World-Wide Reach - Strong Local Presence!

PRESS RELEASE: Prepared Remarks of Richard Cordray Director, Consumer Financial Protection Bureau Small Business Lending Field Hearing

consumer financial protection bureau

FOR IMMEDIATE RELEASE:
May 10, 2017

CONTACT:
Office of Communications
Tel: (202) 435-7170

Prepared Remarks of Richard Cordray
Director, Consumer Financial Protection Bureau

Small Business Lending Field Hearing 

Los Angeles, Calif.
May 10, 2017

Thank you all for coming. It is good to be here again in Los Angeles. Today, the Consumer Financial Protection Bureau is announcing an inquiry into ways to collect and publish information about the financing and credit needs of small businesses, especially those owned by women and minorities. We are well aware of the key role they play in our lives. Small businesses help drive America’s economic engine by creating jobs and nurturing local communities. It is estimated that they have created two out of every three jobs since 1993 and now provide work for almost half of all employees in the private sector. Yet we perceive large gaps in the public’s understanding of how well the financing and credit needs of these entrepreneurs are being served.

As you probably know, Congress provided the Consumer Bureau with certain responsibilities in the area of small business lending. And there is a strong logic behind this. When I served as the Ohio Attorney General, we recognized the need to protect small businesses and nonprofit organizations by accepting and handling complaints on their behalf, just as we did for individual consumers – an approach that proved to be very productive. In addition, the line between consumer finance and small business finance is quite blurred. More than 22 million Americans are small business owners and have no employees. And, according to data from the Federal Reserve, almost two-thirds of them rely on their business as their primary source of income.

Congress specifically has charged the Consumer Bureau with the responsibility to administer and enforce various laws, including the Equal Credit Opportunity Act. Unlike other consumer financial laws, the ECOA governs not only personal lending, but some commercial lending as well. In fact, we have now conducted a number of ECOA supervisory examinations of small business lending programs. Through that work, we are learning about the challenges financial institutions face in identifying areas where fair lending risk may exist, and we are assisting them in developing the proper tools to manage that risk.

In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress took a further step to learn more about how to encourage and promote small businesses. To help determine how well the market is functioning and to facilitate enforcement of the fair lending laws, Congress directed the Consumer Bureau to develop regulations for financial institutions that lend to small businesses to collect certain information and report it to the Bureau. The Request for Information we are releasing today asks for public feedback to help us better understand how to carry out this directive in a way that is careful, thoughtful, and cost-effective.

***

We have considerable enthusiasm for this project. In my own case, I have seen firsthand how small business financing can have a big economic impact. When I served as the Treasurer of Ohio, we had a reduced-interest loan program to support job creation and retention by small businesses. The way the program worked was that the state could put money on deposit with banks at a below-market rate of interest, and this deposit was then linked to a same-sized loan to a small business at a correspondingly below-market rate. This so-called “Linked Deposit” program had been authorized more than twenty years earlier, but had gradually fallen into disuse.

At its core, however, the program made good sense. Small businesses are often in desperate need of financing to update and expand their operations, and if they can get inexpensive financing, they often can fertilize their ideas for growth and be even more successful. So we diagnosed the program and found that after its initial success, it had become too bureaucratic. We heard from both banks and businesses that the program, which was still paper-based, was so slow and cumbersome that nobody wanted to use it.

So we changed all that. We put the process online, rebranded it as the “Grow Now” program, and made specific commitments to those who wanted to participate in it. We told them they could fill out a typical application in 30-60 minutes, and we promised them they would have a yes-or-no answer on their application within 72 hours. That was not easy, and it required very close coordination with the banks that took part in the program. But we did it, and the “Grow Now” program really took off. Only about $20 million had been allocated when we started, but in less than two years we deployed more than $350 million, helping about 1,500 small businesses create or retain approximately 15,000 jobs across the State.

