Opportunity Fund Advocates for Responsible Lending

Yesterday, Opportunity Fund, alongside fellow members of the Responsible Business Lending Coalition (RBLC) and nearly 60 other organizations, submitted a comment letter outlining how California’s Department of Business Oversight (DBO) should bring true cost transparency to the small business lending market.

Why is this important? In the aftermath of the Great Recession of 2008, banks dramatically cut back lending to small businesses and a new wave of alternative lenders, many of them offering loans exclusively online, expanded into the frozen credit market. While some of these companies are responsible lenders offering affordable products that help small businesses grow, many of these new lenders offer alternative financing with an average annualized rate of 94% or higher that is never actually disclosed to the borrower.

The comment letter is a follow-up to last year’s CA Senate Bill 1235, the first ever Truth-In-Lending Act (TILA) for small business lending in the nation. While the bill offered a path towards transparency, it is up to California’s chief financial regulator, the DBO, to specifically define and implement the disclosures outlined in the bill.

Here’s what we urge the DBO to consider:

– APR disclosures on all products

– A disclosure of total estimated monthly payment

Requiring these two key disclosures will ensure small business borrowers can compare costs across a range of financing products. This was the intent of the historic law helped pass last year.

Democracy in action is a beautiful thing, and we are grateful Opportunity Fund can voice these comments to the DBO.

This is likely step one of a multi-step process. For more updates, follow along right here on our blog!