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Senate Small Business and Entrepreneurship Committee Chairman Ben Cardin, D-Md., and Ranking Member Joni Ernst, R-Iowa, wrote to the Small Business Administration (SBA) this week to express major concerns on two proposed rules issued by the agency to change regulations governing SBA's 7(a) Loan Program and 504 Loan Program, and to allow fintech lenders to offer 7(a) loans.

“The sweeping changes contained in these two rules would substantially overhaul SBA’s lending programs by permitting new program participants and changing the current guardrails of the programs, something that comes dangerously close to authorizing through the regulatory process,” stated the lawmakers in their press release. 

Cardin and Ernst also noted that “Congress has not authorized any loosening of prudent underwriting on affiliation standards.”

NAFCU shared similar concerns with the proposed rules, warning the SBA that “the simultaneous loosening of lending requirements and opening 7(a) lending to underregulated, fraud-prone fintechs would represent a major shift in SBA lending, the impacts of which may be significant, and which have not been properly examined.”

The association has also warned against lifting the moratorium on licensing new SBLCs and creating a new type of mission-based SBLC, which would be a specific, nonprofit SBLC to fill an identified capital market gap.

In a letter to the agency, NAFCU expressed that it was "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. 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.”

Read the letter from the lawmakers. NAFCU will continue to engage the SBA to ensure the safety and soundness of credit unions’ ability to provide access to capital for Main Street small businesses.