Sens. Sherrod Brown (D-OH) and Marco Rubio (R-FL) recently crafted the Small Business Lending Fairness Act, which is designed to shield small businesses from predatory lenders.
The bill seeks to protect small businesses by codifying the Federal Trade Commission’s (FTC) 1985 ban on confessions of judgment in consumer loan contracts and extending the ban to include small business borrowers.
“When we let financial predators harm hard-working Americans through scams like confessions of judgment, we undermine the dignity of work that makes this country great,” Brown, ranking member of the U.S. Senate Committee on Banking, Housing and Urban Affairs, said. “This bipartisan bill ensures that consumers and small business owners benefit from protections that prevent predatory lenders from stripping away their hard earned money under cover of night.”
Confessions of judgment require a borrower to give up rights in court before obtaining a loan and allow the lender to seize the borrower’s assets without warning to satisfy the debt. Although many states have banned this practice for small business loans as well as individuals, borrowers are still exposed because the FTC left open a loophole.
“With this new bill, we are taking another step in protecting America’s small businesses, the foundation of our economy, by preserving the right of a business to be heard in the court of law before a potential credit default,” Rubio said. “I remain committed to protecting our small businesses, and I hope my colleagues will join me in this effort by passing this bill.”