The U.S. Senate has voted to block a new lending rule opposed by the National Federation of Independent Business (NFIB), one of the largest voices representing American entrepreneurs, after receiving a letter from the organization urging Congress to oppose the policy due to fears it would tighten small business owners’ access to vital funding.
The Consumer Financial Protection Bureau (CFPB) 1071 Small Business Lending Rule, or simply CFPB 1071, would require entrepreneurs, specifically those with 20 employees or less, and their lenders to submit and collect additional paperwork when applying for a loan. The information within the documents, which include demographics and other data points, would then be sent to the bureau. If unopposed, the policy would have become effective on January 1, 2024. The NFIB resisted the rule on two counts.
First, the organization argued that small business owners and the local financial institutions that support them are already required to submit substantial amounts of paperwork when applying for a loan. If passed, the CFPB 1071 lending rule may have overburdened those who lack the means to create and process extensive documentation. “Small businesses are already inundated with federal paperwork when opening and running a business and applying for loans,” stated Kevin Kuhlman, vice president of federal government relations, in a letter to the U.S. Senate. “They do not have the resources or staff to handle additional paperwork that this rule will require, and neither do the small financial institutions they overwhelming use.”
Second, if small business owners were unable to supply the documents required by the proposed lending rule, their operations may have been forced to go without funds. Entrepreneurs are already struggling to obtain credit in the post-pandemic economy, an issue aggravated by the collapse of several banks earlier this year. In his letter to Congress, Kuhlmna noted that 67% of all NFIB members relied on small and regional banks for their loans, meaning that if these institutions were forced to comply with CFPB 1071, business loans could become even more inaccessible. “This rule would not only have a negative impact on credit unions and small banks nationwide but also have the potential to limit small businesses’ access to credit,” he noted.
To prevent the enactment of CFPB 1071, the NFIB urged lawmakers to uphold S.J. Res. 32, a Congressional Review Act resolution repealing the policy. On October 18, the Senate voted 53 to 44 in favor of overturning the lending rule, with the support of every Republican lawmaker, three Democratic senators, and two independents.