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Congressman Emanuel Cleaver

Representing the 5th District of MISSOURI

Congressman Cleaver Launches Investigation into Fintech Lending

Jun 23, 2017
Press Release
Congressman Cleaver sends inquiry to several FinTech Lending companies

(Washington, D.C.) - Today, U.S. Congressman Emanuel Cleaver, II launched an investigation into small business FinTech lending, including online companies that offer payday loan-like products for small businesses and individual consumers.

In recent years, the small business lending market has seen a number of new entrants primarily operating online. Many of these entrants offer “merchant cash advances,” which are loans given to small businesses in exchange for a percentage of their future credit card sales receivables.

“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,” said Congressman Cleaver.

In a letter from Congressman Cleaver to the Chief Executive Officers of several rapidly emerging FinTech small business lenders, the executives were asked to share information about their company products, fees, and methods when it comes to disclosures and potentially discriminatory practices. The letters were sent to Lending Club, Biz2Credit, Fora Financial, Prosper, and *Lend Up. Companies are expected to respond by August 10, 2017.

Unlike consumer credit products, small business borrowers are typically not protected by disclosure requirements under the Truth in Lending Act. While FinTech lenders are required to comply with anti-discrimination laws like the Equal Credit Opportunity Act, these lenders are not subjected to supervisory exams like those required for community banks and credit unions.

Without proper supervision and oversight, Congressman Cleaver believes certain FinTech companies may be taking advantage of or discriminating against hardworking individuals from communities of color.

“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,” said Congressman Cleaver. “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.”

On March 15, 2017, Congressman Cleaver wrote a letter to the Consumer Financial Protection Bureau urging the agency to investigate the evolving sector. He requested the agency provide information about its small business data collection rulemaking that would help to eliminate discriminatory practices.

Congressman Cleaver will continue to collect information about FinTech small business lending as part of a broader effort to ensure economic growth and fairness in the marketplace.

*Lend Up is an online consumer lending company but agreed to take part in this investigation.

Emanuel Cleaver, II is the U.S. Representative for Missouri’s Fifth Congressional District, which includes Kansas City, Independence, Lee's Summit, Raytown, Grandview, Sugar Creek, Blue Springs, Grain Valley, Oak Grove, North Kansas City, Gladstone, Claycomo, and all of Ray, Lafayette, and Saline Counties. He is a member of the exclusive House Financial Services Committee, the Ranking Member of the Subcommittee on Housing and Insurance, and also a Senior Whip of the Democratic Caucus. A high-resolution photo of Congressman Cleaver is available here.

For more information, please contact Heather Frierson at 816-842-4545 or Heather.Frierson@mail.house.gov.