Today, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, delivered the following statement on the House floor in opposition of Senate Joint Resolution 32, a Republican-led resolution that would hurt small businesses by overturning a Consumer Financial Protection Bureau (CFPB) rule to support small businesses by improving transparency and fairness in small business lending.
Madam Speaker, Senate Joint Resolution 32 would repeal the CFPB’s small business lending rule, which was required by Congress in Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFPB’s rule would simply require lenders to collect and report data on small business lending. This data will help drive competition in the market, lowering small business costs, and will help combat discrimination.
I worked closely with my colleague, Congresswoman Nydia Velazquez, who is the Ranking Member of the Small Business Committee, to ensure that this provision was included in the Dodd-Frank Act because we both knew how critical this data would be to helping small businesses.
Access to capital is a key challenge that many small businesses face. For example, Goldman Sachs found that over 75 percent 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. Access to capital is an issue for many family farms who don’t have the same access that larger agriculture corporations have. And yes, access to capital is an issue for our young people working in the gig economy, seeking to start a business of their own, but too often are told “No” by banks.
Unfortunately, Section 1071 of Dodd-Frank was not implemented for 13 years. In fact, small business owners had to sue the CFPB under the Trump administration to force implementation of this rule.
One of the small business owners who sued the CFPB was ReShonda Young, a Black woman who founded Popcorn Heaven, a small business selling gourmet popcorn in Waterloo, Iowa.
Ms. Young explained that she was the victim of discriminatory lending practices, saying “In several instances there was just blatant discrimination, and in other cases I found out about it later on. And it wasn’t just me…..” She further explained that, “I had a regular hourly income, my personal expenses were pretty low so it wasn’t like I couldn’t cash infuse from my personal [income] if I needed to, my credit score was good, but I couldn’t get what I needed… Enough of the disrespect, enough with the blatant disrespect, when a bank says ‘we don’t want your business for any good reason, why don’t you move your accounts elsewhere.’ It was at that point, okay something has to be done."
The CFPB, under the leadership of a Trump appointee, settled the case and agreed to a court-supervised timeline, resulting in the final rule that the CFPB issued this year.
Now that the CFPB’s rule has been finalized after all of these years, so many other small businesses in Iowa, in North Carolina, in Texas, in California, and all across the country will be able to reap the benefits of a more transparent lending marketplace that Ms. Young should have had.
Specifically, the CFPB rule will allow small businesses to comparison shop between lenders and see how much other small businesses are being charged for their loans. This price transparency is essential to a competitive and fair marketplace.
In designing the rule, the CFPB was mindful of its impact on 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. This fully exempts more than 80 percent of depository institutions, including 98 percent of credit unions. For 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.
Make no mistake, Senate Joint Resolution 32 is just another part of Republicans’ relentless attack on the CFPB. They have erroneously claimed that the CFPB is unconstitutional and unaccountable, and have even gone so far as to attempt to eliminate the agency altogether.
But our constituents disagree. A recent bipartisan poll found that 82 percent of Americans, including 77 percent of Republicans support the CFPB and its mission.
With that, I would like to highlight 3 main points about the CFPB’s small business lending rule that this Resolution would repeal.
First, the data collected under the rule is very similar to data collected under the Home Mortgage Disclosure Act or HMDA. This data collection under HMDA has been going on for decades, successfully bringing much needed transparency to the mortgage market. Despite misleading claims by Republicans, I want to be very clear that small businesses are not required to provide demographic information about their ownership under the rule. It is completely voluntary.
Second, this rule will help ALL small businesses thrive by providing greater transparency that will drive competition in the small business lending market, ultimately increasing access to credit and lowering interest rates for small businesses.
Third, as I mentioned earlier, we have seen how HMDA data for mortgages have been instrumental to identifying discriminatory trends like modern-day redlining. The CFPB’s rule would similarly help prevent discrimination in the small business lending market, giving our regulators and the public another tool to identify discriminatory trends.
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, including some Members of Congress, 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, opposing the CFPB, which would help them continue to operate with a lack of transparency and avoid accountability.
However, the big banks are alone in their support for this misguided resolution. In fact, more than 230 organizations representing small businesses, family farmers, community lenders, and others strongly oppose S. J. Res. 32.
There’s a lot of talk in Congress about how we love small businesses, how we support small businesses. But the proof of the pudding is in the eating. Therefore, I urge Members on both sides of the aisle to actually do something to help small businesses, stop talking about your support of small businesses when you know they need access to capital that they don’t have, and so we want to do something real for small businesses. If you do vote down this harmful resolution.