Business Center for New Americans (BCNA) is proud to be a signatory of the Small Business Borrowers’ Bill of Rights, guidelines set by The Responsible Business Lending Coalition. These guidelines mirror our own commitment to responsible credit culture and equal access to small business funding for all.
1. The Right to Transparent Pricing and Terms
You have a right to see the cost and terms of any financing being offered in writing and in a form that is clear, complete, and easy to compare with other options, so that you can make the best decision for your business. In order to protect your Right to Transparent Pricing and Terms, lenders and brokers must:
- Transparent Rate – Disclose the Annual Percentage Rate (APR)*, as the all-in annualized price of the financing, and the annualized interest rate if one is used.
- No Hidden Fees – Disclose all upfront and scheduled charges.
- Plain-English Terms – Describe all key terms in an easy-to-understand manner, including the loan amount, total amount provided after deducting fees or charges, payment amount and frequency, total monthly payment amount if payment frequency is other than monthly, collateral requirements, and any prepayment charges.
- Clear Comparison – Present all of these pricing and other key terms clearly and prominently, in writing, to the borrower when the loan offer is summarized for the borrower and whenever a term sheet, offer summary, or equivalent is provided.
2. The Right to Non-Abusive Products
You have a right to loan products that will not trap you in an expensive cycle of re-borrowing. Lenders’ profitability should come from your success not from your failure to repay the loan according to its original terms. In order to protect your Right to Non-Abusive Products, lenders must:
- No Debt Traps – If the borrower is unable to repay an existing loan, extend new credit only if due diligence indicates that the borrower’s situation has changed, enabling them to repay the new loan.
- No “Double Dipping” – Do not double-charge the borrower. When refinancing or modifying a loan with a fixed-fee as the primary financing charge, do not charge fees on the borrower’s outstanding principal unless there is a tangible cost benefit to the borrower**.
- No Hidden Prepayment Charges – If the borrower receives no savings, or limited savings, in early payoff, disclose this in the original loan term sheet or offer summary, and again at the time of payoff. For financing with a fixed term, if a prepaying borrower owes a fixed repayment amount or a certain percentage of that amount regardless of when they pay off the financing, disclose this as prepayment charge. This charge is equal to the remaining financing charge owed at payoff, which is the cost the borrower is paying for the unused portion of the loan.
- Appropriate Product – Match loan product design and loan product use. If presenting a loan product as designed for one use, do not encourage borrowing behavior contrary to that use. For example, short-term products may be well suited for short term use, but not for long-term recurring use. Long-term products with prepayment penalties may be well suited for long-term use, but not for short-term needs.
- Pressure Free – Allow borrowers a reasonable time to consider their loan options free from pressure or artificial timelines.
Prompt Prepayment Assistance – If a borrower seeks to prepay a loan, provide any information required for prepayment within two business days of the borrower’s request.
- Responsive Complaint Management – If a complaint is submitted, provide a confirmation of receipt within five days and in writing, when possible, and research and resolve the complaint in a timely manner***.
- Clear Notice Regarding Referrals – If referring a small business to another lender or broker, provide clear notice that a referral is being made. If the lender or broker is not already a signatory of the Small Business Borrowers’ Bill of Rights and thus has not agreed to clear disclosure and responsible lending practices, inform borrowers that as they move forward they should consider key aspects of any financing offered – the APR, the total payment amount owed monthly (even if payments are made daily or weekly), their ability to pay off any financing they take, and whether they may owe financing charges even if they pay off early.
3. The Right to Responsible Underwriting
You have a right to work with lenders who will set you up for success, not failure. High loss rates should not be accepted by lenders simply as a cost of business to be passed on to you in the form of high rates or fees.In order to protect your Right to Responsible Underwriting, lenders must:
- Believe in the Borrower – Offer financing only with high confidence that the borrower can repay its entire debt burden without defaulting or re-borrowing.
- Alignment of Interests – Lenders who receive repayment directly from the borrower’s gross sales must also verify, through documents, data from third parties, and/or due diligence, that the borrower can repay all debt and remain profitable, or that it has a credible path to profitability. Lenders should not make loans that the borrower cannot truly afford, even if the lender can find a way to be repaid.
- Right-sized Financing – Size loans to meet the borrower’s need, rather than to maximize the lender’s or broker’s revenue. Seek to offer the borrower the size of loan that they need, rather than offering the largest amount they could qualify for.
