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NAFCU calls on SBA to pause proposal that would allow fintech lenders to offer 7(a) loans
NAFCU Regulatory Affairs Counsel James Akin called on the Small Business Administration (SBA) to rescind or pause all movement on its proposed rulemaking that would allow new lenders to apply for a license to offer SBA-backed 7(a) small business loans until the proposal’s impacts – related to fintechs and the SBA’s proposed changes to the affiliation and lending criteria rule – are better understood.
The proposed rule would lift the moratorium on licensing new Small Business Lending Companies (SBLCs) and create a new type of mission-based SBLC, which would be a specific, nonprofit SBLC to fill an identified capital market gap; the SBA has had a moratorium on new SBLCs since 1981. Additionally, the rule would also remove the requirement for loan authorization under the 7(a) and 504 loan programs.
“NAFCU is deeply troubled by the risks that would be introduced to the 7(a) Loan and Microloan Program if unregulated, fraud-prone fintechs were given access,” wrote Akin. “Additionally, although NAFCU supports efforts to increase access to lending in underserved communities, it is concerned that the mission-based SBLC program, as currently proposed, lacks the specificity and program requirements necessary to achieve that goal.”
Akin’s letter reiterated many of the same concerns he outlined in a December letter to the SBA where he called for the agency’s proposal to change regulations governing the SBA 7(a) loan program and 504 loan program to be rescinded and paused as well.
NAFCU sent members a Regulatory Alert in November to break down the proposal and solicit feedback.
The association and other trade groups previously wrote to Congress to express concerns over both SBA proposals and reiterated issues in a December request to SBA Administrator Isabella Casillas Guzman for the SBA to withdraw them. NAFCU will continue to engage the SBA to ensure the safety and soundness of its business loan programs.