After reviewing proposed policy changes from the Consumer Financial Protection Bureau (CFPB), a group of short-term lenders have written to Congress for greater insight into the proposed changes' effect on small businesses. The letter, addressed to Sen. David Vitter (R-La.) and Rep. Steve Chabot (R-Ohio), chairmen of the respective Senate and House committees on small business, spoke of the stifling effect that the proposal might have on small businesses' ability to secure capital. The lenders explained that they have established strong and healthy relationships with small businesses, and offer access to credit that is often necessary for them to maintain operations. Further restrictions, lenders argue, could place those relationships, and the small businesses themselves, in jeopardy.
The lenders also expressed frustration that the CFPB has failed to acknowledge their work with state-level regulatory authorities to better protect small business borrowers. They felt that recent updates had already added significant costs, and the additional proposed restrictions were both prohibitively expensive as well as unnecessary.
"It was even more frustrating that bureau officials could not identify failings in the state regulatory framework that would prompt a federal overlay of new regulatory obligations, and that bureau officials admitted they had not even analyzed the existing state programs," the lenders wrote in the letter. "We worry that the CFPB does not understand this critical fact: if the CFPB proposal advances, our customers will fall victim to unregulated and unlicensed lenders and inferior forms of credit."
The businesses urged the CFPB to meet with state legislators and gain a better understanding of current regulations before moving forward with its proposal. They also asked for a detailed assessment on the impact on small lenders, as well as the potential changes to the cost and availability of credit to small businesses.
Lenders of all sizes need to be aware of how changes in regulation can impact their operations, especially in the current climate of heightened regulatory scrutiny over nearly every aspect of the financial industry. Leveraging credit application software that can quickly be adjusted to changing lender landscapes can help lenders stay compliant and profitable.
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