November 29, 2023

You’re the Boss Blog: The Big Banks Say They Are Meeting Their Lending Commitment

Searching for Capital

A broker assesses the small-business lending market.

Earlier this month, I published a post entitled, “Are the Big Banks Keeping Their Commitment to Small Businesses?” It had to do with a commitment that 13 of the largest banks in the country made last September to increase their small-business lending by $20 billion over the following three years.

Before writing that post, I spoke with executives from three of the largest banks on the list, the Small Business Administration and the Financial Services Roundtable, a trade association that represents these banks. Because I wanted to understand what exactly the banks had promised to do, I asked some basic questions:

What types of small businesses were the banks talking about? Were they truly small businesses that needed capital, or were the banks including larger businesses that have tens of millions of dollars of revenue? What type of loans were included in this commitment? Were the banks including credit card lending? Do all of the banks have the same understanding of the commitment?

The questions might seem like nitpicking, but without a clear definition of the kinds of loans and the kinds of businesses, it was hard to know whether the commitment meant much of anything at all. Furthermore, judging by what the banks have stated in their call reports to the Federal Deposit Insurance Corporation, it seemed the big banks had fallen behind in their commitment. But the Small Business Administration and the Financial Services Roundtable assured me that they would be issuing their own report card toward the end of September and that it would clearly state how the banks were doing at the one-year mark of their commitment.

In a blog post published Monday night, the S.B.A. administrator, Karen G. Mills, announced that in just one year “the 13 banks have already increased lending by more than $11 billion.” But the post offered no further information about what the terms of the commitment. Meanwhile the Financial Services Roundtable, the American Bankers Association and the Consumer Bankers Association sent out a release announcing the progress and stating, “Our members are fully committed to increasing lending to small businesses.” Their release was short and simple and similarly provided no additional detail.

According to Ms. Mills, the banks are up by $11 billion; according to the F.D.I.C. call reports, the banks have fallen behind by more than $2 billion. We are still hoping the banks will explain what exactly they have committed to do.

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

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Bucks: A Plan to Cut Mortgage Paperwork

Elizabeth Warren, assistant to the President on the Consumer Financial Protection Bureau(Harry Hamburg/Associated Press)Elizabeth Warren, the acting head of the Consumer Financial Protection Bureau

Anyone who has applied for a mortgage knows it can involve a daunting amount of paperwork. The new Consumer Financial Protection Bureau is taking a step toward reducing at least some of the pages required by federal law.

The bureau is trying to combine two federally required disclosure forms, which now total five pages, into a single form that makes clear the costs and risks of the loan.

The two forms are the Truth in Lending Act disclosure and the Real Estate Settlement Procedures Act’s Good Faith Estimate of settlement service charges, which all borrowers must receive within three days of filing a loan application. (I have particularly bad memories of the good faith estimate form causing debate during the closing of our first home years ago.) The two forms are meant to convey basic facts about home loans to help consumers compare different loan options and interest rates, but they’re often redundant and difficult to understand.

So as part of its “Know Before You Owe” project, the new agency is testing two form prototypes, with the goal of proposing a new, combined form next year. “With a clear, simple form, consumers will be in a better position to answer two basic questions: Can I afford this mortgage and can I get a better deal somewhere else?” Elizabeth Warren, the acting director of the new bureau, said in a news release.

The testing will include in-person interviews with borrowers in English and Spanish, in six cities: Albuquerque; Baltimore; Birmingham, Ala.; Chicago; Los Angeles; and Springfield, Mass. There will be five rounds of testing and revision through September. The agency will then further refine the draft form into a final proposed version by next summer.

The agency is also interested in feedback from consumers and advocacy groups. Both of the proposed documents are two pages long. You can view the first proposed form here, and the second one here.

Or, you can go here to view the two versions together and submit comments.

What do you think of the forms? Does anything stand out that could be made simpler?

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