It was also exciting and interesting to see how the businesses were able to use the loan funds. I can recall a construction business in northeast Ohio that needed a loan to buy a large piece of equipment so the company could compete for new and different jobs. They got the money, they got the equipment, and they thrived. I recall a manufacturer in northern Ohio that needed money to turn their factory sideways on their property so they could utilize more space and employ more people. We funded the build-out, they executed on it, and they met their goals for growth of output, revenue, and jobs. And I recall a company in western Ohio that started out as a caterer, began making their own tents for events, recognized that they might be able to succeed as tentmakers, and needed financing to be able to bid on a major project with the U.S. Department of Defense. We got them the loan, they got the bid, and Inc. magazine named them one of its 500 fastest-growing businesses of that year!

***

The moral of this story is that business opportunity – especially opportunities for small businesses – often hinges on the availability of financing. People have immense reserves of energy and imagination. Human ingenuity is the overwhelming power that allows human beings to reinvent the future and make it so. These forces unleash what Joseph Schumpeter called the “gales of creative destruction” that constantly mold and reshape the patterns of our economic life. Innovation has sharpened our nation’s economic edge for generation after generation, but when credit is unavailable, creativity is stifled.

To make the kind of meaningful contributions they are capable of making to the American economy, small businesses – particularly women-owned and minority-owned businesses – need access to credit. Without it, they cannot take advantage of opportunities to grow. And with small businesses so deeply woven into the nation’s economic fabric, it is essential that the public – along with small business owners themselves – can have a more complete picture of the financing available to this key sector.

Some things we do know. We are releasing a white paper today that lays out the limited information we currently have about key dimensions of the small business lending landscape. According to Census data, and depending on the definition used, there are an estimated 27.6 million small businesses in the United States. We estimate that together they access about $1.4 trillion in credit. Businesses owned by women and minorities play an especially important role in this space. Women-owned businesses account for over one-third (36 percent) of all non-farming, private sector firms. The 2012 Survey of Business Owners, the most recent such information available, indicates that women-owned firms employed more than 8.4 million people, and minority-owned firms employed more than 7 million people. Those are huge numbers:  by comparison, in 2014 fewer than 8 million people were employed in the entire financial services sector.

When small businesses succeed, they send constant ripples of energy across the economy and throughout our communities. For example, a  2013 study by the Federal Reserve Bank of Atlanta found that counties with higher percentages of their workforce employed by small businesses showed higher local income, higher employment rates, and lower poverty rates. In order to succeed, businesses need access to financing to smooth their cash flows for current operations, meet unexpected contingencies, and invest in their enterprises to take advantage of opportunities as they arise. Another study found that the inability to obtain financing may have prompted one-in-three small businesses to trim their workforces and one-in-five to cut benefits.

Unfortunately, much of the available data on small business lending is too dated or too spotty to paint a full picture of the current state of access to credit for small businesses, especially those owned by women and minorities. For example, we do not know whether certain types of businesses, or those in particular places, may have more or less access to credit. We do not know the extent to which small business lending is shifting from banks to alternative lenders. Nor do we know the extent to which the credit constraints that resulted from the Great Recession persist and to what extent. The Beige Book produced by the Federal Reserve on a regular basis is a survey of economic conditions that contains a huge amount of anecdotal information about business activity around the country. But it has no systematic data on how small businesses are faring and whether or how much they are being held back by financing constraints.

Given the importance of small businesses to our economy and their critical need to access financing if they are to prosper and grow, it is vitally important to fill in the blanks on how small businesses are able to engage with the credit markets. That is why Congress required financial institutions to report information about their applications for credit from small businesses in accordance with regulations to be issued by the Consumer Bureau. And that is why we are here today for this field hearing.

***

The inquiry we are launching today is a first step toward crafting this mandated rule to collect and report on small business lending data. To prepare for the project, we have been building an outstanding team of experts in small business lending. We are enhancing our knowledge and understanding based on our Equal Credit Opportunity Act compliance work with small business lenders, which is helping us learn more about the credit application process; existing data collection processes; and the nature, extent, and management of fair lending risk. We also have learned much from our work on the reporting of home loans under the Home Mortgage Disclosure Act, which has evolved and improved considerably over the past forty years.

