Washington, D.C. (May 17, 2023) — The Independent Community Bankers of America (ICBA) today told Congress that the Small Business Administration should pause new rules lifting the moratorium on the number of non-federally regulated institutions, including nonbank fintech companies, that can make loans under its 7(a) program.
Testifying at a House Small Business Committee hearing, Bank of Charles Town, W.Va., President and CEO Alice Frazier said opening the 7(a) program to unregulated entities poses a serious threat to a program designed to expand lending in underserved areas.
“The new SBA rules, which were rushed through the process without input from Congress or the industry, will undermine this critical goal,” said Frazier, chair of ICBA’s Bank Operations Committee. “We recommend the agency hit the pause button and convene a working group of existing SBA lenders to determine how we can better align the program with the SBA mission of reaching the smallest businesses and entrepreneurs.”
Frazier said online-only lending can never substitute for on-the-ground, relationship-based community bank lending that partners with small businesses to support long-term success. She noted that 68% of SBA loans were made to underserved borrowers in fiscal 2022, exceeding the agency’s goal of 42%, while nonbank fintechs’ higher default rates and incidence of fraud would drive 7(a) fees higher and make the program more costly and less accessible to borrowers.
ICBA told policymakers in a recent comment letter to the SBA and joint letters to the agency and Congress that the rule would unintentionally harm the very borrowers the agency is trying to aid. ICBA will continue working to ensure the SBA 7(a) program continues to support small businesses in local communities while preserving safeguards against fraud and abuse.
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 nearly $5.9 trillion in assets, over $4.9 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.