The COVID-19 pandemic has been devastating for many American small businesses, who have struggled to navigate the economic turmoil caused by the virus. The hardships endured by small businesses and entrepreneurs include damage to their credit histories. Similar to how a bank or credit card company might pull your personal credit report from a consumer reporting company like Equifax, TransUnion or Experian before offering you a loan, creditors rely on data from specialized companies when deciding whether to lend to small businesses.
Many small businesses are often unaware that information about them is being collected and assembled for sale to others. The Fair Credit Reporting Act has some protections for individual consumers, like the right to dispute inaccurate information. However, small businesses don’t necessarily have the same set of rights. Errors and inaccurate information can be costly to a small business.
The Federal Trade Commission (FTC) recently reached a proposed settlement agreement with one of those companies, Dun & Bradstreet (D&B). D&B provides business credit information to banks and other creditors. The FTC alleged that D&B deceived small businesses about a line of products called CreditBuilder, which among other things purported to help the businesses improve their credit reports. The FTC asked for comment on its proposed agreement before deciding to finalize it, and the CFPB submitted a comment letter yesterday.
Under the settlement, D&B agreed to make several changes to its operations, such as modifying processes so complaints about inaccurate information get prompt responses, and placing restrictions on automatic renewals for CreditBuilder subscriptions. D&B also committed to offering refunds to affected small businesses.
The CFPB’s submission applauds the FTC for holding D&B to account for its clear misconduct, and these changes will make a real difference in preventing future harm. Of course, refunds alone do not make whole businesses that may have lost out on contracts or financing opportunities due to these practices. The CFPB and FTC will be working together to ensure that small businesses are treated fairly when it comes to accessing loans.
The CFPB is working on a rule to shine more light on small business lending, by gathering more data about whether and how small businesses are able to access credit. In the law that created the CFPB, Congress tasked the Bureau with taking on this challenge. For too long, small businesses have had to rely on opaque business credit reporting agencies as gatekeepers of financing and we look forward to helping regulators, including the FTC, better understand the landscape of credit availability.