At the same time, we recognize that the small business lending market is much different from the mortgage market. It is even more diverse in its range of products and providers, which range from large banks and community banks to marketplace lenders and other emerging players in the fintech space. Community banks play an outsized role in making credit available to small businesses in their local communities. And unlike the mortgage market, many small business lenders have no standard underwriting criteria or widely accepted scoring models. For these reasons and more, we will proceed carefully as we work toward meeting our statutory responsibilities. And we will seek to do so in ways that minimize the burdens on industry. Our Request for Information released today focuses on several issues.

First, we want to determine how best to define “small business” for these purposes. Despite the great importance of these firms to our economy, there is surprisingly little consensus on what constitutes a small business. For example, the Small Business Administration, in overseeing federal contracting, sometimes looks at the number of employees, sometimes looks at the annual receipts, and applies different thresholds for different industries. For our part, the Consumer Bureau is thinking about how to develop a definition that is consistent with the Small Business Act, but can be tailored to the purposes of collecting business lending data. So we are looking at how the lending industry defines small businesses and how that affects their credit application processes. Having this information will help us develop a practical definition that advances our goals and aligns with the common practices of those who lend to small businesses.

Second, we want to learn more about where small businesses seek financing and the kinds of loan products that are made available to them. Our initial research tells us that term loans, lines of credit, and credit cards are the all-purpose products used most often by our small businesses. In fact, they make up an estimated three-fourths of the debt in the small business financing market, excluding the financing that merchants or service providers extend to their small business customers to finance purchases of the sellers’ own goods and services. But we want to find out if other important financing sources are also being tapped by small businesses. Currently, we have limited ability to measure accurately the prevalence of lenders and the products they offer. We also want to learn more about the roles that marketplace lenders, brokers, dealers, and other third parties may play in the application process for these loans. At the same time, we are exploring whether specific types of institutions should be exempted from the requirement to collect and submit data on small business lending.

Third, we are seeking comment about the categories of data on small business lending that are currently used, maintained, and reported by financial institutions. In the statute, Congress identified specific pieces of information that should be collected and reported. They include the amount and type of financing applied for; the size and location of the business; the action taken on the application; and the race, ethnicity, and gender of the principal owners. Congress determined that the reporting and disclosure of this information would provide a major boost in understanding small business lending. At the same time, we are sensitive to the fact that various financial institutions may not currently be collecting and reporting all of this information in the context of other regulatory requirements. And we understand that the changes imposed by this rule will create implementation and operational challenges.

So we will look into clarifying the precise meaning of some of these required data elements to make sure they are understood and consistently reported. We will be considering whether to add a small number of additional data points to reduce the possibility of misinterpretations or incorrect conclusions when working with more limited information. To this end, we are seeking input on the kinds of data different types of lenders are currently considering in their application processes, as well as any technical challenges posed by collecting and reporting this data. We will put all of this information to work in thinking carefully about how to fashion the regulation mandated by Congress under Section 1071 of the Dodd-Frank Act.

Finally, the Request for Information seeks input on the privacy implications that may arise from disclosure of the information that is reported on small business lending. The law requires the Consumer Bureau to provide the public with information that will enable communities, government entities, and creditors to identify community development needs and opportunities for small businesses, especially those owned by women and minorities. But we also are authorized to limit the data that is made public to advance privacy interests. So we will be exploring options that protect the privacy of applicants and borrowers, as well as the confidentiality interests of financial institutions that are engaged in the lending process.

