A group of nonprofits and industry leaders has launched a list of rights it believes can change the small business financing industry and help ensure that borrowers will fully understand the terms of their loans and are treated fairly, Forbes reported last week. The list, framed as a “bill of rights,” includes the following protections:
- The right to transparent pricing and terms, including a right to see fees and an annualized interest rate
- The right to non-abusive products, so that borrowers don’t get trapped
- The right to responsible underwriting, so that borrowers don’t accept loans that they cannot repay
- The right to fair treatment from brokers, so that borrowers are not steered to the most expensive loans that pay the broker the highest commission
- The right to inclusive credit action, without discrimination
- The right to fair collection practices to prevent harassment
If a lender agrees with all the above criteria, the CEO can sign on and pledge to be compliant. 10 lenders have signed on so far, and the movement appears to be gaining momentum. However, it remains to be seen whether the movement for fair lending to business owners can gain critical mass and widespread acceptance.
The need for this type of protection is very real, according to Karen Mills, the former head of the U.S. Small Business Administration. Mills told Forbes that “small business owners are seeing the number of alternative sources for financing their companies grow at an unprecedented rate, and while this is a good thing in terms of increasing access to capital, borrower protections have not caught up.”
To view signatories and endorsers of the bill of rights and get more information, check out the project’s website here.
What do you think? Is this overkill, or a necessary protection? Tweet your thoughts to us at @AccessToCapital.
Photo Credit: Jeff Ferzoco, Flickr