Regulatory Obstacles: Confusion, Omission, and Overlap

The current US regulatory system is “spaghetti soup” comprised of 7 federal agencies and 50 state banking entities which has proven challenging amid rapid evolution in small business lending technologies. Two critical concerns are that federal agencies have little oversight over fintech lenders and that small business borrower protections fall through the cracks. This chapter examines the emerging regulatory issues in small business lending including data privacy and security, third-party regulations, oversight of non-bank entities and transparency of AI, algorithms, and other new automated technologies which must be addressed in order to create a better small business lending market. Finally, the author points to the lack of data in small business policymaking, and the need to collect more real-time information on this important segment of our economy.