Louis Caditz-Peck on Predatory Lending, the Borrower’s Bill of Rights, and Why Small Businesses Deserve Fair Financing

By Kekeletso Nkele, small.news Assistant

Q: Why did you start the Responsible Business Lending Coalition?

A: We’re trying to create a small business economy where business owners can get fair financing that genuinely helps them — and to harness the real potential we now have for small business lending to be more accessible, affordable, personalized, and helpful than it has ever been, using the technology available to us today.

At the same time, we’re trying to stop the rise of predatory lending from taking the small business economy down the same path the subprime mortgage market took before the foreclosure crisis. When our coalition launched in 2015, one of the now-governors of the Federal Reserve spoke at our launch event and said that the practices he was beginning to see in small business lending looked to him like the practices that preceded the subprime foreclosure crisis. That was ten years ago, and in many ways the market has moved in exactly that direction.

The narrative that small businesses simply need access to capital is outdated. What they need access to is responsible capital.

Q: What are the core principles behind the Small Business Borrower’s Bill of Rights?

A: The Bill of Rights contains 24 specific practices organized into six rights: the right to transparent pricing and terms, the right to responsible underwriting, fair treatment from brokers, fair collection practices, fair treatment if a business struggles — so owners can get back on their feet — and non-discrimination.

The practice people are most surprised to learn about is transparency around pricing. For a long time, there were no transparency standards for small business lending at all. The Federal Reserve did a study where they presented a group of business owners with the terms of a typical online loan — here is how much you receive, here is how much you repay — and asked whether they had everything they needed to know. Everyone said yes. Then researchers asked what the interest rate was. Everyone said they knew. Then they asked them to name it.

Only at that point did people realize they didn’t actually know. When asked to guess, responses ranged from 8% to a high of 30%. The actual effective APR on that loan was 60% — twice the highest guess.

We have done significant legislative work to pass common sense laws that already exist in consumer lending but did not extend to business borrowing. We have passed two federal laws and, as of this year, eleven state laws including New York, California, and Vermont, requiring the same transparency protections for small business borrowers that consumers have long had.

Q: What percentage of this problem is solved by financial education, and what percentage requires lenders to simply do better?

A: Financial education is important, and everyone should pursue it. But it becomes a dodge when governments or companies use it to say the problem is that borrowers aren’t using their products correctly.

Inside a financing company, there is a marketing team doing A/B testing to figure out how to describe their pricing in the way most likely to get people to take the loan. Some companies do this ethically — they commit to transparent pricing and give borrowers everything they need in a standardized way. Others use that testing to create new metrics that sound like an interest rate but aren’t. That is an intent to take advantage, and it needs to be named as such.

Q: Where can small businesses find responsible lenders?

A: Borrowersbillofrights.org.

Q: What are you most hopeful for in terms of policy change?

A: I feel genuinely fortunate to work on an issue where there is real bipartisan agreement. This was a priority under the Biden administration, and the SBA under the Trump administration has also raised concerns — describing certain financing products as extortionate. The Federal Trade Commission under the Trump administration has also stated that small business owners are consumers too and deserve the same protections.

Almost all of the laws we have passed are bipartisan. At the state level, opposition usually comes not from lawmakers of the other party but from lawmakers with close relationships to lobbyists representing financing companies that don’t want to disclose their pricing or treat borrowers fairly. It is less a partisan issue and more a lobbying and accountability issue.

Q: What are you most worried about for small businesses right now?

A: Small business ownership is changing in ways that are both helpful and harmful. Increasingly, business owners are functioning more like contractors to larger platforms — outsourcing marketing, back-office operations, accounting, procurement, and sales to services that handle those functions. In many ways this is liberating. But those platforms extract their own economics, and the challenge for business owners is navigating how to use these services to reach customers while still running a business that actually makes money.

This fits into a broader pattern one academic called the “great risk shift” — where larger organizations find ways to transfer costs and risk onto individuals while retaining the profit. We see it in employment, with the shift from pensions to 401ks and from guaranteed hours to just-in-time scheduling. We see it in business models like Uber, where drivers bear the risk, the insurance costs, and the uncertainty. Small business owners are increasingly in a similar position, and that is precisely why we need to ensure they have the same legal protections as individuals acting in other capacities.

Q: What are you most hopeful for?

A: If we can get the tools right — financing that follows clear rules of the road, that is fast and easy to access, alongside all the other technology now available — the vision of running a business with greater knowledge and capability than ever before is genuinely within reach. The utopian version people are describing is real. It just requires the right guardrails, real competition, and the right incentives to get there.

Q: If you had a Magic Silver Wand and could make one thing true for small businesses right now, what would you use it for?

A: We have a policy platform to ensure that business owners are getting fair, responsible financing. I would make that the law of the land — so that the rules of the road are clear, the financing is accessible and transparent, and everyone is operating on a level playing field. Life gets easier and more prosperous for everyone when that is the baseline.

Q: How can our community support you?

A: If you are a small business owner who has had an experience with financing that did not treat you fairly, please get in touch with us through borrowersbillofrights.org. Those stories are what actually drive change — more than facts and numbers alone. One business owner, Paloma, shared her testimony with the California legislature. The bill passed unanimously. If you have a story, we may already be working in your state.

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