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CBA Comment Letter on SBA's SBLC Moratorium Rescission
Dear Director Seaborn:
The Consumer Bankers Association (CBA) appreciates the opportunity to submit this letter in response to the U.S. Small Business Administration’s (SBA or Agency) request for comments on the SBA’s proposal to lift the moratorium on licensing new Small Business Lending Companies (SBLCs) and add a new type of entity called a Mission-Based SBLC (Proposed Rule).
In the Proposed Rule, SBA proposes to lift the longstanding moratorium on the number of non-federally regulated institutions that can make loans under the 7(a) program and to create a new type of SBLC called “Mission-Based SBLCs.” Accordingly, the Proposed Rule intends to open SBA’s flagship 7(a) program to a potentially unlimited number of SBLC lenders, including nonbank financial technology companies, or “FinTechs,” that would be regulated solely by SBA. SBA claims that the purpose of removing the moratorium for all types of SBLCs is to fill a capital market gap for underserved markets identified by SBA.
CBA represents many of the country’s largest lenders participating in the SBA’s 7(a) loan program and we welcome competition from any lender as long as those lenders operate by equal standards and under adequate scrutiny. While the SBA’s stated intention for the proposed changes is to aid traditionally underserved borrowers, a goal which CBA members fully support, we believe the changes, as proposed, will not actually help minority and underserved communities, and could unintentionally harm the very borrowers that SBA is trying to aid. The SBA would be better served to work with Congress to adjust overburdensome lending requirements and low guarantee levels to existing programs (e.g., 7(a) Express), ensuring more low-dollar loans to those small business borrowers in need.