ABA, associations support limits on non-federally regulated lenders in 7(a) program

The American Bankers Association, National Association of Government Guaranteed Lenders and four other bank and credit union trade associations today expressed appreciation for Senate legislation rolling back recent policy changes made to the 7(a) loan program by the Small Business Administration, including the agency’s decision to lift the moratorium on the number of non-federally regulated lenders in the program.

SBA issued final rules in April that eliminated limits on nonregulated fintechs and other lenders in the program while also loosening underwriting standards. Senate Small Business Committee Chairman Ben Cardin (D-Md.) and Ranking Member Joni Ernst (R-Iowa) drafted legislation that would cap the number of non-federally regulated lenders at 17; impose higher underwriting standards, particularly for 7(a) loans of $350,000 and above; and impose other guardrails on the 7(a) program. In a joint letter, the associations expressed support for the committee’s efforts to advance legislation to respond to SBA’s final rules.

“We remain concerned that SBA’s decision to lift the moratorium on the number of non-Federally regulated lenders in the 7(a) program while simultaneously loosening underwriting standards may negatively impact the performance of 7(a) loans, threaten the integrity of the program, and lead to increased borrower and lender fees,” the groups said. Supporting small business is of the utmost importance to the national economy “and our organizations stand ready to assist in ensuring that access to capital is protected,” they added.