00:00.000 --> 00:03.870 Chairman: I'd like to call this hearing to order. And I think 00:03.870 --> 00:06.120 we'll get underway. I don't know if you're all familiar with this 00:06.120 --> 00:10.140 place, but we got votes this morning at about 1030. So we'll 00:10.140 --> 00:14.340 just go and we may have to let out for a few minutes and 00:14.340 --> 00:17.280 reconvene after votes. We're not expecting a huge vote series, 00:17.310 --> 00:19.770 but it probably be 20 or 30 minutes, just so you all know 00:19.770 --> 00:24.090 it's heading our way. Let's just start off and begin I'll try to 00:24.120 --> 00:26.760 get through some of this rapidly. Small business access 00:26.760 --> 00:30.450 to capital has always been a top priority for this committee. 00:30.600 --> 00:33.510 Access to Capital give small businesses the resources they 00:33.510 --> 00:36.030 need to keep the lights on purchase inventory, pay their 00:36.030 --> 00:39.300 employees, expand their businesses. For decades, small 00:39.300 --> 00:41.880 business owners typically went to their local community bank to 00:41.880 --> 00:44.940 receive this capital. These banks were the backbone of how 00:44.940 --> 00:48.300 main streets across this nation were created. However, the 00:48.300 --> 00:50.250 amount of community banks in the United States has fallen 00:50.250 --> 00:53.250 dramatically in recent years and regulations such as Dodd Frank 00:53.250 --> 00:55.740 have made it more difficult for small businesses to acquire 00:55.740 --> 00:59.670 loans through traditional means. Therefore, many small businesses 00:59.670 --> 01:02.970 have had to resort to other means to acquire capital. One 01:02.970 --> 01:05.520 private sector solution that has grown considerably in recent 01:05.520 --> 01:10.410 years to address this credit gap is online lending. While it's 01:10.410 --> 01:13.080 difficult to estimate the size of this industry, online lenders 01:13.080 --> 01:16.920 originated an estimated five to 7 billion in loans to small 01:16.920 --> 01:21.540 businesses in 2015. And it is expected to become a $50 billion 01:21.750 --> 01:25.290 industry by 2020. While this is an emerging industry with 01:25.290 --> 01:28.410 several types of business models to assess risk, mitigate lender 01:28.410 --> 01:31.320 exposure and obtain the capital to lend to small businesses. 01:31.710 --> 01:34.440 online lenders typically offer smaller loans with rapid 01:34.440 --> 01:37.560 approval and funding times. This morning, we will hear from a 01:37.560 --> 01:40.560 distinguished panel of witnesses who will give their perspective 01:40.560 --> 01:42.930 on recent trends in the small business online lending 01:42.930 --> 01:46.080 industry, and how it fits into the overall small business 01:46.080 --> 01:49.740 credit market. I appreciate the witnesses being here today. 01:49.740 --> 01:52.110 Thank you all very much for coming. I look forward to your 01:52.110 --> 01:54.930 testimony. I now yield to the ranking member for his opening 01:54.930 --> 01:55.470 remarks. 01:55.529 --> 01:57.749 Dwight Evans: Thank you, Mr. Chairman. Right. Access to 01:57.749 --> 02:00.299 capital is critical to the success of small minutes 02:00.329 --> 02:03.179 however, obtaining conventional credit can be particularly 02:03.179 --> 02:07.139 difficult. For many small firms. lending requirements are much 02:07.139 --> 02:10.529 tighter now that they are than they were before before the 02:10.529 --> 02:13.679 financial crisis and small businesses, especially startups 02:13.829 --> 02:18.629 are still considered a risky bet by many lenders. Although 02:18.629 --> 02:21.269 FinTech provides significant advantages, there are some 02:21.269 --> 02:24.719 drawbacks FinTech lending platform reserves the right to 02:24.719 --> 02:27.059 reject small business application, just like 02:27.059 --> 02:31.409 traditional banks. In 2014, the Federal Reserve found only 8% of 02:31.409 --> 02:34.499 business loan applications are acceptable by the larger 02:34.499 --> 02:38.669 platform. Today's hearing will provide members with an 02:38.669 --> 02:42.389 opportunity to learn about the online lending market and how it 02:42.389 --> 02:46.079 has helped increase access to capital small businesses. Today, 02:46.079 --> 02:49.289 many firms are turned to alternative lending that 02:49.289 --> 02:53.009 operates on online lending platform. These services have 02:53.219 --> 02:55.889 made hundreds of millions of dollars available to small firms 02:55.889 --> 02:59.699 by offering a number of benefits over traditional sources, but do 02:59.699 --> 03:02.249 have some drawbacks. I look forward to hearing from our 03:02.249 --> 03:05.969 witnesses on ways to improve the marketplace and increase access 03:05.969 --> 03:09.869 to capital for the nation's job creation and innovation. Thank 03:09.869 --> 03:11.129 you, Mr. Chairman, I yield back. 03:18.270 --> 03:20.340 Chairman: If committee members have an opening statement 03:20.340 --> 03:23.670 prepared, I asked them to be submitted for the record, I'd 03:23.670 --> 03:26.580 like to take a moment to explain the timing lights for our panel 03:26.580 --> 03:28.680 today, you will each have five minutes to deliver your 03:28.680 --> 03:32.340 testimony. The light will start out green. When you have one 03:32.340 --> 03:35.370 minute remaining, the light will turn to yellow. And finally at 03:35.370 --> 03:38.580 the end of your five minutes it will turn red. I ask that you 03:38.580 --> 03:43.470 try to adhere to that time limit as best you can. And will that 03:43.470 --> 03:46.830 we'll get off to our testimony. Our first witness today is Mr. 03:46.830 --> 03:49.560 William Phelan, the President and co founder of Paynet 03:50.010 --> 03:52.890 incorporated in Skokie, Illinois. Paynet provides small 03:52.890 --> 03:56.760 business credit data analysis to a variety of clients. He also 03:56.760 --> 03:59.670 serves on the Advisory Council on agricultural small business 03:59.670 --> 04:03.510 and labor to the Federal Reserve Board of Chicago. Thank you for 04:03.510 --> 04:05.700 being here this morning. You are recognized for five minutes. 