IL House Committee Inaction on Lending Transparency Bill Means Small Businesses Remain Vulnerable to Predatory Financial Products

“For the second consecutive year, Illinois lawmakers have let small businesses down by refusing to adopt common-sense legislation that would drastically reduce the prevalence and pain of predatory loans. Instead of looking out for entrepreneurs who are not protected by the federal Truth in Lending Act, some lawmakers decided it was more important to prioritize financial institutions that refuse to disclose full terms and pricing to small business borrowers. 

SB 2234 would require transparency in the details of business loans, most notably a clear disclosure of the Annual Percentage Rate being offered. This is essential because the federal Truth in Lending Act does not apply to most commercial loans. The original rationale for not extending federal truth-in-lending protections to commercial loans was based on the belief that businesses have much greater financial expertise at their disposal. This is certainly true for some businesses, but not for most small businesses. Legislation like SB 2234 is needed because small businesses in Illinois regularly agree unknowingly to higher-cost loan terms – which remains perfectly legal in many cases. 

Small businesses want to see greater lending transparency, which is why 65% of small business owners nationwide support this type of legislation. Let’s hope that Illinois finally gets it right next year and protects small businesses by passing legislation like SB 2234.”