For Second Year in a Row, Bill Doesn’t Get a Vote in House Committee
Illinois – Despite being passed by an overwhelming majority of the State Senate (36-19) and backed by a large coalition of advocates encompassing the entire state and representing over 250,000 small businesses, a bill to provide small businesses with basic disclosure protections when borrowing money was not called for a vote in the House Financial Institutions Committee. The Small Business Financing Transparency Act (SB2234 – Belt/Tarver) would require “nonbank” lenders to disclose the annual percentage rate (APR) of their loans to small business borrowers.
The statewide coalition in support of the bill includes the Illinois State Black Chamber of Commerce, the Illinois Hispanic Chamber of Commerce, the Southland Chicago Black Chamber of Commerce, the Responsible Business Lending Coalition, Woodstock Institute, Small Business Majority, and others. There were over 60 proponents of the bill, consisting of organizations, businesses, and individual citizens. There were fewer than 10 opponents.
There was no explanation for not calling the bill. A prior version of the bill met with the same fate last year when the bill was sent to a sub-committee for “a subject matter hearing.”
The bill would apply to loans made by “nonbank lenders,” lenders that almost exclusively reside on the internet. Because small businesses in Black, Brown, and lower income communities do not receive their proportionate share of loans from banks, they are more frequently forced to turn to the nonbank lenders. It is not uncommon for such lenders to charge more than 300% APR, but this APR is not disclosed to the small business borrower.
The federal Truth In Lending Act (TILA), which took effect 55 years ago, entitles Individual consumers to APR disclosures when they get a mortgage, credit card, student loan, or any other type of loan. TILA does not cover small businesses. The Small Business Financing Transparency Act would have closed the “APR Disclosure Loophole” by requiring nonbank lenders to disclose APRs to small businesses. California and New York have adopted laws similar to SB 2234.
“This is an issue of transparency and equity for small businesses,” said Jaime di Paulo, President & CEO of the Illinois Hispanic Chamber of Commerce. “We will not stop advocating for minority-owned businesses to get access to capital without predatory lenders threatening their futures.”
“Not only is protecting small businesses from predatory lending the right thing to do, but this legislation has the full backing of industry experts and small business leaders,” said Tasha Brown, Illinois Director of Small Business Majority. “Despite the evidence and support behind reform, Illinois small businesses will continue to be targeted by nonbank lenders charging exorbitant interest rates–unbeknownst to the borrower–thanks to the inaction of House committee members.”
“SB 2234 is long overdue. President Lyndon B. Johnson signed the law in 1968 that gave individual consumers like you and me the right to know the APR of a loan,” said Brent Adams, Senior Vice President of Policy & Advocacy at Woodstock Institute. “It is high time we close the APR disclosure loophole and empower small businesses with the information they need to protect themselves. Transparency is good for small businesses, the communities in which they reside, and the State’s overall economy.”
A recent analysis by the Responsible Business Lending Coalition found that SB 2234 would save Illinois small businesses an estimated $175 million to $835 million dollars each year in unnecessary interest and fees, simply by empowering business owners to make better-informed price comparisons. Latino/a business owners would save $22 million to $104 million, and Black business owners would save an estimated $24 million to $112 million a year.