Protecting Small Business Access to Credit
Washington,
February 15, 2018 -
The Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing today on a common practice – known as “de-risking” – that has limited the ability of legitimate small businesses to access credit.
“De-risking” occurs when a financial institution terminates relationships and closes the accounts of clients and merchants they deem “high risk” in order to avoid legal liability and greater regulatory scrutiny. This practice has virtually eliminated access to credit for many legitimate small businesses – like money service businesses, pawn brokers, and financial technology companies.
The hearing looked at the key drivers of “de-risking,” and potential regulatory and legislative opportunities for Congress and the Administration to ensure legitimate businesses have equal and consistent access to the financial system.
“Like many of my colleagues, I’ve heard from too many people who have lost access to financial services,” said Subcommittee Chairman Blaine Luetkemeyer (R-MO). “Accounts have been terminated for a money services business in Cincinnati. It is a payday lender from St. Louis, an ATM operator from the suburbs of Phoenix, and amusement gaming operators in Oregon and California. The committee secured House passage of H.R. 2706, my Financial Institutions Customer Protection Act, which would help curb ‘de-risking’ by requiring federal banking agencies to establish a transparent process by which account termination requests and orders must be made. However, we must continue to shine light on this issue so that we can understand the root causes of ‘de-risking’ and the implications it has on our economy, both at home and abroad.”
Topline Quotes from Witnesses
“State regulators focus on tailored supervision. Consistent with this approach, my view is that banks should be responsible for managing the risks of their business relationships, and my role as a bank regulator is to ensure that each of our supervised banks understands and can manage these risks.” -- Bryan A. Schneider, Secretary, Illinois Department of Financial & Professional Regulation, on behalf of the Conference of State Bank Supervisors
“In all too many areas, if independently owned ATMs are shut down, the only available alternative for local residents will be to travel—in urban areas several miles or more, and in rural areas perhaps 20 miles, 30 miles, or even 50 miles—to get to the nearest bank branch or bank-owned ATM, or perhaps an independent ATM. Widespread, reliable access to cash is one of the principal drivers that sustains the strength and growth of America’s consumer-driven economy, and independent providers of ATM services are a principal and indispensable source of that access.” -- Tim Baxter, President, SwypCo ATM Solutions, on behalf of the National ATM Council
“…[Electronic Transactions Association] members have been working diligently to expand consumer access to payment options, credit, and other financial services. One of the goals of our financial system is to provide high quality, affordable financial services for the broadest possible set of consumers. An inclusive financial system is one that provides consumers and businesses with access to a variety of financial products and services.” -- Jason D. Oxman, Chief Executive Officer, The Electronic Transactions Association
