The Hamline Midway Coalition called for the Mayor and City Council in Saint Paul to adopt the Small Business Borrowers’ Bill of Rights. It becomes the second district council in the city of Saint Paul asking policy leaders at the city, state and national level to adopt protections for small and minority businesses against predatory lending. There is more protections for consumer lending but weak protections for small business lending. ( HMC resolution).
Union Park District Council adopted a similar resolution last month. As the Covid economic crisis deepens there is increasing concern that the poor access to capital by small and minority businesses will force them into the hands of predatory lenders.
Both HMC and UPDC are located in the heart of one of the most valuable opportunity zones in the nation right by Allianz field. The two district councils and Ward 4 Councilmember Mitra Jalali are providing very strong leadership and are very engaged to ensure that the economic development projects in the region benefit the residents in the area.
Minnesota’s Attorney General, Governor and Legislature have all been asked to increase protections for small and minority businesses. This is especially relevant when it is well documented nationally that the Mom and Pop stores in the country have been totally left out of the current federal Covid Economic relief efforts.
Nationally, there is a growing trend in predatory lending targeting small businesses, and in particular minority businesses. The business in time of critical needs reaches out to an online lender which offers money with the minimum requirements but locks in very high interest and fees. They also include a “confession of judgement” clause where the borrower signs off against any legal remedy as foreclosure actions are initiated by the lender.
Case in point – It took over six months for a group of lenders that included African Economic Development Solutions (AEDS), Metropolitan Economic Development Association (MEDA), the City of Saint Paul, Community Reinvestment Fund (CRF) and Vision Bank to put together a deal to save a female African immigrant business owner, located in the prime opportunity zone in Saint Paul, Little Africa, from a predatory lender. This lender, during the heart of the Covid crisis, when all other institutions were giving breaks to renters and mortgage holders, raised the closing cost by $5000. Total interest and fees were over 200 percent for a short term loan.
The City of Saint Paul, MEDA, CRF and AEDS have to be commended for their commitment to small and minority businesses as they struggle to remain in business.
During the current COVID crisis, AEDS has worked with small business tenants in the building that was put into foreclosure by the predatory lender, to access loans and grants from federal, state and city resources so that they can pay their rent and other fixed costs.
Below are the principles of the Small Business Borrowers’ Bill of Rights from the website of the Responsible Business Lending Coalition (RBLC). The UPDC and HMC resolutions were developed in partnership with the RBLC.
“1. The Right to Transparent Pricing and Terms: A borrower has the right to have the cost and terms of any financing being offered presented to them in writing and in a form that is clear, complete, and easy to compare with other financing options, so they can make the best decision for their business.
2. The Right to Non-Abusive Products: A borrower has the right to expect that the financing products offered by a lender will not trap his/her business in an expensive cycle of re-borrowing.
3. The Right to Responsible Underwriting: A borrower has the right to expect a lender is offering financing based on underwriting practices that assess the ability of the borrower’s business to succeed and repay.
4. The Right to Fair Treatment from Brokers: A borrower has the right to honest, transparent, and impartial communications with a broker regarding loan options, conflicts of interest, fees, and the financing options available.
5. The Right to Inclusive Credit Access: A borrower has the right to fair and equal treatment when seeking a loan including protections guaranteed under the Equal Credit Opportunity Act.
6. The Right to Fair Collections Practices: A borrower has the right to be treated fairly and respectfully throughout a collections process and the right to protections like those guaranteed under the Fair Debt Collection Practices Act.
The Small Business Borrowers’ Bill of Rights is a product of the Responsible Business Lending Coalition, a network of non-profit and for-profit lenders, investors, and small business advocates that share a commitment to innovation in small business lending and serious concerns about the rise of irresponsible small business lending.”