathering at the US Department of Treasury to publish a Small Business Borrowers’ Bill of Rights. The coalition of signees included Funding Circle, Lending Club, Fundera and other advocacy groups to promote what is being touted as the “first ever consensus on responsible small business lending practices”.
“Over the last 8 years Lending Club has set the industry standard for transparency, customer-friendly terms and responsible credit products to help consumers and small businesses achieve their financial goals. We believe setting consistent rights and principles for the benefit of small business owners is necessary and important. We hope the entire small business financing community will join us in upholding these rights.”
Information shared by the coalition said the group wanted to “protect Main Street” from lenders who do not abide by the guidelines. Eventually most all borrowing will move online. While the sector is dominated by leading direct lenders today, PayDay loan types and those platforms not as inclined to adhere to best practices are quickly pushing into the internet finance space.
Karen Mills, former head of the U.S. Small Business Administration was the keynote speaker at the event. Mills emphasized the importance of supporting small business;
“Small business owners are seeing the number of alternative sources for financing their companies grow at an unprecedented rate, and while this is a good thing in terms of increasing access to capital, borrower protections have not caught up. Seeing industry and other stakeholders take responsible steps like this toward ensuring the basic rights and safeguards is noteworthy and will help shape the dialogue going forward in a way that protects America’s small businesses, without stifling innovation and access.”
- The Right to Transparent Pricing and Terms, including a right to see an annualized interest rate and all fees
- The Right to Non-Abusive Products, so that borrowers don’t get trapped in a vicious cycle of expensive re-borrowing
- The Right to Responsible Underwriting, so that borrowers are not placed in loans they are unable to repay
- The Right to Fair Treatment from Brokers, so that borrowers are not steered into the most expensive loans
- The Right to Inclusive Credit Access, without discrimination
- The Right to Fair Collection Practices, to prevent harassment and unfair treatment
The Small Business Borrowers’ Bill of Rights was unveiled at the National Press Club in Washington DC today with a keynote from Mills, followed by a panel discussion moderated by Michael Barr, former Assistant Secretary of the Treasury.
The panel featured Accion CEO Gina Harman, Fundera co-founder and CEO Jared Hecht, Funding Circle co-founder and U.S. managing director Sam Hodges, Lending Club CEO Renaud Laplanche, MultiFunding founder and CEO Ami Kassar, Opportunity Fund founder and CEO Eric Weaver, Small Business Majority founder and CEO John Arensmeyer. Joyce Klein of the Aspen Institute, a nonprofit educational and policy studies organization that facilitated the coalition, emceed the event.
According to the group, Catarah Hampshire and Shoneji Robison, co-owners of Southern Girl Desserts, will share their story of experiencing the worst of the current small business loan landscape. Turned down by banks, Hampshire and Robison will speak about their attempts to obtain credit and how pricing and terms weren’t transparent. Sucked into a cycle of re-borrowing high-cost, short-term loans, the entrepreneurs nearly lost their business and were close to letting their 14 employees go. “They made it sound so simple and affordable,” said Hampshire. “All too quickly, we realized we were trapped in a debt spiral.”
“Funding Circle was founded on the very notion that small businesses, the growth engine of our economy, deserve a better borrowing experience,” said Sam Hodges, co-founder of Funding Circle. “We are proud to partner with other industry leaders to defend Main Street from predatory players and set the first-ever gold standard for a transparent, accountable and fair small business lending market.”