***

The announcement we are making today, and the work we are doing here, reflect central tenets of the Consumer Financial Protection Bureau. We are committed to evidence-based decision-making. We aim to develop rules that meet our objectives without creating unintended consequences or undue burdens. We want to see a financial marketplace that offers fairness and opportunity not just to some, but to all. A marketplace that does so without regard to race, ethnicity, gender, or any of the other elements of our fabulous American mosaic. We all know that small businesses are powerful economic engines. They supply jobs that lift people out of poverty or dependence, teach essential skills, and serve as backbones of our communities. So we mean to meet our obligation to develop data that will shed light on their ability to access much-needed financing. It is essential to their future growth and prosperity, and therefore to the growth and prosperity of us all. Because what Cicero observed in ancient Rome still holds true today. He said, “Nothing so cements and holds together all the parts of a society as faith or credit.”  Our communities depend on both of those precious things just as much today.

As we launch this inquiry, I want to remind all of you that we value the feedback we get. We take it seriously, consider it carefully, and integrate it into our thinking and our approach as we figure out how best to go forward with this work. So we ask you to share your thoughts and experiences to help us get there. And we thank you again for joining us today.

###

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

Subscribe!

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 3,780 other subscribers

Upcoming Live Music

No shows booked at the moment.

Featured: Viento Callejero with Marlene Beltran

Featured: Guitarist Gloria Estrada & Viento Callejero

Susie Garcia & Las Colibri

Follow me on Twitter

RSS Alexa Blog

  • Developing a Marketing Strategy
    The best way to start developing a marketing strategy is to reflect back on your business’s successes and failures. By assessing what worked and what didn’t work from past campaigns, you can identify tactics to focus on or avoid in upcoming plans. You can see gaps in your marketing initiatives and point out places where […]
  • How to Reach Your Growth Potential Through Lead Generation Marketing
    For a business to reach their full growth potential, they must connect with a large audience, keep their pipeline filled with prospects, and stay in touch with customers. They must have a strong lead generation and nurturing plan that attracts interested audiences and keeps them engaged. The rest of this post will show you how […]
  • The Beginner’s Guide to Small Business Internet Marketing
    Small business internet marketing can seem overwhelming for those just getting started. It’s a vast landscape and involves many moving parts. After all, different platforms and marketing methods resonate differently for different audiences, industries, niches and products. For example, the fitness industry is very prominent on Instagram, while artists and musicians find a place on […]
  • Don’t Forget These 9 Growth Metrics When Analyzing Your Marketing Results
    Reporting and analysis are crucial parts of successfully growing a company. Reflecting on growth metrics helps you identify gaps in strategy, areas for improvement, and tactics that have worked well and should continue to be invested in. But your metrics can only help you if you know what information to monitor and measure for your […]
  • Discover New Ways to Find and Reach Your Audience with Audience Overlap
    We recently released some big new changes to our Audience Overlap Tool. It’s never been easier to understand your audience, identify under-the-radar competitors, and discover new partnership opportunities. Plus, we added a new interactive visualization to make exploring sites easier and more fun! Here’s what’s new in Audience Overlap Find Related Sites More Easily Audience […]

RSS Search Engine Watch

  • How much should SEO cost?
    The price associated with an SEO campaign can be determined by a significant amount of factors: what work has been conducted previously? What internal resources are available to support the campaign? How competitive is the industry? What are the goals of the campaign? As a result, pricing SEO can sometimes feel akin to a ‘how […]
  • How to future-proof your SEO for 2018
    With just a couple of weeks left in December, it’s time to start preparing for what SEO might look like in 2018. A little while ago, we highlighted our seven SEO trends for 2018 that you should be watching out for. But what practical steps should you be taking with your SEO to prepare for […]
  • How to use Google Trends for SEO
    Google Trends, first launched in 2006, provides marketers with invaluable insights into how people search on the world's most popular search engine. Over time, the power of this service has been tapped in new and enlightening ways. Here's how you can use it for SEO.
  • The highs and lows of enterprise SEO: Which strategies paid off best in 2017?
    As we come to the end of 2017 and embark on the inevitable dozens of review articles looking back over the past year of search, it’s as good a time as any to reflect on SEO strategy. What are the greatest challenges being faced by the industry as a whole? What have been the biggest […]
  • Highlights from TechSEO Boost: The key trends in technical SEO
    Last week, the industry's first ever technical SEO conference was held in Boston. TechSEO Boost, organized by Catalyst, set out to be a "technical SEO conference that challenges even developers and code jockeys". Here are the highlights from a packed event.