04:05.730 --> 04:06.120 Thank you. 04:07.050 --> 04:09.210 William Phelan: Thank you, Mr. Chairman. Thank you for that 04:09.210 --> 04:12.060 introduction, the financial crisis, as you all state 04:12.090 --> 04:15.270 disrupted the credit markets, traditional banks, as you 04:15.270 --> 04:21.270 mentioned, and even large banks were preoccupied and didn't find 04:21.270 --> 04:24.930 lending to be as profitable. fintechs jumped in, as you said, 04:24.930 --> 04:27.090 chairman to fill the credit gap and but they have their own 04:27.090 --> 04:29.670 challenges as well. Let me just briefly talk about the credit 04:29.670 --> 04:32.400 conditions for small businesses right now. There's less 04:32.400 --> 04:36.210 investment being taken by small businesses right now. From the 04:36.210 --> 04:39.630 period 15 to 17, the Small Business Investment is actually 04:39.630 --> 04:45.600 down 1% versus 2005 to seven where it was up 12%. Having said 04:45.600 --> 04:48.420 that the financial health of small businesses is extremely 04:48.780 --> 04:51.930 strong right now. There are days past two are actually better 04:51.930 --> 04:54.720 than they were before the recession. Very briefly, let me 04:54.720 --> 04:57.450 just mention the size of this market. It's important to 04:57.450 --> 05:00.360 understand the sheer scope of the Small Business his credit 05:00.360 --> 05:04.890 market we estimated over $1 trillion in total credit, banks 05:04.920 --> 05:07.560 make up the biggest portion of that about 700 billion, 05:07.890 --> 05:11.880 commercial finance about 250 billion. And alternative finance 05:11.880 --> 05:16.560 or Fintech is about five to 7 billion right now. Briefly, you 05:16.560 --> 05:18.960 mentioned the banks and the challenges they've had they go 05:18.960 --> 05:22.980 undergo a credit process, the credit process is one of 28 05:22.980 --> 05:27.210 different steps that can cost a bank five to $7,000 to complete 05:27.210 --> 05:30.060 one credit application. So it's a very expensive process for a 05:30.060 --> 05:32.970 bank. And then they have to spend a lot of time actually 05:32.970 --> 05:36.270 reviewing those loans. And that's another $1,000 of cost. 05:36.870 --> 05:41.700 You mentioned the credit gap as well. In your opening, I'd like 05:41.700 --> 05:44.700 to point out that Harvard Business School conducted a 05:44.700 --> 05:48.030 research study called the decline of big bank lending to 05:48.030 --> 05:52.080 small businesses, the dynamic impacts on local credit and 05:52.080 --> 05:55.230 labor markets. This was conducted by Jeremy Stein, an ex 05:55.230 --> 05:58.650 fed governor and two of his colleagues. And what they found 05:58.650 --> 06:02.010 was that fewer businesses expanded employment as small as 06:02.370 --> 06:05.460 the large big four banks pulled back and providing access to 06:05.460 --> 06:10.440 capital. These were unemployment rates rose, wages fell, the 06:10.440 --> 06:14.100 effects were concentrated in industries like manufacturing, 06:14.430 --> 06:18.990 and small banks, non bank, finance companies, and fintechs 06:19.020 --> 06:22.110 jumped in to fill that gap. And so there's evidence of this 06:22.110 --> 06:25.590 shown in this Harvard study, wages are still lower, that 06:25.590 --> 06:28.080 still persists, which means there's more work to be done. 06:28.860 --> 06:31.890 You mentioned in your memo, the size of FinTech at five to 7 06:31.890 --> 06:34.920 billion, so I won't dwell on that. They do make traditional 06:34.920 --> 06:38.160 loans, they make working capital loans. There are several 06:38.160 --> 06:41.100 coalition's that have banded together to make disclosure 06:41.100 --> 06:44.010 available, like the innovative lenders platform Association, 06:44.340 --> 06:49.200 the responsible business lending coalition, and the electronic 06:49.200 --> 06:51.960 transaction Association, and they've all instituted 06:51.960 --> 06:56.130 disclosures to help understand the cost of this capital. Very 06:56.130 --> 06:59.700 briefly, I want to point out the credit quality of the type of a 06:59.700 --> 07:03.600 business that uses FinTech, we've seen that credit quality 07:03.600 --> 07:09.450 improve from 2009 to the current to two through 2016. The credit 07:09.450 --> 07:13.410 scores were about 660. Back in oh nine, they're about six, 07:13.410 --> 07:18.930 almost 670. Now, in 2016, we've seen the fintechs actually 07:19.050 --> 07:21.780 increase the balance of the loans that they're providing 07:21.780 --> 07:25.590 small businesses, so they were around 20, and the 20,000 size 07:25.590 --> 07:29.730 and other at the $65,000 size. We've seen them expand the 07:29.730 --> 07:32.520 length of the loans that they're providing. These were very short 07:32.520 --> 07:36.420 term loans, six month type loans. Now they're average of 15 07:36.420 --> 07:43.560 months. We've seen the, the businesses that they lend to is 07:43.560 --> 07:46.020 actually longer established businesses. This was really 07:46.020 --> 07:48.630 interesting in some of the research that they're lending to 07:48.630 --> 07:51.660 businesses that have been in business for 10 or more years, 07:52.170 --> 07:55.620 to the tune of about 70% of their borrowings go to those 07:55.620 --> 08:00.570 kinds of businesses versus 77% for banks, and they're expanding 08:00.570 --> 08:03.810 into diverse industries. These are, we're seeing lending into 08:03.810 --> 08:07.020 retail healthcare, a combination of foods, construction, 08:07.020 --> 08:10.860 professional services, wholesale trade, transportation, 08:10.890 --> 08:14.370 administration and manufacturing. Very briefly, we 08:14.370 --> 08:17.820 have pain that conducted a study, we looked at what happens 08:17.820 --> 08:21.660 to businesses that borrow from online or FinTech lenders. And 08:21.660 --> 08:24.690 we see that about 80% of them have actually kind of climbed 08:24.690 --> 08:28.590 that credit ladder, and actually seen their their credit in their 08:28.590 --> 08:32.190 financial health actually improve over that timeframe. So 08:32.190 --> 08:36.000 that was important finding that we had. But we also note that 08:36.000 --> 08:38.820 there's a long way to go for fintechs to be successful. 