MENENDEZ INTRODUCES BILL TO PROTECT SMALL BUSINESSES, SAFEGUARD OWNERS FROM PREDATORY LENDERS

Statement

Ahead of Small Business Saturday, U.S. Senator Bob Menendez (D-N.J.) today announced the introduction of legislation to protect small business borrowers from predatory lenders and loans carrying unclear terms and conditions and would secure safeguards already required in consumer lending, through the Truth in Lending Act. The bicameral Small Business Lending Disclosure Act of 2021 would bring enhanced transparency to small commercial loans.

"As we prepare to go out into our communities on this next Small Business Saturday and support our favorite local shops and stores, we should also stand up for their right to safe and transparent financing," said Sen. Menendez. "When we provide entrepreneurs and business owners with the knowledge they need to make informed decisions, we better position them to grow and succeed. If we want to build back better, we have to build a fairer and more accountable financial system that gives entrepreneurs of all backgrounds the tools they need to succeed."

Small businesses make-up almost half of private sector jobs in the United States and play a key role in local communities. In recent years, online lending for entrepreneurs and small businesses has grown to help meet the demands of the small business credit market, and while many of these financial products help meet entrepreneurs' capital needs, some carry undisclosed fees and interest rates that are not transparent, leaving small business unaware of the true costs of the loan.

Under the bill, disclosure and transparency protections already in place in consumer lending will be extended to small business financing. Small business lenders would be required to make additional information readily available to borrowers including: the annual percentage rate; financing charges for loans; loan terms; payment amounts and collateral requirements, so small business owners can understand the costs and terms of the loan and are equipped with the information they need to make the best financial decision for their business. The bill was led in the U.S. House of Representatives by Congresswoman Nydia Velazquez (D-N.Y.-07).

"Prior to the COVID-19 pandemic immoral lenders sought to prey on small businesses with unfair and unsustainable loans, said Rep. Velázquez. "Once we were in the midst of the worst public health crisis in over a century these predatory lenders would take aim at business and entrepreneurs trying to stay afloat. This legislation is a critical step in extending many of the protections in consumer lending law to small firms, bringing needed transparency to small business credit markets and ensuring entrepreneurs understand their obligations and rights when they sign up for a loan."

Sen. Menendez announced the introduction of his bill at Café MoSo in Montclair. The bistro, like many other small, minority-owned businesses, thrived before COVID-19 hit our state. Without the frequent foot traffic, business at the restaurant was greatly impacted.

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