Today, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, delivered the following testimony at Rules Committee in response to Senate Joint Resolution 32, which is a Republican-led resolution aimed at overturning a Consumer Financial Protection Bureau rule to support small businesses by improving transparency and fairness in small business lending.
Watch the full testimony HERE.
Good evening, Chairman Cole, Ranking Member McGovern, and Members of the Committee. I appreciate the opportunity to testify before you today regarding Senate Joint Resolution 32. This harmful piece of legislation would overturn a critical rule that was finalized by Consumer Financial Protection Bureau – or CFPB – under the leadership of Director Rohit Chopra to support small businesses. Specifically, CFPB’s rule would require lenders to report to the public on their small business lending practices! activities, finally implementing Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that I worked on with our Small Business Committee Ranking Member, Representative. Nydia Velazquez.
Now, I understand why the largest banks don’t want to tell the public about their lending. This data will shine a bright light on the opaque small business lending market, revealing what interest rates and other financial terms are being offered to small businesses throughout the country. It will also help Congress and others to learn what types of businesses are getting approved and which are not. Transparency will promote competition and reduce borrowing costs for small businesses while also helping to eliminate discrimination. We know this because lenders have been successfully collecting and reporting similar data for mortgage loans pursuant to the Home Mortgage Disclosure Act, or HMDA, for decades.
It is hard enough to run a small business already; we should not make it harder by eliminating a tool the CFPB will use to protect these businesses from being discriminated against. Whether it’s a small family-owned farm or a tech startup founded by women, every small business should have a fair chance of getting access to the capital they need to build their business.
Unfortunately, this Resolution is yet another baseless attack against the CFPB by Republicans, despite the agency’s broad support from our constituents across the political spectrum. A recent bipartisan poll found that 82 percent of Americans, including 77 percent of Republicans support the CFPB and its mission. Despite this broad support, Republicans have attacked the CFPB repeatedly in the courts and here in Congress with legislation they have advanced. While my colleagues across the aisle argue they just want accountability, House Republicans revealed how disconnected they are with the American people when the majority of them supported an amendment to the FSGG appropriations bill to zero out the CFPB’s budget.
Similarly, Senate Joint Resolution 32 goes to the extreme. It does not merely overturn the CFPB’s small business lending rule. This Resolution would actively prohibit the CFPB from issuing any similar rule in the future, restricting the agency’s ability to comply with its legal obligation to issue such a rule under the Dodd-Frank Act.
To illustrate the need for this long, overdue rule, Members should bear in mind that this is a legal obligation that small business owners themselves want the CFPB to honor. The CFPB issued the rule pursuant to a court-supervised settlement agreement after several small business owners from Iowa and Oregon, who faced repeated incidents of discrimination when applying for loans, successfully sued the agency for failing to write this rule.
Many of us also recall the challenges that too many small businesses faced during the COVID-19 pandemic. Unfortunately, when Congress stepped in to provide relief through the Paycheck Protection Program, or PPP, the big banks that were tasked with implementing the program chose to prioritize their concierge clients, initially leaving small businesses, especially those owned by people of color, out in the cold.
It is perhaps not a coincidence that the same big banks who misused the PPP to the detriment of small businesses during the early stages of pandemic are now pushing for the passage of Senate Joint Resolution 32, which would help them continue to operate with a lack of transparency and avoid accountability. If the CFPB’s rule had been in place during the pandemic, the transparency would have likely deterred such shameful behavior and would have helped ensure the program was administered more equitably.
We just celebrated Small Business Saturday last weekend, and if we are serious about helping small businesses thrive, we have to recognize that access to capital is a key challenge that many small businesses face. For example, Goldman Sachs found that over 75% of small businesses they surveyed were concerned about access to capital. Research has also shown that minority-, women-, and LGBTQ+ owned businesses are more likely to be denied loans and pay steeper interest rates.
So, to emphasize and expand on why the House should reject this resolution and support the CFPB’s rule, it would:
- Promote competition through much needed transparency regarding the rates and other financing terms lenders offer small businesses;
- Expand access to credit and drive down borrowing costs through increased competition;
- Expose discriminatory lending practices to ensure equal access to credit for all small businesses;
- Identify community development opportunities that would benefit underserved businesses, especially businesses owned by women, LGBTQ+ individuals, and people of color; and
- Empower policymakers with key data points for 95% of small business loans made by banks and credit unions year after year -- a vast improvement compared to the limited market surveys we currently have -- that will inform additional steps that Federal agencies can take to help small businesses with their financing needs.
In designing the rule, the CFPB consulted with a small business advisory panel and considered feedback provided by a wide range of stakeholders. In issuing the final rule, they were very mindful of its impact community financial institutions. For example, the rule completely exempts lenders that originate fewer than 100 small business loans in each of the two preceding years. For small lenders that originate more than 100 loans, they would have more than two years before they would need to begin to comply with the rule in 2026.
In conclusion, I would like to highlight that more than 150 organizations oppose S.J. Res 32, including organizations representing small businesses and community financial institutions. I would like to ask unanimous consent to submit a letter of opposition reflecting this fact for the record. I would also highlight that all House Financial Services Committee Democratic Members rightfully rejected an identical measure when it was marked up earlier this year. So, I would urge this Committee to stand with small businesses who are looking for fair access to affordable loans and reject Senate Joint Resolution 32. I would be happy to answer your questions, and I yield back.