08:39.270 --> 08:42.240 They've done a good job with the technology, but they still have 08:42.240 --> 08:45.810 work to do on acquiring accounts, and finding access to 08:45.810 --> 08:49.620 capital. And they're on the road towards this disclosure, which I 08:49.620 --> 08:52.350 think is an important part of what they've got to do to 08:52.350 --> 08:54.930 further bolster their business models. With that I'll wrap up 08:54.930 --> 08:56.100 my comments. Thank you. 09:18.540 --> 09:20.640 Katherine Fisher: Chairman Brat Ranking Member Evans and 09:20.640 --> 09:23.340 committee members, thank you for the opportunity to present 09:23.340 --> 09:26.760 testimony today regarding financing through FinTech online 09:26.760 --> 09:30.360 lending its role in improving small business capital access. I 09:30.360 --> 09:33.420 am here today on behalf of the commercial finance Coalition, a 09:33.420 --> 09:35.940 group of responsible finance companies that provide needed 09:35.940 --> 09:38.580 capital to small business small and medium sized businesses 09:38.580 --> 09:42.060 through innovative methods. Small businesses face a gap in 09:42.060 --> 09:45.240 credit availability. commercial finance coalition member 09:45.240 --> 09:47.820 companies are trying to close this gap and help spur 09:47.820 --> 09:50.610 entrepreneurship so more Americans can own and operate 09:50.610 --> 09:54.270 their own businesses. And my testimony today I will provide 09:54.270 --> 09:56.670 an overview of the types of financing available to small 09:56.670 --> 09:59.640 businesses with an emphasis on some of the more innovative 09:59.640 --> 10:03.270 finance In options, I also will address existing regulation on 10:03.270 --> 10:05.910 small business which is sufficient to protect small 10:05.910 --> 10:11.040 businesses. First, small businesses need choices. Small 10:11.040 --> 10:13.590 businesses benefit from having different types of financing 10:13.590 --> 10:16.800 available. A business owner who is planning for longer term 10:16.800 --> 10:19.740 capital needs may choose to apply for a loan guaranteed by 10:19.740 --> 10:23.310 the Small Business Administration. These SBA loans 10:23.310 --> 10:27.810 are relatively low cost, they range typically from 25,000 to 10:27.810 --> 10:32.700 $5 million. To apply for an SBA loan, the loan applicant must 10:32.700 --> 10:36.060 submit a business plan and the business owner must often use 10:36.060 --> 10:40.560 her house as collateral for the loan. In contrast, a business 10:40.560 --> 10:43.920 owner who has short term capital needs may choose to apply for a 10:43.920 --> 10:47.040 loan from a non bank lender or to sell future receivables to a 10:47.040 --> 10:51.030 merchant cash advance company. These types of transactions are 10:51.030 --> 10:54.090 typically higher costs than traditional SBA loans, and are 10:54.090 --> 10:57.960 in smaller dollar amounts. To apply for one of these loans or 10:57.960 --> 11:01.410 MC A's, the applicant usually must submit bank statements 11:01.440 --> 11:04.560 showing several months worth of revenue, and the business can 11:04.560 --> 11:08.730 receive funds in a matter of days. MCA companies these are 11:08.730 --> 11:11.700 merchant cash advance companies are primarily balance sheet 11:11.700 --> 11:15.690 funders who have an interest in the success of the business. MCs 11:15.690 --> 11:18.360 are also unique because they allow the merchant to adjust the 11:18.360 --> 11:23.340 terms of the transaction to match the revenue. Whatever the 11:23.340 --> 11:26.130 type of financing a business owner chooses, banks alone are 11:26.130 --> 11:29.640 not addressing the needs of small business. Other financing 11:29.640 --> 11:32.430 sources are finding success because small businesses demand 11:32.430 --> 11:35.910 them. This demand shows that small businesses are being 11:35.910 --> 11:40.530 underserved by the traditional funding sources. The MCA and 11:40.530 --> 11:43.200 commercial lending spaces are sufficiently regulated by 11:43.200 --> 11:47.430 existing federal and state laws and regulations. Both MCA 11:47.430 --> 11:50.130 companies and commercial lenders must comply with laws and 11:50.130 --> 11:52.500 regulations affecting nearly every aspect of their 11:52.500 --> 11:56.130 transactions from marketing and underwriting through servicing 11:56.130 --> 12:00.360 and collections. Even when they comply with every applicable law 12:00.360 --> 12:03.450 and regulation. Small Business funders must also be wary of the 12:03.450 --> 12:06.720 Federal Trade Commission's powerful authority to prevent 12:06.720 --> 12:11.220 unfair or deceptive acts or practices. commercial lenders 12:11.220 --> 12:14.160 must comply with additional federal regulation, and many 12:14.160 --> 12:16.650 states subjected them to comprehensive licensing and 12:16.650 --> 12:21.060 regulatory schemes. For example, on the federal level, commercial 12:21.060 --> 12:24.120 lenders must comply with the Equal Credit Opportunity Act and 12:24.120 --> 12:27.090 its implementing regulation P which prohibit discrimination 12:27.120 --> 12:29.670 against protected classes of people in the extension of 12:29.670 --> 12:33.600 credit. The Equal Credit Opportunity Act and REG be 12:33.630 --> 12:36.690 applied to business credit and provide protections specifically 12:36.690 --> 12:40.680 for business borrowers. Another example is the Fair Credit 12:40.680 --> 12:43.410 Reporting Act, which requires a funder to have a permissible 12:43.410 --> 12:46.860 purpose to pull a consumer report for sole proprietor or 12:46.860 --> 12:51.030 for an individual guarantor of a business transaction. This is 12:51.030 --> 12:53.760 particularly relevant in the world of Small Business Finance, 12:53.940 --> 12:56.730 where the business is often organized as a sole proprietor, 12:57.150 --> 12:59.970 or the individual owner will serve as a guarantor in the 12:59.970 --> 13:04.350 event that the business defaults. Finally, many states 13:04.350 --> 13:07.710 require a license to make a loan to a business limit the interest 13:07.710 --> 13:11.760 rates lenders may charge to business borrowers or both. And 13:11.760 --> 13:15.600 with state licensing programs comes regulatory oversight 13:16.590 --> 13:19.920 states that regulate lending and also typically limit the terms 13:19.920 --> 13:22.740 of loans, required disclosures and loan documents and limit the 13:22.740 --> 13:26.580 fees that creditors may impose. Most state laws regulating 13:26.580 --> 13:29.640 lending apply to loans with smaller dollar values. And these 13:29.640 --> 13:32.010 are exactly the types of loans upon which small businesses 13:32.010 --> 13:36.540 rely. I'm very optimistic that FinTech and alternative finance 13:36.540 --> 13:39.270 will fill the void for those underserved by traditional banks 13:39.480 --> 13:42.420 and financial institutions, providing much needed access to 13:42.420 --> 13:44.490 capital for small businesses. Thank you. 13:47.460 --> 13:49.440 Chairman: Thank you, Miss Fisher. We appreciate your 13:49.470 --> 13:52.110 testimony as well. Thank you very much and I'll now yield to 13:52.110 --> 13:53.970 our ranking member for the introduction of the final 13:53.970 --> 13:54.450 witness. 