In the News
House Dem Wants Info On Fintech Small-Biz Lending
Law360By Evan Weinberger
Tuesday, June 23, 2017
A Democratic lawmaker on Friday asked several online small-business lenders to provide information about their lending practices, as part of an investigation into potential discrimination against minority-owned businesses.
U.S. Rep. Emanuel Cleaver of Missouri, a member of the House Financial Services Committee, sent letters to some of the biggest names in small-business financial-technology lending, asking them to outline how the algorithms they use to evaluate borrowers work. He said he is also interested to know whether minority small-business owners are being targeted for loans known as “merchant cash advances,” which have characteristics similar to payday loans offered to individuals.
“FinTech companies geared toward lending to small businesses by using certain biased algorithms for creditworthiness have the potential of charging disproportionately higher rates to minority-owned businesses,” Cleaver said in a statement.
“It is therefore important to determine if minority-owned small businesses are being charged higher rates, or if they have been subject to predatory fees by these FinTech firms,” he added.
Cleaver sent the letters to companies such as Lending Club, Biz2Credit, Fora Financial, Prosper and Lend Up and gave them until Aug. 10 to respond.