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House of Representatives
Session of 2021 - 2022 Regular Session

MEMORANDUM

Posted:	August 4, 2021 11:51 AM
From:	Representative Kristine C. Howard
To:	All House members
Subject:	Protecting Small Businesses from Predatory Lending

Small businesses are offered little protection from predatory lending and other pitfalls of commercial lending. While larger businesses typically have the means to receive fair and favorable loans, small businesses are often left to navigate a chaotic, confusing, and unjust lending environment plagued by manipulative practices and low transparency, one created by a comparative lack of legislative oversight of commercial loans.    In the near future, I plan on introducing a pair of bills offering commonsense reforms to rectify this. The first bill would amend the Loan Interest and Protection Law, requiring lenders to provide specific information to small businesses when providing loans. This “Truth-in-Lending” bill would give commercial borrowers greater transparency in the loan marketplace and protect them from predatory lending, ensuring they are fully informed on conditions for financing. The second bill would prohibit the use of confessions of judgement, which allow for immediate judgments against borrowers without prior notice or the opportunity to be heard in court. While this practice is rightfully forbidden in loans to consumers nationwide because of the FTC’s 1984 Credit Practices Rule, it is still permitted in commercial loans in Pennsylvania, a severe legislative oversight that harms many small businesses. Please join me in co-sponsoring these important pieces of legislation to protect small businesses across the Commonwealth.

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Document #1

Description:	The first bill would amend the Loan Interest and Protection Law to require additional disclosures in commercial loans to businesses with fewer than 500 employees. These disclosures shall include, but not be limited to, the total cost of the loan, both in raw dollars and as an annualized rate, details of payments, the term, and detailed descriptions of prepayment policies.

Document #2

Description:	The second bill would prohibit the use of confessions of judgement in commercial loans. This would bring commercial loans in line with protections offered to consumers against this very abuse-prone contractual tool.