WASHINGTON, D.C. – Today, U.S. Sen. Sherrod Brown (D-OH) – ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, and Senator Marco Rubio (R-FL), Chair of the U.S. Senate Committee on Small Business and Entrepreneurship re-introduced legislation to protect small businesses from fly-by-night predatory lenders.
“When we let financial predators harm hardworking Americans through scams like confessions of judgment, we undermine the dignity of work,” said Brown. “This bipartisan bill ensures that consumers and small business owners benefit from protections that prevent predatory lenders from stripping away their hard earned money under cover of night.”
“With this bill, we are taking another step toward protecting America’s small businesses—the foundation of our economy—by preserving the right of a business to be heard in a court of law before a potential credit default,” Rubio said. “I remain committed to protecting our small businesses from predatory, out-of-state lenders, and I hope my colleagues will join me in this effort.”
Confessions of judgment require a borrower to give up her rights in court before obtaining a loan, and allow shady lenders to seize the borrower’s assets without warning in order to pay off the debt. Although many states have banned this practice for small business loans as well as individuals, borrowers nationwide are still exposed due to loopholes in state laws that have allowed predators to devastate small businesses across the country. The Small Business Lending Fairness Act gives small businesses federal protections like the ones consumers already have.
Last year, Bloomberg published an in-depth investigative report on this shady small business lending tactic which has allowed creditors to steal the savings of out tens of thousands of borrowers with no notice or opportunity for defense.
The Small Business Lending Fairness Act:
- Codifies the FTC’s 1985 ban on confessions of judgment in law in consumer loan contracts, and
- Expands the ban to provide these protections to business borrowers as well.
More information on the bill can be found here.