NCRC Testifies at CFPB Field Hearing on Small Business Lending Trends

Washington, DC – Today, National Community Reinvestment Coalition (NCRC) Senior Advisor Josh Silver testified before a Consumer Financial Protection Bureau (CFPB) field hearing regarding small business lending trends. In the testimony, NCRC detailed the difficulties that many women-, minority-owned, and very small businesses experience accessing small business lending. NCRC also discussed the benefits of the CFPB’s enhanced collection of small business lending data as mandated by Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“A variety of reasons exist for these racial, gender, and regional disparities [in small business lending],” said Josh Silver, Senior Advisor at NCRC. “Some of it is due to the characteristics of the small businesses, such as lack of collateral or lower credit scores. Some of it is due to lack of access to bank branches. Research has demonstrated that higher numbers of bank branches in a geographical area boosts small business lending. Unfortunately, however, research also documents the persistence of lending discrimination.

“Here is where an obscure provision, Section 1071, of the Dodd Frank Wall Street Reform and Consumer Protection Act will be invaluable. …Section 1071 requires the CFPB to collect data from lending institutions regarding demographic characteristics of small businesses and to publicly report the data. Vital data to be collected includes the race, gender, and revenue size of the small business. The CFPB also has the discretion to collect data from a wide array of lenders – both banks and non-banks – and to include additional information about loan terms and conditions in the data.

“Part of the reason why small businesses experienced a surge of high cost lending, particularly from online lenders, in the last few years is that lending trends remained opaque, cloaked in a veil of secrecy. Publicly available data pierces that veil and encourages lenders to compete against each other in serving communities with responsible lending. What could be more American and capitalistic than that?”

The testimony can be read here.

 

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About NCRC:
NCRC and its grassroots member organizations create opportunities for people to build wealth. We work with community leaders, policymakers and financial institutions to champion fairness in banking, housing and business development.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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