Why is the GOP trying to hide the funding problems small businesses face?

A common refrain politicians toss around while stumping for votes is that small businesses are the backbone of the economy. They’re right—small businesses have created two out of every three jobs in America since 1993. Unfortunately, in many instances, this favorite phrase has become little more than a feel-good platitude politicians use to check a political box. Since the financial crisis, big banks have, for the most part, turned down the financing small business owners need to grow and thrive, and in a stunning move, the Treasury secretary, congressional Republicans and the acting Comptroller of the Currency are trying to kill a new mechanism designed to improve small business lending.

Known as the 1071 data reporting requirement, this mechanism was included in the Dodd-Frank financial reform bill to increase the transparency around small business lending to ensure all entrepreneurs are getting a fair shake from banks. It requires the Consumer Financial Protection Bureau (CFPB) to collect data on the state of small business lending, along with information about access to credit for women and minority-owned businesses, in order to better understand lending patterns.

{mosads}Access to capital is one of the most important engines of small business formation and continued success, but small business owners cite financing as one of their largest challenges, including in a new report released earlier this month in California. The data made available through 1071 will allow the public and regulators to see where there are gaps and discriminatory patterns in lending, thereby ensuring that all small businesses have equal opportunity when it comes to achieving the American Dream.

This issue is crucial to small business success and our economy. Small businesses employed just under 57 million people in 2013, nearly half the private workforce. Beyond creating income and wealth for the owners, small businesses reinvest profits into their communities, pay local taxes, and are more likely to hire people with only a high school diploma. They are especially critical to low-income communities, but, just like large corporations, they need financing to start, grow and thrive.

The CFPB began the process of writing the rule to implement 1071 data by holding a field hearing in May. Panelists discussed how this data will create a clearer picture for banks, lenders, policymakers and regulators about which banks are the leaders and which are the laggards in supporting small businesses. A similar reporting requirement for mortgages has been a key tool to understand local housing markets, credit needs and the challenges homebuyers face.

While the CFPB hasn’t always been popular with the GOP or Wall Street, it was surprising to see how quickly something that would help small business owners was targeted. This summer, the GOP-controlled House approved the Financial Choice Act (H.R. 10), which would eliminate 1071. And while a Treasury Department report acknowledged that “…small business lending by banks has been one of the most anemic sectors, barely recovering to the levels of 2008,” it then agreed with the House and called for the elimination of 1071, as did Acting Comptroller of the Currency Keith Noreika in recent Congressional testimony

Critics of Dodd Frank have argued that it restricts bank profits and their ability to lend. A catchy narrative, but not one supported by the facts: the FDIC reported that banks earned a record-setting $171 billion last year. For community banks, which represent 92 percent of FDIC-insured institutions, net income was up 10.5 percent in the fourth quarter of 2016.  

If the GOP and this administration kill 1071, the American people will be the ones who suffer. It will be the American worker with a high school diploma who could have been hired by a small business owner who was denied a loan to expand; or the individual whose local economy is stifled by the lack of small businesses’ growth; or an entrepreneur who must abandon their dream of opening a small business that would have provided a better life for his or her family.

Senators face an important decision if the Financial Choice Act moves forward. Are they willing to move beyond stale campaign clichés? Are they willing to stand up for the small businesses that drive our economy? If so, they must support 1071 and the accountability and fairness in lending it will create.

Paulina Gonzalez is the executive director of the California Reinvestment Coalition, a statewide coalition of nonprofits in California. Luz Urrutia is the CEO of Opportunity Fund, the nation’s largest nonprofit Community Development Financial Institution supporting small businesses.