RSS Search Engine Land

  • SearchCap: Bing & Reddit, Google travel pricing & meta descriptions
    Below is what happened in search today, as reported on Search Engine Land and from other places across the web. The post SearchCap: Bing & Reddit, Google travel pricing & meta descriptions appeared first on Search Engine Land. Please visit Search Engine Land for the full article.
  • Google: Fundamentals of writing meta descriptions don’t change with longer search snippets
    Google has officially commented about what webmasters should focus on when writing meta descriptions after Google extended their search result snippets. The post Google: Fundamentals of writing meta descriptions don’t change with longer search snippets appeared first on Search Engine Land. Please visit Search Engine Land for the full article.
  • Google adds price tracking features to flight search, hotel search and Google Trips
    Google adds several features to help searchers plan their getaways. The post Google adds price tracking features to flight search, hotel search and Google Trips appeared first on Search Engine Land. Please visit Search Engine Land for the full article.
  • Bing announces AI-powered new ‘intelligent search’ features
    None of the features or changes is disruptive, but they collectively point to the fact that search evolution is accelerating. The post Bing announces AI-powered new ‘intelligent search’ features appeared first on Search Engine Land. Please visit Search Engine Land for the full article.
  • SEO in 2018: Optimizing for voice search
    Columnist Bryson Meunier argues that by understanding the nuances of voice search, marketers can do a better job of helping searchers find exactly what they're looking for when they're asking for it by voice. The post SEO in 2018: Optimizing for voice search appeared first on Search Engine Land. Please visit Search Engine Land for […]

RSS Local Business Locator Blog

  • Consider Supporting This Cause: Cathy Fragoso Medical Fund
    Click Here to Donate to this Cause!       Cathy Bishop Fragoso, a Riverside County Social worker/Supervisor (DPSS) for more than 20 years – a mother, grandmother and widow – suffered catastrophic injuries when illiegal street racers, in 2 separate vehicles, slammed into the vehicle she was a back passenger in, with one car […]
  • Meet HAMLET PAREDES the “Tabaquero” @ Zafutos Cigar Haven in Ontario, Ca
        Hamlet Paredes in person @ ZAFUTOS on Friday, December 15, 2017. Hamlet will be rolling cigars. There will be raffles, refreshments and cigar deals! 990 Ontario Mills Dr., Suite E Ontario, Ca 91764
  • Meet HAMLET PAREDES of Rocky Patel Premium Cigars @ Zafutos Cigar Lounge
        Hamlet Paredes of Rocky Patel Premium Cigars   Meet the incomparable HAMLET PAREDES @ Zafutos Cigar Lounge in Ontario on Friday, December 15th, 2017 @ 5:00 p.m. URL
  • Did Fresno Police Chief Jerry Dyer Murder His Lieutenant?
      Did Fresno Police Chief Jerry Dyer Murder His Police Lieutenant – Jose Moralez?     Updated: November 2, 2017 after receiving new information. Official documents and evidence soon to be published on this site. More evidence and testimony set aside and reserved; NOT published herein.   Why do people believe that FRESNO POLICE CHIEF […]
  • CHAM (“Baby Cham”) in Association with Sevilla Local Media – “Money Wine” Release
        Sevilla Local Media, LLC (951) 289-1710 sevillalocalmedia@gmail.com www.sevillalocalmedia.com   For Immediate Release: Sevilla Local Media, a Riverside, California, based Digital Marketing & SEO Company that also manages and promotes a select stable of recording artists, announces an official association with CHAM (Damian Beckett), more famously known as BABY CHAM, specific to marketing, promotion […]

