(small.news) — Senior Labour backbenchers are asking the United Kingdom government to create legislation that will force banks in the country to expand affordable lending to small business owners and those in low-income neighborhoods.

According to The Guardian, former Minister Gareth Thomas said, “Given the cost of living crisis, we need to unlock far better access to cheap loans for the millions of people on low-and middle-incomes to help them through the financial emergencies that everyone faces at some point, while also making it easier for talented [small business owners] to find the affordable finance they need to get their businesses up and running.”

Thomas has tabled a 10-minute rule bill, which is a type of private member’s bill. Co-sponsors of the legislation include Labour Select Committee Chairs Sarah Owen, Meg Hillier, and Liam Byrne. It also includes former Shadow Chancellors John McDonnell and Anneliese Dodds.

The Treasury published its own strategy in 2025, including a commitment to supporting credit union expansions. However, some complained that it put very few specific duties on the financial sector, which Chancellor Rachel Reeves has called the “crown jewel in our economy.”

New Legislation Would be Similar to the US Community Reinvestment Act

The United States passed the Community Reinvestment Act in the 1970s, which requires banks in the country to report to regulators on their record in lending to those in lower-income communities. Those banks are then rated, and have to explain what they will do to improve.

The bill that Thomas introduced would create similar requirements in the UK. Banks would have to “measure and disclose their performance in reducing financial exclusion, including exclusion from affordable credit, and in improving access to finance for small and medium-sized businesses.” Regulators would also have to “establish a system for rating banks according to that performance.”

This legislation would also require banks to back credit unions and community development finance institutions (CDFIs) that specialize in face-to-face, small-scale banking in marginalized communities. In the US, many banks fulfill their requirements by working with CDFIs.

“I’m pleased my colleague Gareth is drawing attention to this issue,” Hillier said. “All too often, improving financial inclusion is treated as an abstract box-ticking exercise rather than a core responsibility of a modern, progressive society. My committee has launched an inquiry into the Treasury’s proposals to improve financial inclusion. We will be looking at whether the government has the plan and resources to genuinely tackle the real barriers people face. If this is not done properly, we all lose out.”

The founder of Small Business Britain, Michelle Ovens, said, “Many small businesses and individuals continue to face barriers to accessing fair and affordable banking. This bill would be an important step towards tackling financial exclusion by increasing transparency and accountability across the banking sector.”

A source from the Treasury has claimed that there are laws and regulations already in place that put responsibilities on banks in terms of financial inclusion. So, Thomas’ legislation might duplicate some of those rules.