Washington, D.C. (Jan. 6, 2023) — The Independent Community Bankers of America (ICBA) reiterated its call for the Small Business Administration to maintain its long-standing moratorium on the number of non-federally regulated institutions, including nonbank fintech companies, that can make loans under its 7(a) program.
In its comment letter and in recent joint letters to the SBA and Congress, ICBA said the SBA’s proposals to lift the moratorium on Small Business Lending Companies and to loosen or remove the 7(a) program’s underwriting requirements could harm borrowers and undermine the program. Instead, the SBA should withdraw its proposals while focusing on the community bank partnerships that have been so beneficial for expanding lending in underserved areas, ICBA said.
“The Small Business Administration’s proposal to allow nonbank fintechs and other non-federally regulated institutions to participate in its successful 7(a) loan program could unintentionally harm the very borrowers the SBA is trying to aid as well as the program’s underwriting standards,” ICBA President and CEO Rebeca Romero Rainey said today. “The SBA’s Paycheck Protection Program—which community banks successfully led in local communities while eliminating many lending risks that plagued fintechs’ participation in the program—demonstrates the importance of ensuring federal loan programs benefit from institutions with sound regulatory supervision and prudent lending practices.”
In its comment letter, ICBA said the SBA proposal to lift the moratorium on SBLCs—which has been in place since 1982 because the agency has lacked the resources needed to manage the 7(a) program—would threaten the integrity of a program long led by community banks to support small businesses in the local communities most in need of lending. Further, the proposal lacks details on how new SBLCs would measure success under the program and is missing information on supervision, regulation, loss mitigation, fraud, capital adequacy, and overall safety and soundness.
Meanwhile, the Select Subcommittee on the Coronavirus Crisis’s report regarding the role of fintechs in facilitating a disproportionately high rate of fraudulent and otherwise ineligible loans through the Paycheck Protection Program, long-standing concerns with the SBA’s administration of the PPP, and the uncertainty of the economic outlook raise further questions about the SBA’s proposals to introduce new risks to the 7(a) program, ICBA said.
The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. ICBA is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education, and high-quality products and services.
With nearly 50,000 locations nationwide, community banks constitute roughly 99 percent of all banks, employ nearly 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5.8 trillion in assets, over $4.8 trillion in deposits, and more than $3.5 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.