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The Office of Consumer Financial Protection on Wednesday proposed a rule to increase transparency around small business loans.
If completed, the federal agency rule would require lenders to collect and report more data on small business credit applications, including demographics and pricing data and the reasons why lenders deny a loan.
The rule would help regulators learn how employers are doing when trying to access funding and what barriers can prevent them, according to Dave Uejio, acting director of the CFPB.
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The proposal applies to a wide range of credits, including term loans, lines of credit, credit cards, and commercial cash advances. The public has 90 days to submit comments on the proposal.
“After ownership, small business ownership is the main means by which families and communities generate wealth,” Uejio said. “Still, all too often, small business development is hungry for lack of access to responsible, reasonably priced credit.”
According to the CFPB, the Covid-19 pandemic exposed adverse economic effects when policymakers do not have enough data to properly address credit. Many employers struggled to access Covid aid funds, such as those available through the Payment Check Protection Program, through certain banks, the agency said.
The office also announced Wednesday the creation of a web portal that small businesses can use to share stories with the regulator about the credit application.
Correction: The CFPB announced on Wednesday the creation of a web portal that small businesses can use to share stories with the regulator about the credit application. An earlier version incorrectly indicated the day.