14:14.040 --> 14:19.350 Dwight Evans: Thank you, Mr. Chairman. Our last witness is 14:19.350 --> 14:25.290 Mr. Dryer, CEO of the company is Mirador, did I get that right? 14:25.740 --> 14:29.130 Mirador. Mirador Finance in Portland, Oregon. Mr. Dryer 14:29.130 --> 14:37.020 received his a BA in history. literature from Harvard 14:37.020 --> 14:40.290 University before receiving his JD from Stanford University Law 14:40.290 --> 14:43.290 School. Thank you for being here this morning. And you may begin. 14:43.320 --> 14:44.100 Thank you, Mr. 14:44.840 --> 14:47.450 Dryer: Chairman, brat and Ranking Member Evans, thank you 14:47.450 --> 14:50.240 for the opportunity to testify today. It's really an honor to 14:50.240 --> 14:54.560 be here. As mentioned, my name is Trevor Dreyer. I'm the CEO of 14:54.590 --> 14:57.530 Mirador, which is a small business headquartered in 14:57.530 --> 15:01.670 Portland, Oregon. Mirador is a White Label third party service 15:01.670 --> 15:05.090 provider working with regional mid sized and community banks, 15:05.120 --> 15:10.040 credit unions and nonprofit CDI CDFIs. Mirador is dedicated to 15:10.040 --> 15:13.130 the proposition that regulated financial services companies 15:13.130 --> 15:16.970 want to serve small businesses in their communities. Mirador is 15:16.970 --> 15:19.940 not a lender. Our platform focuses on improving the 15:19.940 --> 15:22.490 engagement and experience between borrower and lender 15:22.700 --> 15:26.330 supporting commercial term loans, SBA back loans, working 15:26.330 --> 15:29.720 capital lines of credit, commercial real estate loans and 15:29.720 --> 15:33.050 small dollar loans. When a borrower goes to one of our 15:33.050 --> 15:36.320 customers branches or to their website to apply for a business 15:36.320 --> 15:39.680 loan, they're routed onto the Mirador platform. However, they 15:39.680 --> 15:42.560 likely won't even know they have left the bank site and we want 15:42.560 --> 15:45.740 it that way. Borrowers can follow simple steps to fill out 15:45.740 --> 15:48.770 the application and Mirador technology completes a credit 15:48.770 --> 15:51.830 memo by pulling additional data from public records, credit 15:51.830 --> 15:55.610 bureaus, accounting software, bank accounts and the IRS, which 15:55.610 --> 15:58.400 is returned to a banks loan officer with a simple indication 15:58.400 --> 16:02.330 of credit worthiness. Based on the lenders credit criteria. We 16:02.330 --> 16:05.120 are paid for every credit memo we complete without regard to 16:05.120 --> 16:08.570 the final outcome of the application. The benefit to our 16:08.570 --> 16:11.600 bank customers is a vast reduction in the time and cost 16:11.600 --> 16:14.630 to process the loan. For the borrowers they benefit from an 16:14.630 --> 16:17.510 equally steep reduction in the time it takes to go from the 16:17.510 --> 16:21.320 application to the funding of the loan. As we grow our client 16:21.320 --> 16:24.110 base, we're creating a network of partners borrowers and 16:24.110 --> 16:27.290 lenders passing along customers to ensure that any small 16:27.290 --> 16:29.570 business can gain access to credit from a regulated 16:29.570 --> 16:32.810 institution without having to go through the time and trouble of 16:32.810 --> 16:36.560 starting the application process over each time. This is also a 16:36.560 --> 16:39.410 unique way to increase awareness of low cost lenders such as 16:39.410 --> 16:43.040 CDFIs that traditionally do not engage in marketing activities. 16:44.000 --> 16:46.610 Innovation in the area of small business lending is improving 16:46.610 --> 16:49.250 access to capital. However, a number of issues still 16:49.250 --> 16:51.740 negatively impact this market and place the borrower at a 16:51.740 --> 16:55.490 disadvantage. To that end, I proffer a few recommendations to 16:55.490 --> 16:58.250 further remove pain points for small business borrowers and 16:58.250 --> 17:02.390 lenders. First, I strongly encourage the IRS to automate 17:02.390 --> 17:05.930 the 45 O 60 process for a third party to obtain a tax 17:05.930 --> 17:09.470 transcript. Congressman McHenry and Blumenauer as well as the 17:09.470 --> 17:11.180 ranking member of this committee, Congresswoman 17:11.180 --> 17:16.100 Velazquez introduced hr 3860. The IRS data verification 17:16.100 --> 17:20.000 Modernization Act of 2017, requiring the IRS to automate 17:20.000 --> 17:23.900 the income verification express service process by creating an 17:23.900 --> 17:27.560 API or application programming interface, which will reduce the 17:27.560 --> 17:30.320 paperwork and the waiting period that currently burdens lenders 17:30.320 --> 17:33.980 and borrowers alike. Second, working with New York Business 17:33.980 --> 17:37.160 Development Corporation, we've identified an opportunity to 17:37.160 --> 17:40.040 increase referrals of those borrowers unable to gain access 17:40.040 --> 17:42.740 of credit through traditional methods to a mission based 17:42.740 --> 17:46.250 nonprofit lender, by providing Community Reinvestment Act or 17:46.250 --> 17:50.390 CRA consideration for referrals. Currently, banks do not receive 17:50.390 --> 17:53.390 CRA credit from referring borrowers to CDFIs or other 17:53.390 --> 17:56.270 qualified institutions. When these loans are too risky for 17:56.270 --> 17:59.120 the bank to underwrite. Given the economic development 17:59.120 --> 18:02.540 missions of CDFIs. To support small businesses, a successful 18:02.540 --> 18:04.670 referral from a bank is something that regulators should 18:04.670 --> 18:08.930 incentivize. Third, the law should allow credit reports to 18:08.930 --> 18:12.050 travel with referred loan applications. When applying for 18:12.050 --> 18:14.510 a loan. Numerous credit inquiries occur from the various 18:14.510 --> 18:17.510 lenders considering the borrower's request, even though 18:17.510 --> 18:20.990 the borrower is seeking a single loan. Currently, each lender has 18:20.990 --> 18:24.290 to pull a credit report even if the loan is a referral. The more 18:24.290 --> 18:27.440 inquiries the greater the impact on a credit score. As a credit 18:27.440 --> 18:30.800 score gets lowered, the cost of capital increases and becomes 18:30.800 --> 18:35.210 more difficult to obtain. Finally, I'd encourage further 18:35.210 --> 18:38.720 AI to further incentivize the SBA to improve their technology 18:38.720 --> 18:41.210 and making the agency's lending process more efficient and 18:41.210 --> 18:44.750 borrower friendly. SBA back products remain a vital source 18:44.750 --> 18:47.900 of capital for small businesses, particularly newer businesses 18:47.900 --> 18:51.020 and startups. However, the process and technology used are 18:51.020 --> 18:53.480 cumbersome and can deter many lenders and borrowers from 18:53.480 --> 18:56.540 participating. The private sector including Mirador has 18:56.540 --> 18:59.390 developed world class matching technology, ensuring that 18:59.390 --> 19:01.610 borrowers end up approved by a lender under the most 19:01.610 --> 19:04.460 appropriate terms and conditions. The SBA should be 19:04.460 --> 19:06.650 encouraged to look to the private sector for technology 19:06.650 --> 19:09.260 solutions to improve the borrower experience in their 19:09.260 --> 19:13.550 flagship programs, SBA won an SBA lender match. Once again, 19:13.550 --> 19:16.040 thank you so much for this incredible opportunity and happy 19:16.040 --> 19:16.940 to answer your questions. 