Statement by Mark Herbert, California Director for Small Business Majority, on why the California Senate vote to pass a groundbreaking lending transparency bill is good news for the state’s small firms
The California Senate vote to pass SB 1235, which would be the nation’s first small business truth-in-lending law, is a major step toward protecting small business owners from predatory lending practices. This legislation is critical because it would dramatically increase the transparency of financial products marketed to small firms.
Although the federal Truth in Lending Act protects consumers, it does not specifically protect small businesses. SB 1235 would close that loophole by providing the Department of Business Oversight the flexibility to set disclosure standards that provide small business owners the transparency they deserve, without impinging on any responsible business practices. These requirements would give small businesses the ability to compare products and make informed borrowing decisions, while protecting them from unsafe or predatory lenders.
A scientific opinion poll conducted on behalf of Small Business Majority found predatory lending, particularly by online lenders, is a concern for California small business owners. In fact, 71 percent feel that while online small business lending has opened up new sources of capital for small business owners, these lenders should be regulated to ensure small business borrowers are protected from predatory practices. What’s more, an overwhelming majority of 8 in 10 California small business owners reported that they are in favor of regulating online lenders to ensure interest rates and fees are clearly disclosed to borrowers.
Alternative lending products offer exciting new financing opportunities for small businesses but these products cannot continue to exist in an unregulated space, leaving small business owners open to predatory practices that can cripple their business and undermine their financial security. SB 1235 would extend important protections to small businesses, and we hope Gov. Brown moves quickly to sign this measure, which should serve as a model for other states.
About Small Business Majority
Small Business Majority was founded and is run by small business owners to ensure America’s entrepreneurs are a key part of a thriving and inclusive economy. We actively engage our network of more than 58,000 small business owners in support of public policy solutions and deliver information and resources to entrepreneurs that promote small business growth. Our extensive scientific polling, focus groups and economic research help us educate and inform policymakers, the media and other stakeholders about key issues impacting small businesses and freelancers. Learn more about us on our website and follow us on Twitter, Facebook and Instagram.