Rep. Emanuel Cleaver II has begun an investigation into small business financial technology (FinTech) lending, expressing concern that “some FinTech lenders may be trapping small business owners in cycles of debt or charging higher rates to entrepreneurs of color.” Cleaver stated that his investigation is particularly interested in payday loans for small businesses because the payday loan industry has frequently “targeted communities of color with high rates and fees.”
According to Cleaver, “FinTech lending companies, also known as alternative small-business lending, are a fast growing industry offering a new wave of innovation – and also pose many new risks.” Although FinTech lenders must comply with anti-discrimination laws such as the Equal Credit Opportunity Act, they do not have to undergo supervisory exams like credit unions or community banks. Additionally, small business borrowers do not have the same level of protection, such as the Truth in Lending Act, which consumer borrowers have.
On March 15, 2017, Cleaver contacted the Consumer Financial Protection Bureau (CFPB) and requested that the CFPB investigate FinTech lenders. On June 22, 2017, Cleaver contacted the chief executive officers of several FinTech small business lenders, asking 10 questions related to each company’s general profile, each company’s approach to protecting borrowers from discrimination, and each company’s disclosures and transparency towards borrowers. The congressman also asked that the companies, which included Biz2Credit, Fora Financial, Lending Club, Lend Up, and Prosper, respond no later than August 10, 2017.