19:18.730 --> 19:20.950 Chairman: Super. Thank you, Mr. Dryer, we appreciate your 19:20.950 --> 19:24.880 testimony as well. And I think for the questions, I'm first 19:24.880 --> 19:28.180 going to yield to my colleague, Mr. Luke De Meyer. He's got a 19:28.180 --> 19:31.750 special interest and expertise in this area, and he'll lead off 19:31.750 --> 19:32.470 with some questions. 19:33.250 --> 19:34.660 Luke De Meyer: Thank you, Mr. Chairman. I appreciate the 19:34.660 --> 19:39.760 opportunity to be here today in your in your committee. Miss 19:39.940 --> 19:43.570 Miss Fisher, I'm kind of curious. You are advocating I 19:43.570 --> 19:46.570 represent anyway the merchant cash advance folks that correct? 19:48.790 --> 19:52.960 Would you describe a cash advance as a loan or investment 19:52.960 --> 19:54.310 or how would you classify that? 19:54.370 --> 19:57.520 Katherine Fisher: Sure, thanks for asking that. A merchant cash 19:57.520 --> 20:01.180 advance is not a loan. It is a purchase of of the right to 20:01.180 --> 20:05.320 receive future income from a business. So a small business 20:05.320 --> 20:09.070 owner can enter into a transaction with a merchant cash 20:09.070 --> 20:12.400 advance funder under which the small business owner sells a 20:12.400 --> 20:16.570 percentage of its future income. And the merchant cash advance 20:16.570 --> 20:21.640 company then will receive that portion of the of the small 20:21.640 --> 20:25.900 business's revenue, as the small business makes the revenue. It's 20:25.900 --> 20:30.460 a very helpful product for small businesses and that payments are 20:30.460 --> 20:33.400 not unconditionally required, the payments to the merchant 20:33.400 --> 20:36.220 cash advance company are required only to the extent that 20:36.220 --> 20:38.320 the small business actually creates revenue. 20:38.800 --> 20:43.150 Luke De Meyer: Okay, fantastic. So I know that in Mr. Failings 20:43.150 --> 20:46.510 testimony, he talks about a Smart Box. And I'm all for 20:46.510 --> 20:49.810 disclosures. I think the individual the business needs to 20:49.810 --> 20:52.480 know what they're getting into. That gets important. But I know 20:52.510 --> 20:56.020 in the smart box there is an APR, disclosure, how do you 20:56.020 --> 20:59.710 disclose an APR with a Merchant Advance product? 21:02.170 --> 21:04.180 Katherine Fisher: That's a good question. A merchant cash 21:04.180 --> 21:05.620 advance product is not. 21:05.710 --> 21:08.020 Luke De Meyer: It's not a loan. So therefore you don't really 21:08.020 --> 21:08.860 have an APR. 21:09.070 --> 21:12.820 Katherine Fisher: If there's and and also, there is no definite 21:12.820 --> 21:16.480 term. So because a small business is required to deliver 21:16.480 --> 21:19.300 their a portion of their receipts, as as receipts are 21:19.300 --> 21:24.610 created. We can't know when those crates those receipts will 21:24.610 --> 21:28.180 be created. And, and things can happen. Like there can be a 21:28.180 --> 21:31.900 tough winter in Minnesota and business slows down for 21:31.900 --> 21:34.840 businesses there. And so receipts trickle in more slowly 21:34.840 --> 21:39.910 than expected. So putting a an APR as a measurement on a 21:39.910 --> 21:43.360 transaction with no definite term is is not the most healthy. 21:43.360 --> 21:45.130 Luke De Meyer: We're trying to turn a square peg into a round 21:45.130 --> 21:50.860 hole. I have I deal with a lot of small dollar lending. And I 21:50.860 --> 21:54.040 chair the financial institutions subcommittee and financial 21:54.040 --> 21:56.740 services. And so I deal with this stuff all the time. And 21:56.740 --> 22:00.400 it's, you know, for a long time, I actually chaired the Financial 22:00.400 --> 22:02.350 Services Committee back in Missouri when I was back in the 22:02.350 --> 22:06.580 state house. And I've always dealt with the the problem with 22:06.580 --> 22:10.330 APR, just disclosures for small barrel lending anything less 22:10.330 --> 22:14.350 than a year. You know, APR, the letter stands for annual 22:14.380 --> 22:17.770 percentage rate, how do you have an annual percentage rate on 22:17.770 --> 22:21.100 something that's not an annual payment and is not done on an 22:21.100 --> 22:23.860 annual basis, it's done for two, three weeks or six months at a 22:23.860 --> 22:26.890 time, I've really struggled with this. And I think, you know, 22:26.890 --> 22:30.610 quite often time the APR is the misrepresented because at the 22:30.610 --> 22:34.720 end of the day, if I'm if I've got a leaky faucet at home, and 22:34.720 --> 22:39.130 I call my plumber up, and he charges 50 bucks to open, you 22:39.130 --> 22:42.310 know to stop by my my doorstep goes in and so you gotta you 22:42.310 --> 22:44.710 gotta tap, I just got to fix it within five minutes, you know, 22:44.740 --> 22:51.190 10 minutes there, he he fixed my my faucet. Now He charged me 50 22:51.190 --> 22:54.760 bucks to stop by and pay for his trip out and his experience and 22:54.760 --> 23:00.340 all his tools and all that or He charged me $300 an hour. That's 23:00.340 --> 23:03.430 the that's the disproportionality of an APR, 23:03.730 --> 23:07.270 and the misrepresentation of what's going on with a service 23:07.270 --> 23:10.300 charge for small dollar lending, which, you know, in your 23:10.300 --> 23:15.010 situation here, quite frankly, didn't even apply because of the 23:15.040 --> 23:19.450 business model that you have. So that's my concern with with APR, 23:19.480 --> 23:22.150 I think, for small dollar lending or anything