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Is there Discrimination in Small Business Lending?

The Consumer Financial Protection Bureau (CFPB) is looking to enforce a new rule which would mandate banks collect and report data on approved and rejected small business loans. These reports would include information such as the ethnicity and gender of the business owners applying for funding. The major push behind the possible new rule is for economists and regulators to identify if lenders are discriminating against diverse businesses.

While the new rule has some support, one of the major opponents of the new rule comes from the American Bankers Association citing an increase in regulation and red tape for small business lenders. Despite the push back, numerous studies back an argument to at least look in to the possibility of discrimination, which has been illegal since the 1970s. According to a recent report from the California Reinvestment Coalition, more than “half of respondents said that women and minorities applying for bank loans do face discrimination”.

Whether this rule will be enacted is anyone’s guess as the CFPB is currently under fire by Republican lawmakers looking to decrease the organizations authority. The CFPB was created under the Obama administration as a way to oversee banking practices since the Financial Recession of 2008 – 2009. The Trump administration is looking to eliminate its powers and decrease regulatory oversight of the banking industry.


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