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FinTech Lenders on Notice: Congressman Launches Investigation into FinTech Lending

Rep. Emanuel Cleaver II has begun an investigation into small business financial technology (FinTech) lending, expressing concern that “some FinTech lenders may be trapping small business owners in cycles of debt or charging higher rates to entrepreneurs of color.” Cleaver stated that his investigation is particularly interested in payday loans for small businesses because the payday loan industry has frequently “targeted communities of color with high rates and fees.”

According to Cleaver, “FinTech lending companies, also known as alternative small-business lending, are a fast growing industry offering a new wave of innovation – and also pose many new risks.” Although FinTech lenders must comply with anti-discrimination laws such as the Equal Credit Opportunity Act, they do not have to undergo supervisory exams like credit unions or community banks. Additionally, small business borrowers do not have the same level of protection, such as the Truth in Lending Act, which consumer borrowers have.