is less than 23:22.150 --> 23:24.640 a year. I think it's an irrelevant thing. And I hope 23:24.640 --> 23:27.640 that that can be something that a smart box can be able to be 23:27.640 --> 23:30.850 fixed. So that doesn't do more harm than good, because I think 23:30.850 --> 23:35.230 it misrepresents what's actually going on there. Mr. Dryer, you 23:35.230 --> 23:37.420 made a comment a minute ago with regards to credit bureau 23:37.420 --> 23:40.360 inquiries. I think this is a very, very important point from 23:40.360 --> 23:43.120 the standpoint that the more inquiries that an individual 23:43.120 --> 23:46.330 has, or businesses has, at some time can have a negative impact 23:46.660 --> 23:49.180 on that person or that business's ability to get 23:49.180 --> 23:51.130 credit. Would you like to elaborate on that just a little 23:51.130 --> 23:55.180 bit? It seems counterintuitive, because you're trying to find a 23:55.180 --> 23:57.760 way to help people actually hurt them by going to the credit 23:57.760 --> 23:58.030 bureau. 23:58.420 --> 24:02.230 Dryer: That's right, we see typically, because of the rules 24:02.230 --> 24:04.810 that don't allow one lender to share a credit report with 24:04.810 --> 24:08.200 another that small businesses often have to apply to several 24:08.200 --> 24:11.080 lenders in order to find one that could they fit their credit 24:11.080 --> 24:13.810 parameters, their lending parameters. And so you'll see 24:13.810 --> 24:16.630 sometimes when they're looking for the same $50,000 loan, 24:16.990 --> 24:19.210 that'll apply to five or six lenders, and as they go through 24:19.210 --> 24:22.360 the process, more credit inquiries lowering their FICO 24:22.360 --> 24:22.810 score. 24:23.290 --> 24:24.940 Luke De Meyer: So how would, how would you fix that for your 24:24.940 --> 24:27.130 small for your small businesses, because this is really 24:27.130 --> 24:28.780 important, because they're trying to get started, they're 24:28.780 --> 24:32.230 struggling. And yet if they actually try and go someplace 24:32.230 --> 24:35.740 and get some funds, and they that individual or company or 24:35.740 --> 24:38.170 entity goes to the credit bureau, it's actually a mark 24:38.170 --> 24:39.580 against them. How do you how do you solve that problem? 24:40.020 --> 24:42.870 Dryer: I would solve it by allowing the credit report to be 24:42.900 --> 24:45.630 transferred from lender to lender. If you're applying for a 24:45.630 --> 24:48.300 single loan, even if it's a multiple lenders, that should be 24:48.330 --> 24:52.080 one credit inquiry, in my view, and if you can allow the 24:52.080 --> 24:55.200 borrower to kind of take that data with them, that would I 24:55.200 --> 24:56.760 think, solve largely the problem. 24:57.060 --> 24:59.130 Luke De Meyer: Appreciate that. Thank you, Mr. Chairman. My time 24:59.130 --> 24:59.640 is expired. 25:01.550 --> 25:04.010 Chairman: Thank you. I'll now yield to the ranking member 25:04.040 --> 25:06.200 member, Mr. Evans for five minutes. 25:06.230 --> 25:10.700 Dwight Evans: Thank you, Mr. Chairman. Miss Fisher. Want to 25:11.150 --> 25:13.520 probe a little bit more what my colleagues just talked about 25:13.550 --> 25:16.730 when applying for finance? Does your industry get personal 25:16.730 --> 25:19.640 guarantees that lenders and other industries receive? 25:22.670 --> 25:25.220 Katherine Fisher: Thank you for that question. When the merchant 25:25.220 --> 25:28.670 cash advance industry, they're typically our personal 25:28.670 --> 25:31.160 guarantees, but they're of a different sort than what the 25:31.160 --> 25:35.540 loan as I explained before, with a merchant cash advance 25:35.540 --> 25:38.930 transaction, the business is only obligated to deliver 25:38.930 --> 25:41.900 revenue to the extent the business creates that revenue. 25:42.170 --> 25:45.500 So the personal guarantee is not a personal guarantee of payment. 25:45.950 --> 25:48.920 The business owner also make certain promises such as they 25:48.920 --> 25:53.720 won't divert revenue, they they won't open multiple bank 25:53.720 --> 25:58.520 accounts and do funny things with their money. So the 25:58.520 --> 26:02.630 guarantee is a guarantee of those types of promises, not the 26:02.630 --> 26:03.980 guarantee of repayment. 26:05.270 --> 26:08.360 Dwight Evans: So does that lack of collaboration affect your 26:08.360 --> 26:09.050 business model? 26:14.480 --> 26:17.930 Katherine Fisher: No, I, I think it affects it in a positive way, 26:17.930 --> 26:22.400 in that it helps only ensure that the business owner who 26:22.400 --> 26:25.130 typically is the person who can control in a small business, 26:25.400 --> 26:28.490 whether they're opening multiple bank accounts is standing behind 26:28.490 --> 26:32.390 those promises. But it doesn't change the nature of the product 26:32.390 --> 26:34.040 being not absolutely repayable. 26:35.690 --> 26:38.390 Dwight Evans: This is to the entire panel, I'll start with 26:38.390 --> 26:41.690 you. Are you aware of the Small Business borrowing Bill of 26:41.690 --> 26:44.960 Rights? And do you think its tenants include common sense 26:44.960 --> 26:47.540 tools to protect small businesses and provide 26:47.540 --> 26:48.560 transparency? 26:49.610 --> 26:52.640 Katherine Fisher: Oh, thank you. I am aware of the small 26:52.700 --> 26:55.070 borrowers Bill of Rights. I haven't I haven't read it in a 26:55.070 --> 27:00.320 while. So I'm not familiar with exactly what it says. I think 27:00.320 --> 27:02.750 that, as I recall, there are certain things about it that are 27:02.750 --> 27:05.600 very good. There are certain things about it. I think it 27:05.930 --> 27:08.690 mentions APR. So that would be something that I would disagree 27:08.690 --> 27:13.550 with. The good news is there are many different industry groups 27:13.580 --> 27:16.520 who are working on best practices. And although they 27:16.520 --> 27:20.030 don't agree with every practice, they are working hard on coming 27:20.030 --> 27:23.150 together for best practices as a whole. So that that's a positive 27:23.150 --> 27:23.480 thing. 