Since the financial crisis, regulators and policymakers have concentrated on making brick and mortar banks safe and secure. But, away from regulatory scrutiny, a new sector has emerged led by non-bank online lenders and, if we aren’t careful, it has the potential to harm millions of small business borrowers. Self-policing is a step in the right direction, but increased regulatory vigilance is both warranted and desired.
On August 6 in Washington, a responsible business lending coalition of for-profit online and mission-based lenders, brokers, think tanks and small business advocates announced an agreement on rights that every small business borrower deserves when seeking a loan online, defined as a Small Business Borrowers’ Bill of Rights. This marks a turning point in the small business lending industry. For the first time, online lenders are agreeing to self-regulate and offer fair and transparent terms to small businesses. Any lender or broker will be permitted to sign onto the agreement, by signing a letter from their CEO attesting that they abide by the principles enshrined in the agreement.