Discrimination in Small Business Lending

Dear Commissioner,

We, the undersigned small business owners, urge the Federal Trade Commission (FTC) to immediately begin an investigation into discrimination in small business lending.

Since the 2008 financial crisis, bank loans to small business have decreased by 20 percent, while loans to larger businesses have increased. Nearly half of all small business owners have experienced problems obtaining credit. Though all small businesses are affected, the problem is especially dire for people of color and woman-owned businesses.

  • Women-owned firms have a loan approval rate that is 15 to 20 percent lower than their male counterparts.
  • Businesses located in neighborhoods where majority of residents are of color are less than half as likely to receive loans compared to businesses in predominantly White neighborhoods.
  • Less than one-third of borrowers of color are approved for loans, compared to two-thirds of White borrowers.
  • Also, nearly one-third of Black-owned businesses reported receiving less in loans than requested, compared to less than one-fifth of White-owned businesses.

As a result, many small business owners are forced to turn to predatory lenders, including so-called “fintech” loans (loans given out through non-bank financial technology, i.e. mobile payments, money transfers, loan fundraising, etc.) that are just as predatory as consumer payday loans. The average fintech borrower pays an APR of 94 percent, with rates reaching as high as 358 percent. Predatory loans with high interest rates, onerous terms, and aggressive debt collection trap small business owners in never-ending debt cycles.

Given the troubling realities cited above, we urge the Federal Trade Commission to investigate these disparities and take enforcement actions to deter discrimination in small business lending.

Sincerely,

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