27:25.550 --> 27:27.410 Dwight Evans: Any people want to respond to that? 27:31.220 --> 27:35.690 William Phelan: Thank you, Congressman. We we also are 27:35.690 --> 27:38.870 aware of all the different disclosures that are underway 27:38.870 --> 27:41.510 now in the industry. And I mentioned some of them in my 27:41.510 --> 27:50.030 opening remarks. And there, there are different tools for 27:50.060 --> 27:55.670 assessing the cost of these types of loans. We think that 27:55.670 --> 27:59.810 more of those tools that are made available are better for 28:00.050 --> 28:04.550 the business to assess. I think somebody here mentioned that 28:05.090 --> 28:07.940 businesses have all kinds of credit needs and financial 28:07.940 --> 28:12.050 needs. And it's it's hard to distill this down into any one 28:12.080 --> 28:15.950 kind of point of view that can encompass all these different 28:15.980 --> 28:20.000 capital needs or credit needs for businesses. And so providing 28:20.030 --> 28:23.450 the disclosure and having the tools available, make a lot of 28:23.450 --> 28:27.950 sense is a way to help clarify the cost for the business. 28:30.770 --> 28:35.060 Dryer: Yes, we applaud the efforts of the industry to 28:35.090 --> 28:38.390 create more transparency and disclosure at the end of the 28:38.390 --> 28:41.060 day. That to me is what's important is the Small Business 28:41.060 --> 28:43.460 understanding what they're getting into. I think the 28:43.460 --> 28:46.970 challenge is when you have regulated entities that are 28:46.970 --> 28:50.450 subject to regulations requiring a certain disclosure, and then 28:50.450 --> 28:52.910 you have industry groups that have taken a different approach 28:53.120 --> 28:55.490 can become very confusing for a small business, if they're 28:55.490 --> 28:59.060 looking at multiple lenders to really understand the true costs 28:59.060 --> 29:02.900 and the terms of the loans. And we see that can be quite 29:02.900 --> 29:06.530 confusing. I don't have a great solution for that. But I think 29:06.530 --> 29:10.730 the more that a small business can be allowed to compare 29:10.760 --> 29:14.270 proverbial apples to apples, the better it is for the borrower. 29:16.620 --> 29:19.080 Dwight Evans: Thank you. Mr. Chairman. I yield back the 29:19.080 --> 29:19.770 balance of my time. 29:20.760 --> 29:24.840 Chairman: Thank you, Mr. Evans. I think we're actually doing all 29:24.840 --> 29:26.880 right on the voting clock. They're still talking on the 29:26.880 --> 29:30.420 floor. So we've done well today I'll ask a bit of a technical 29:30.420 --> 29:33.300 question. And then in the back your minds. You're up here in 29:33.300 --> 29:37.710 DC, federal government, federal law, etc regulations. At the 29:37.710 --> 29:41.220 end, maybe just suggest how we can be helpful to you moving 29:41.220 --> 29:44.640 forward, what can we do better and that but I'll just start off 29:44.640 --> 29:46.980 with a more of a narrow question. We'll just start with 29:46.980 --> 29:51.390 Mr. Phelan work down currently the Consumer Financial 29:51.390 --> 29:54.390 Protection Bureau. CFPB is in the process of implementing 29:54.390 --> 29:58.260 section 1071 of Dodd Frank which would require financial 29:58.260 --> 30:01.530 institutions including online land endeavours to gather and 30:01.530 --> 30:04.680 submit demographic data of borrowers to the government? 30:05.850 --> 30:09.360 What concerns if any, do you have with this provision? And 30:09.390 --> 30:12.660 how would it affect both small financial institutions and small 30:12.660 --> 30:13.380 businesses? 30:14.460 --> 30:17.220 William Phelan: Thank you for that question. Yes, we're we've 30:17.220 --> 30:20.370 worked a little bit with the CFPB to help them understand 30:20.370 --> 30:25.170 this data collection requirement. The, it's complex, 30:25.170 --> 30:28.590 and what we find is that the data doesn't exist today. So 30:28.590 --> 30:32.880 it's, it's hard to say where exactly to go for it right now. 30:33.750 --> 30:39.090 We think that the challenges in creating this sort of this 30:39.090 --> 30:43.920 massive set of information, and that, you know, it's going to 30:44.400 --> 30:48.180 put a burden on the businesses ultimately to report this in the 30:48.180 --> 30:51.480 in the transaction. And so there will be some requirements to 30:51.480 --> 30:54.000 collect it from the business, it's really the only source to 30:54.000 --> 30:56.760 get it is directly from the business because no other 30:56.760 --> 31:00.900 sources exist right now. Then you've got the challenge of 31:00.900 --> 31:04.320 being able to create this massive data warehouse, and 31:04.320 --> 31:07.890 there's different ways to do it. What we've spoken with with the 31:07.890 --> 31:13.350 CFPB, is to utilize current technology right now that exists 31:13.530 --> 31:18.180 right now, to collect this information. Once that's 31:18.180 --> 31:22.050 collected, it has to then be crafted into finished product 31:22.050 --> 31:24.900 that can understand what's going on in the lending markets and to 31:24.960 --> 31:30.000 understand fair credit, you know, lending activity. So the 31:30.000 --> 31:33.120 concerns are, it's it's going to be a massive project, it's going 31:33.120 --> 31:38.580 to be a very substantial initial change for both the business all 31:38.580 --> 31:42.000 the way through, I think, even to the CFPB to finally finally 31:42.000 --> 31:44.820 get understanding out of out of this dataset. 31:46.490 --> 31:48.950 Chairman: Great, thank you much. I apologize for the fire alarm. 31:48.950 --> 31:51.980 I've never heard it go off like that before. But I think I'm 31:51.980 --> 31:55.580 going to yield my time to a member. He bet Clark from New 31:55.580 --> 31:58.400 York right now. She's with us. And I want to make sure we get 31:58.400 --> 32:01.130 her questions in if she has any for you today. Thank you. 32:01.160 --> 32:03.350 Speaker 1: Certainly, I thank you very much, Mr. Chairman. I 32:03.350 --> 32:07.370 thank Ranking Member Evans, I think our expert witness for 32:07.490 --> 32:10.580 appearing here today, we know that the world has changed 32:10.580 --> 32:14.090 dramatically over the past decade alone, we've seen rapid 32:14.390 --> 32:17.900 technological advances that have allowed us to access the world 32:17.900 --> 32:21.530 in the palm of our hands. However, we have also seen 32:21.530 --> 32:24.860 generations of family wealth wiped out through the mortgage 32:24.860 --> 32:28.250 foreclosure crisis. At the center of all of this lies the 32:28.250 --> 32:33.440 financial technological industry. This crucial industry 32:33.470 --> 32:36.800 offers the promise of easier access to capital for people to 32:36.800 --> 32:40.940 open businesses afford college and launch new products. 