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CBA Urges Congress To Address Harmful Changes Made To SBA’s Signature Lending Program
In a new letter sent to the U.S. House Committee on Small Business (Committee), the Consumer Bankers Association (CBA) and other leading financial groups encouraged lawmakers to work towards a bipartisan solution in response to issues arising from recent policy changes made to the 7(a) program by the Small Business Administration (SBA). Specifically, the letter identifies key industry priorities and concerns for the Committee to consider during a scheduled markup tomorrow to consider such legislation.
As the leading organizations representing virtually all the thousands of lenders participating in the SBA’s signature 7(a) loan program, the letter reaffirms deep concerns from industry regarding changes made by the SBA that could harm borrowers, lenders, and the program, at large:
“We support the mission of the 7(a) program to encourage lenders to provide loans to underserved small businesses. However, we remain concerned that SBA’s decision to lift the moratorium on the number of non-Federally regulated lenders in the 7(a) program while simultaneously loosening underwriting standards may negatively impact the performance of 7(a) loans, threaten the integrity of the program, and lead to increased borrower and lender fees.”
With this change to the 7(a) program, SBA serves as the primary regulator to an unlimited number of lenders who are not held to the same level of federal oversight as traditional banks. As a result, CBA encourages legislative action, not unilateral rule and standard operating procedure manuals (SOPs) to mitigate risks on the government’s balance sheets:
“While we understand and fully support SBA’s stated goals of aiding underserved borrowers, we remain concerned that SBA’s changes do not meet those goals and may, in fact, create the potential for serious risk to SBA loan program integrity and to borrowers. The recent rule and SOP changes erode the reliance upon decades-long prudent SBA lending standards, which have ensured acceptable loss rates and have kept program costs down for the very borrowers we all aim to aid while avoiding the need for a taxpayer subsidy.”
Recognizing a shared commitment to protect the impact and legacy of the 7(a) program, the groups concluded:
“We are greatly encouraged that it appears both the lending industry and Congress are united in pushing back on these sweeping changes. Collectively, we urge the Committee to craft a comprehensive legislative solution that can serve as a bicameral path forward, using many of the underlying provisions in the Senate Committee’s bill on these issues while building upon and improving some of those provisions.”
To read the full letter, click HERE.
In January, CBA submitted a comment letter to SBA Administrator Isabella Guzman expressing deep concerns with the agency’s proposed changes to the 7(a) program. To read the letter, click HERE.