Inadequate small business credit reports may impede loan access.

The COVID-19 pandemic has inflicted significant damage on numerous American small businesses, forcing them to navigate the economic upheaval caused by the virus. Among the challenges faced by small businesses and entrepreneurs is the detrimental impact on their credit histories. Much like banks or credit card companies assess personal credit reports from consumer reporting agencies such as Equifax, TransUnion, or Experian before extending a loan, creditors utilize data from specialized companies to determine whether to lend to small businesses.

Many small businesses are often unaware that their information is being collected and compiled for sale to third parties. While the Fair Credit Reporting Act provides protections for individual consumers, including the right to dispute inaccuracies, small businesses may not have the same rights. Errors and inaccuracies in credit reports can have significant financial repercussions for a small business.

Recently, the Federal Trade Commission (FTC) reached a proposed settlement agreement with Dun & Bradstreet (D&B), one of these specialized companies that provides business credit information to creditors. The FTC alleged that D&B deceived small businesses regarding a product line called CreditBuilder, which purported to assist businesses in improving their credit reports. The FTC solicited comments on the proposed agreement, and the CFPB submitted a comment letter in response.

As part of the settlement, D&B agreed to implement several changes, including adjusting processes to ensure prompt responses to complaints about inaccurate information and imposing restrictions on automatic renewals for CreditBuilder subscriptions. Additionally, D&B committed to providing refunds to affected small businesses.

The CFPB’s submission commends the FTC for holding D&B accountable for its misconduct, and these changes are expected to prevent future harm. However, refunds alone cannot fully compensate businesses that may have missed out on contracts or financing opportunities due to these practices. The CFPB and FTC will collaborate to ensure that small businesses receive fair treatment in accessing loans.

Furthermore, the CFPB is developing a rule to enhance transparency in small business lending by gathering more data on the accessibility of credit for small businesses. Congress has tasked the Bureau with addressing this challenge, and the CFPB aims to assist regulators, including the FTC, in gaining a better understanding of credit availability for small businesses, which have long relied on opaque business credit reporting agencies as gatekeepers of financing.

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