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Friday, NAFCU, and other financial trade groups, wrote to the Senate and House Small Business Committees to express “serious concerns” regarding the Small Business Administration’s (SBA) recent proposed Small Business Lending Company (SBLC) moratorium rescission and proposed rule regarding affiliation and lending criteria for the SBA business loan programs. The groups wrote that the regulatory proposals are “major” and create “a detrimental shift in the 7(a) lending program. Both propose removal or modification of long-existing prudent lending standards which have ensured programmatic integrity for decades.” 

The letter notes that the SBLC proposed rule intends to open the 7(a) program to more lenders, such as nonbank fintechs. While the groups praise the SBA’s effort to help underserved borrowers, they believe that the proposed changes “will not actually help minority and underserved communities, and could unintentionally harm the very borrowers that SBA is trying to aid.” Additionally, the groups share concerns about the proposed rules’ inability to promote mission lending, lack of regulation and oversight, and lack of clarity and scope.

Following the release of a report from the House Select Subcommittee on the Coronavirus Crisis, which found fintech companies facilitated fraud in the SBA’s paycheck protection program (PPP), the letter cautions the administration from inviting fintech companies into another program while investigations are still underway.

The groups reiterate the potential harm these rules could have on communities in need and call on Congress to halt the proposed rules to “allow for appropriate dialogue and a more reasonable path forward.” The House Small Business Committee is set to hear from SBA Administrator Isabella Guzman as part of an SBA oversight hearing on Wednesday. 

Although NAFCU supports certain aspects of the affiliation and lending criteria proposed rule, the loosening of certain lending requirements at the same time as fintechs are invited to engage in 7(a) lending raises serious concerns.

NAFCU sent members a Regulatory Alert on the proposed moratorium rescission in November; comments are due to the association Dec. 16. In addition, NAFCU remains engaged with the SBA on their affiliation and lending criteria proposed rule and sent a Regulatory Alert in October.

The association will continue to work with the SBA on the proposed rules and will communicate any updates via NAFCU Today.