RSS LBL Blogspot Feed

RSS Music Connection

  • The Latin Grammy Cultural Foundation Announces the Carlos Vives Scholarship December 14, 2017
    The Latin Grammy  Cultural Foundation announced on Dec.14 that it is accepting applications for the Carlos Vives Scholarship from music students accepted to Berklee College of Music, who are interested in Latin music. The four year scholarship, which holds a maximum value of $200,000, will be awarded toward a bachelor's degree. Singer, composer, actor, businessman and […]
  • Act Casual at PJ’s Lager House in Detroit, MI December 14, 2017
    Material: Act Casual is a group of highly skilled musical chefs that each stirs into the pot their own batch of scintillating ingredients. A dash of funk, a dollop of country, a pinch of jazz and a helping of blues are all essential in making this stew a success. Their tunes are original and span […]
  • Buddy Rich Centennial at the Grammy Museum in Los Angeles, CA December 14, 2017
    To honor drumming legend Buddy Rich's centennial, Rich's daughter Cathy Rich, Red Hot Chili Pepper's drummer Chad Smith and Buddy Rich Band drummer Gregg Potter were interviewed by Grammy Museum Executive Director Scott Goldman.  The Q&A included video footage of Rich's TV performances on the Tonight Show with Johnny Carson and the Muppets as well as […]
  • Evanescence at Sony Centre For The Performing Arts in Toronto, Canada December 14, 2017
    Evanescence has been firing up their engines for the last two years, after having taken several years off. Last month, they released “Synthesis,” an album of hits re-worked with an orchestral accompaniment, along with three new tracks for the album including the first single “Imperfection.” Now, they’ve taken this album on the road for a […]
  • Biggest Myths Musicians Believe December 14, 2017
    The biggest myth I come across when I talk to so many singers, songwriters and independent artists --- is that "If you build it.. they will come". Nothing could be further from the truth. https://savvymusicianacademy.com/webinar-tribe It's not all bad news though! We are in the wild west of the music industry right now. The opportunities […]

RSS Political News

  • Report: Paul Ryan Stepping Down… Became Clear What Was Coming December 14, 2017
    Looking ahead to what will likely be a very contentious 2018 midterm election season, a top Republican may not have the stomach for a fight that’s going to be coming at him from both ends of the political spectrum. According to Politico, Speaker of the House Paul Ryan has told several top allies that he intends to… […]
  • 3 Florida Men Face Serious Criminal Charges After Video Shows Torture on Speedboat December 14, 2017
    Over the summer a horrifying video emerged on social media that showed a shark tied to the back of a speed boat being effectively dragged to its death by a group of very cruel but clearly unidentifiable Florida men. These men have since been identified and arrested. Published online in July, the video wound up triggering mass… […]
  • Country Superstar Should Be Boycotted After Targeting 2nd Amendment Enthusiasts December 14, 2017
    An increasing number of conservatives believe country singer Sheryl Crow should be boycotted over her growing anti-Second Amendment antics and rhetoric, which now include her even blasting her fellow peers in the industry for not being as fanatical as her about reforming gun laws. “You would think after Vegas we would see some leadership from our… […]
  • As Alabama Election Drew to Close, Dems Began Siding With Politicians Over Female Accusers Again December 14, 2017
    It looks like Democrats have very short memories. After months of repeating slogans like “Believe All Women” and “She Persisted,” it appears that the left changes their tune when it involves their own side. Now, it’s “defend accused sexual abusers.” Despite insisting that former Senate candidate Roy Moore’s female accusers had to be believed even… […]
  • Video Captures Hunter Bagging Duck Without Firing a Single Shot December 14, 2017
    Hunters from around the country are mesmerized by a video that’s been making the rounds on Facebook. It’s so remarkable, some have even called it a fake. Take a look: The video shows two men enjoying a morning hunt, when a duck suddenly comes into view. A woman in the background sees the bird and… […]
Please wait...

Subscribe to our newsletter

Want to be notified when our article is published? Enter your email address and name below to be the first to know.
%d bloggers like this: