small Business
small Business Many small companies in the United States have been hit hard by the COVID-19 outbreak and have found it difficult to weather the economic storm it has created. Loss of creditworthiness is one source of stress for startup companies and solopreneurs.
Creditors rely on data from specialist firms when evaluating whether to lend to small businesses, similar to how a bank or credit card company may take your personal credit report from a consumer reporting company like Equifax, TransUnion, or Experian before providing you a loan.
However, many small companies do not realize that their data is being compiled and sold to third parties. Individual customers are afforded some safeguards under the Fair Credit Reporting Act, such as the ability to challenge inaccuracies in their credit reports.
However, tiny enterprises may not have the same protections as their larger counterparts. To put it simply, mistakes and false information may be quite expensive for a startup.
In a recent development, the FTC and one such firm, Dun & Bradstreet, have proposed a settlement arrangement (D&B). D&B is a source for financial institutions and other lenders to gain insight into the financial health of businesses.
The FTC claimed that D&B misrepresented its CreditBuilder product line, which promised to assist small companies increase their credit scores. Before finalizing its proposed deal, the FTC sought feedback from the public and, yesterday, the CFPB responded with a response letter.
D&B consented to the settlement terms by making various modifications to its business practices, including limiting automatic renewals for CreditBuilder memberships and altering systems to ensure timely responses to complaints about erroneous information. D&B has also promised payments to small firms that were negatively impacted.
The FTC is to be commended for holding D&B accountable for its obvious wrongdoing, and the CFPB agrees that the resulting reforms will go a long way toward preventing such incidents in the future.
Companies that may have lost out on contracts or funding opportunities as a result of these activities will not be made whole by refunds alone. To ensure that small companies are afforded a level playing field when applying for loans, the CFPB and FTC will collaborate on this issue.
The Consumer Financial Protection Bureau is currently formulating a regulation to increase transparency in small business lending by collecting additional information on the availability of credit to these enterprises. To address this issue, Congress mandated the CFPB’s existence in the bill that established the Bureau.
We look forward to assisting authorities such as the FTC in gaining a deeper understanding of the environment of credit availability, which has historically been dominated by opaque business credit reporting firms as gatekeepers of finance for small businesses.