- Responsible Credit Reporting – Report loan repayment information to major credit bureaus and consult credit data when underwriting a loan. Such reporting enables other lenders to responsibly underwrite the borrower and helps the borrower build a credit profile that may facilitate access to more affordable loans in the future. Lenders must inform the borrower and any guarantors if they intend to report loan repayment performance to guarantors’ credit bureaus only in certain circumstances, such as after a default.
4. The Right to Fair Treatment from Brokers
You have a right to transparency, honesty, and impartiality in all of your interactions with brokers. In order to protect your Right to Fair Treatment from Brokers, brokers must offer:
- Transparent Loan Options – Disclose all loan options for which the borrower qualifies through the broker’s services, emphasizing the lowest APR option, and disclose all lenders to which the broker sends loan applications on the borrower’s behalf.
- Transparent Broker Fees – Disclose all compensation paid to the broker, and all charges that will be paid directly or indirectly by the borrower, whether paid upfront or financed in the loan.
- Transparent Results – Post clearly and prominently on the broker’s website the anonymous and aggregated results of borrowers who obtain financing through the brokers’ services, in terms of APR and financing product.
- Empower Borrowers to Make Informed Financing Decisions – Educate the borrower on each loan option and ensure that the borrower reasonably understands the cost and terms as well as the pros and cons of financing decisions before they sign a loan document. Brokers should use tools that help the potential borrower comparison shop, including APRs and loan calculators.
- Disclosure of Conflicts of Interest – Disclose any conflicts of interest, the broker’s fee structure, and any financial incentives they have, including whether the broker receives higher fees for brokering certain loans. Brokers who are paid higher fees with certain lenders, loan types, or terms other than the size of the loan, may not state they are acting in the best interest of the potential borrower.
- No Fees for Failure – No fees can be charged to the potential borrower if the broker is unable to find them a loan and if the borrower does not accept a loan secured through the broker’s services.
- Responsive Complaint Management – If a complaint is submitted, provide a confirmation of receipt within five days and in writing, when possible, and research and resolve the complaint in a timely manner.
5. The Right to Inclusive Credit Access
You have a right to fair and equal treatment when seeking a loan. In order to protect your Right to Inclusive Credit Access, lenders and brokers must:
- Non-Discrimination – Respect the letter and intent of fair lending laws, including the EqualCredit Opportunity Act. Do not discriminate against small business owners on the basis of race, color, religion, national origin, sex, marital status, age, sexual orientation or identity, or any other protected class. Lesbian, Gay, Bisexual and Transgender (LGBT) small business owners deserve the same protection when seeking or obtaining credit.
6. The Right to Fair Collection Practices
You have a right to be treated fairly and respectfully throughout a collections process. Collections on defaulted loans should not be used by lenders as a primary source of repayment. In order to protect your Right to Fair Collections Practices, lenders must:
- Fair Treatment – Abide by the spirit of the Fair Debt Collection Practices Act and provide borrowers similar protections as described in that Act.
- Responsible Oversight – Diligently vet and oversee the collections practices of third-party collectors and debt buyers. Do not work with collectors or debt buyers who fail to treat borrowers fairly.
- Accurate Information – Transmit accurate, current, and complete information about the loan to third-party collectors and debt buyers.
The term “loan” and related terms used here such as “lending” are intended to be interpreted in the broadest sense possible so as to include loans, lines of credit, merchant cash advances, and similar products offered and provided to U.S. small businesses, whether or not such credit products are characterized legally or otherwise as loans. Similarly, the terms “lender” and “borrower” are intended to be interpreted in the broadest sense possible so as to include, in the case of lenders, credit marketplaces that facilitate loans on behalf of lenders, cash advance providers, and all manner of persons providing loans to U.S. small businesses or evaluating the creditworthiness of such small businesses in connection with providing a loan, and, in the case of borrowers, all U.S. small businesses who seek or obtain a loan.
*APR (annual percentage rate) is the annual rate that is charged for borrowing, expressed as a single percentage number. It includes fees as well as interest rate, and represents the actual yearly cost of funds.
**While it may be appropriate to charge a reasonable service fee for loan modifications that clearly help the borrower, it is not acceptable to effectively double-charge the borrower while refinancing or renewing by assessing the predominant financing charge, such as a 20% factor rate, on a borrower’s outstanding principal, which they have already paid for.
***While recognizing that some situations may require more time to resolve, a lender will be expected to research and resolve a complaint in less than three weeks.