32:41.180 --> 32:44.900 However, however, it also means that lenders could be exposed to 32:44.900 --> 32:49.490 new forms of fraud, and borrowers could face new forms 32:49.640 --> 32:53.840 of soft discrimination implicit bias by focusing on non 32:53.840 --> 32:57.680 traditional lending factors that structurally disadvantaged 32:57.680 --> 33:01.550 specific communities, our goal is elected representatives of 33:01.550 --> 33:04.490 the American people is to ensure that the government creates 33:04.490 --> 33:09.590 clear, fair and effective rules to maximize access to capital 33:09.680 --> 33:13.490 while minimizing risk and discrimination that results from 33:13.490 --> 33:17.330 bias. So my first question is to Mr. Phelan, can you please 33:17.330 --> 33:21.500 describe what non traditional factors FinTech lenders may look 33:21.500 --> 33:25.070 to look toward and making investment decisions? For 33:25.070 --> 33:29.540 instance, is there some means of explaining the story behind late 33:29.540 --> 33:32.990 payments within the confines of your application process? 33:34.040 --> 33:36.590 William Phelan: Thank you, thank you for that question. First of 33:36.590 --> 33:39.860 all, I'll start with the just the nature of a small business, 33:40.190 --> 33:44.540 a lot of times small businesses lack the the financial 33:44.540 --> 33:49.490 statements in an audited format. And so they don't they start 33:49.490 --> 33:53.840 with the really, they don't have the need to, to, you know, 33:53.840 --> 33:56.240 present audited financial statements and undertake all 33:56.240 --> 34:00.020 that expense that a public company does. And so, you know, 34:00.050 --> 34:04.280 that is the starting point. And with that starting point, you 34:04.280 --> 34:08.240 know, lenders are looking to do a credit assessment, they're 34:08.240 --> 34:11.720 looking to conduct an assessment about the ability to repay the 34:11.720 --> 34:15.290 loan. So if you, you put those two together, and you 34:15.290 --> 34:21.140 immediately you have to go to some sources of data to assess 34:21.140 --> 34:25.700 the credit of the borrower. And the sources are things that are 34:25.730 --> 34:29.300 mentioned in the memo. Things like credit bureau information 34:29.330 --> 34:33.410 is one source, both on the personal end and the commercial 34:33.410 --> 34:36.770 side. So there's commercial credit data that can be used 34:36.800 --> 34:42.050 very effectively. Secondly, there's very creative things 34:42.050 --> 34:45.380 done by the fintechs around collecting financial statement 34:45.380 --> 34:48.470 or financial cash flow information through the bank 34:48.470 --> 34:52.010 statements. And so they can actually look at the cash flows 34:52.010 --> 34:54.350 of the business through the bank statements. So there's these 34:54.350 --> 34:58.280 things. There's other sources that are, I think, been more 34:58.280 --> 35:03.320 hyped than than reality. things like social media that are 35:03.350 --> 35:07.280 interesting from from a credit assessment standpoint, but are 35:07.280 --> 35:11.660 unproven. And so I think those are challenges that have not 35:11.660 --> 35:15.260 really been fully vetted yet. And and then there's, you know, 35:15.260 --> 35:18.350 other forms of payment records like the short term trade 35:18.350 --> 35:21.950 payables information. So shipping bills, phone bills, 35:21.950 --> 35:26.000 light bills, things like that. And so you can you know, what I 35:26.000 --> 35:28.700 think what's interesting about this perspective is that, you 35:28.700 --> 35:32.180 know, the online lenders really never see their their applicant, 35:32.390 --> 35:35.720 they don't meet them face to face, which is far different 35:35.720 --> 35:38.690 than the Community Bank structure. You know, in the 35:38.690 --> 35:41.360 community bank, you walk into the branch, you meet the banker, 35:41.360 --> 35:44.330 face to face. And with the online lenders, this is all done 35:44.330 --> 35:47.420 online, it's all done really through the information in the 35:47.420 --> 35:54.740 data that doesn't provide that view into the business itself 35:54.740 --> 35:57.410 and some of the some of the characteristics other than you 35:57.410 --> 36:00.680 need to get name, address, phone number, name of the business, 36:01.070 --> 36:04.940 you get, then the payment records, and maybe some public 36:04.940 --> 36:08.540 filing information. And so that can be distilled down to create 36:08.540 --> 36:11.630 some very credible and reliable credit assessments. 36:11.660 --> 36:14.300 Speaker 1: Very well. Thank you, Miss Fisher. In your prepared 36:14.300 --> 36:17.690 testimony, you went into detail about the complexity of merchant 36:17.690 --> 36:21.590 cash advances, which allows for businesses to sell their future 36:21.590 --> 36:26.780 receipts for up for cash upfront. Yet you also claim that 36:26.780 --> 36:29.870 they're already sufficiently regulated at the federal and 36:29.870 --> 36:32.930 state level. Are there any changes that you would like to 36:32.930 --> 36:36.020 see made to the way in which the government regulates MCAs? 36:39.990 --> 36:44.880 Katherine Fisher: Thank you for that question. My view is that 36:44.910 --> 36:50.400 federal regulation of merchant cash advances is sufficient. 36:51.030 --> 36:54.210 There are federal laws that touch the merchant cash advance 36:54.210 --> 36:57.540 transaction, as I mentioned, throughout the transaction, from 36:57.540 --> 37:01.380 marketing, to underwriting to servicing and collection, so I 37:01.380 --> 37:03.420 don't have any suggested changes. Thank you. 37:03.690 --> 37:07.170 Speaker 1: Very well. Mr. Mr. Chairman, I yield back. Thank 37:07.170 --> 37:07.380 you. 37:09.660 --> 37:13.020 Chairman: Thank you very much. And sorry for the rush field 37:13.020 --> 37:16.320 today. Um, I apologize. We usually on fly out days, we 37:16.320 --> 37:19.320 usually leave about noon. But today, for some reason happened 37:19.320 --> 37:23.250 a little early. And so I just want to thank you all for your 37:23.250 --> 37:26.520 participation and good spirits today. And the excellent 37:26.520 --> 37:29.580 testimony you all provided. I ask unanimous consent that 37:29.580 --> 37:32.310 members have five legislative days to submit statements and 37:32.310 --> 37:36.840 supporting materials for the record. Without objection. So 37:36.840 --> 37:40.350 ordered this hearing is now adjourned. And don't worry when 37:40.350 --> 37:43.320 you see we have eight minutes, we really have 23 minutes, so 37:43.320 --> 37:45.570 that's alright. That's how it works up here in the swamp. 37:46.440 --> 37:47.790 Thank you. Thank you.