Newsroom

As the House Small Business Committee is set to hold another hearing today focused on recent rules that modify the Small Business Administration’s (SBA) 7(a) lending program, NAFCU Vice President of Legislative Affairs Brad Thaler reiterated the association’s concerns with the changes.

“While these new rules have a laudable goal of trying to increase financial inclusion, we think they miss the mark,” Thaler wrote. “As champions of financial inclusion, credit unions have been at the forefront of efforts to increase access to personal and small business financial services for underserved communities. Credit unions have grown their overall business lending portfolio by more than 20 percent this past year, which is nearly identical to the growth rate over the past five years.

“At the same time, NAFCU has worked tirelessly to ensure that non-depository financial institutions such as fintechs operate on a level playing field with credit unions to protect consumers and small businesses. Unfortunately, we are concerned that these new rules will end up running counter to these efforts by opening the programs to unregulated competition.”

Thaler highlighted the increased risk of fraud incurred by fintechs participating in the Paycheck Protection Program (PPP) and flagged additional concerns about them lending through the 7(a) program, including no supervision for:

• compliance with Bank Secrecy Act and anti-money laundering requirements;
• concentration caps;
• safety and soundness parameters;
• stress test parameters; and
• other regulatory criteria to promote prudent lending.

The SBA in April issued two final rules. The first changed regulations governing its 7(a) and 504 loan programs related to lending criteria, loan conditions, affiliation standards, and more. The other amended its 7(a) loan program regulations to lift the moratorium on licensing new small business lending companies (SBLCs) and add a new type of entity, called a “Community Advantage SBLC.”

NAFCU previously asked the agency to pause both rulemakings to allow for a better understanding of the rules' separate and collective impacts. NAFCU will monitor today’s hearing, set to begin at 10 a.m. Eastern, and continue to advocate to ensure the safety and soundness of credit unions’ ability to provide access to capital for Main Street small businesses.