Small Business Borrowers’ Bill of Rights
Last Revised: September 2016
Our mission is to build a better financial world, and we are proud to partner with industry leaders to set the first-ever gold standard for responsible business lending. Together, we believe small businesses have:
1. The Right to Transparent Pricing and Terms
What this means for lenders and brokers:
• 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, payment amount and frequency, collateral requirements, and the cost of prepayment.
• 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
What this means for lenders:
• No “Double Dipping” – When refinancing or modifying a loan, do not add new fees or fixed charges on existing principal.
• No Hidden Penalties – Charge interest only on the time period that the loan remains outstanding. If the borrower pays off a loan early, do not charge interest or periodic costs associated with the remaining period of the loan, unless such costs have been clearly disclosed, prior to making the loan and specifically disclosed at the time of payoff, as a prepayment penalty or fee.
• Pressure Free – Allow borrowers a reasonable time to consider their loan options free from pressure or artificial timelines.
• Prompt Assistance – Provide a prepayment letter or required prepayment information within two business days of any borrower request.
3. The Right to Responsible Underwriting
What this means for lenders:
• Alignment of Interests – Lenders who receive repayment from directly the borrower’s gross sales must also verify, through documents, data from third parties, and/or due diligence, that the borrower can repay all indebtedness and remain profitable, or that it has a credible path to profitability. Lenders must not rely on an ability to be paid, regardless of the borrower’s profitability, to make loans that the borrower cannot afford.
• 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 maximum amount they qualify for.
• Responsible Credit Reporting – Report loan repayment information to major credit bureaus and consult the borrower’s 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 Inclusive Credit Access
What this means for lenders and brokers:
5. The Right to Fair Collection Practices
What this means for lenders:
• 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.
We invite the entire small business financing industry to join us in upholding these rights.
To learn more, please visit www.ResponsibleBusinessLending.org.