The American Fintech Council (AFC) last week spoke about proposed legislation in Maryland and Minnesota, while CEO Phil Goldfeder also commented on the reintroduction of the Financial Services Innovation Act.
The week began with the AFC supporting the Maryland Commercial Financing – Small Business Truth in Lending ACT. The legislation, introduced by Senator Benjamin Kramer and Delegate David Fraser-Hidalgo, will, the AFC asserts, create long-needed transparency for Maryland small business borrowers and establish critical rules for small business lenders.
“Small businesses deserve the clarity that enables them to make informed decisions about the financial options available to help their business thrive and grow,” said AFC CEO Phil Goldfeder. “Common sense transparency standards promote innovation. We applaud the sponsors of this bill for their commitment to protecting small businesses looking for the capital they need to help them realize their dreams.”
The legislation aims to extend the same consumer lending guardrails and protections found in the Truth in Lending Acts to more than 615,000 small business lenders across Maryland. It would require important transparency for small business borrowers including annual percentage rate (APR) financing charges, and clearly identifiable loan terms and payment amounts.
“Business owners have come to expect standard information for financing products, including APR, since this information has been required for consumer products for more than 50 years under the federal Truth in Lending Act,” wrote the Responsible Business Lending Coalition in a recent letter to the MD House Economic Matters Committee. “Research from the Federal Reserve suggests that in the absence of required disclosures, business owners often confuse commonly used terms such as “simple interest” and “factor rate” with an APR and mistakenly select costlier products based on this information.”
The AFC joined the Responsible Business Lending Coalition (RBLC), a cross-sector small business financing coalition, who convened more than two dozen local, state, and national business organizations and stakeholders, to support the legislation and urge immediate passage.
Goldfeder then delivered testimony before the Minnesota House Committee on Commerce Finance and Policy, opposing legislation recently introduced that the AFC said would devastate Minnesota families. He urged legislators to oppose legislation that would put state-chartered community banks at a disadvantage, remove financial options for Minnesota families and potentially devastate the local economy.
“This legislation will harm Minnesota community banks and cut off access to safe, responsible and affordable credit for hundreds of thousands of Minnesota families,” Goldfeder said. “As a former state representative, I understand how pragmatic legislation, when drafted and implemented correctly can change the lives of the families we represent but I’ve also seen the unintended consequences.”
“Not all fintech is created equal. AFC’s diverse members represent a cross-section of responsible Fintech companies that embrace transparency and are rooted in regulatory compliance and consumer protection.”
AFC testified before the Minnesota House Committee on Commerce Finance and Policy in strong opposition to HF 3680, legislation that would opt Minnesota out of a federal law that it said provides state-chartered community banks with the same opportunities and rights as nationally chartered banks. Although the legality of such legislation is still in question, the AFC said passage would create uncertainty for responsible community banks providing financial access to Minnesota families.
“AFC agrees with the bill’s intent of creating proper guardrails to ensure Minnesota consumers are protected from high-interest lenders operating outside the state’s regulatory perimeter,” said Goldfeder in his remarks before the committee. “However, this bill is a blunt legislative solution for an issue that requires nuance.
“If passed, HF 3680 will decrease access to responsible credit, put community banks at a disadvantage and leave many Minnesota consumers — particularly those in minority and rural communities — with no option but to rely on far too many predatory and high-interest alternatives,” said Goldfeder.
The week concluded with Goldfeder stating his support for the reintroduction of the Financial Services Innovation Act by House Financial Services Committee Chairman Patrick McHenry. Goldfeder said the legislation represents a “pragmatic path to building a clear and consistent framework for how federal agencies should engage with innovation in financial services.”
“As we noted in our recent letter to the Federal Deposit Insurance Corporation (FDIC), agency engagement with industry is crucial to ensuring a pragmatic regulatory framework and effective oversight of the modern banking system,” Goldfeder said. “AFC’s consistent engagement with the numerous innovation offices and agency staff at the federal and state levels has helped build knowledge for both industry and agency participants about innovative financial service offerings and the regulatory frameworks within which they operate.
“This act will create a more unified and beneficial approach to innovation at the federal level by establishing a dedicated ‘front door’ and statutorily mandated process for receiving and addressing requests to modernize agency regulations across the complex federal financial regulatory landscape. More importantly, this legislation sends an important signal to innovators that federal regulators can help advance the financial services industry for the benefit of consumers and the companies serving them.”