While prognosticators take stock of the midterm election outcomes, considering what factors motivated voters and the implications of a closely divided Congress next year, the nation continues to grapple with historic economic headwinds and uncertainty ahead. America's leading banks remain focused on finding durable solutions to these issues over the next year, through addressing the small-dollar lending needs of consumers, expanding access to credit for small businesses and protecting all Americans from fraud.
Policymakers from across the ideological spectrum can work in tandem with banks to further these efforts, helping to ensure every American has access to the financial tools they demand and deserve.
Inflation has risen to its highest level in a generation, raising the price of goods and services — from milk and eggs to gasoline and rent. Consumers are spending more and making less, hampering their ability to deal with emergency expenses. According to a recent survey, more than half of Americans are unable to cover an unexpected $1,000 bill with savings alone.
Increasing the availability of affordable, small-dollar lending products would deliver consumers a much-needed cushion to make ends meet. Whether through rulemaking or legislation, policymakers can take action to provide banks with the ability to easily underwrite and deploy short-term loans without misguided restrictions on availability. Empowering banks to offer viable short-term lending products will provide consumers with a valued emergency safety net and far greater protections than they might receive at a payday lender or other, less-regulated providers.
Small businesses, employing nearly half of the nation's workforce, also have significant headwinds ahead with a looming recession, even as many of them continue to build back from years of pandemic-related restraints. In fact, nearly 40% of America's small businesses were unable to pay rent in October. Policymakers in Washington must do more to bolster banks' abilities to expand access to credit for the small businesses that are so integral to the fabric of Main Streets across this nation.
To do so, the Small Business Administration should immediately take some of the lessons learned from the Paycheck Protection Program, which saw the agency work in tandem with large banks to quickly provide small businesses more than $400 billion in needed relief.
Specifically, the SBA can take steps to streamline the application process for its focused small-dollar loan program, 7(a) Express, by increasing guarantee levels and lending thresholds and decreasing collateral and documentation requirements. As a result, SBA preferred lenders will be able to better serve the smallest (and newest) of small-business borrowers.
Additionally, as the CFPB prepares to release a final small-business data collection rule, it is essential that the bureau avoid creating unintentional impediments to small-business credit by implementing new requirements that would cause further disruption to an already fragile market.
Finally, just as the number of Americans who accessed their financial services online skyrocketed through the pandemic, so did instances of scams and fraud, perpetrated by individuals, organized crime groups, and even state actors. Last year, the Identity Theft Resource Center counted 1,862 data breaches — a 68% increase compared with 2020, and an all-time high.
So, while banks work to support consumers and small businesses, they're also taking significant steps to actively prevent, detect and mitigate scams. But they cannot do it alone. Congress and regulators must work collaboratively with the industry — in a whole of government approach — to prevent bad actors from harming consumers in the first place.
We call on the Consumer Financial Protection Bureau to stand by its mission and initiate new consumer education initiatives, focused on teaching the most vulnerable Americans how to recognize and avoid fraud. The Federal Trade Commission can support these efforts in collaboration with the CFPB while also taking action to stop the illegal "spoofing" of outbound calls and texts. Law enforcement has an important role to play, as well. Leaders at the Treasury Department and FBI must immediately prioritize the identification and prosecution of fraudsters, even those involved in low-dollar scams.
To achieve these goals, policymakers must recognize banks not as adversaries, but willing partners. Bankers don't see red customers and blue customers. They're committed to delivering on a fundamental mission to support all Americans during good times and bad, just as they did throughout the COVID-19 pandemic. By working together on these policy recommendations, we can make a real difference in the lives of the people we are all working to serve.
