Expanding Lending Facility Will Expand Consumer Opportunity
In late May the Federal Reserve finally announced details of its next highly appreciated emergency lending facility, the Main Street Lending Program (MSLP). The goal of the MSLP is tohelp small and medium-sized businesses that were financiallysound before the Coronavirus pandemic maintain their operations and payroll until conditions stabilize. Eligible businesses with up to 15,000 employees or less than $5 billion in annual revenue in 2019 can apply for a loan between $500,000 and $25 million, albeit with some strings attached, including employee compensation and stock repurchase restrictions.
Unfortunately, consumer finance companies, including vehicle finance companies, credit card issuers, and traditional installment lenders are not currently eligible to borrow from the MSLP, or from the popular Paycheck Protection Program. Just like other businesses on main streets in town and cities across America, the consumer finance industry needs access to federal relief programs to help pay their employees, rent, mortgage interest, or utilities during this public health crisis. To date, it is unclear why the Treasury Department and Federal Reserve have chosen to disqualify the consumer finance industry from assisting nurses, teachers, stay-at-home parents, childcare workers and others at a time of so much personal economic uncertainty.
During a recent Senate Banking Committee hearing on the implementation of the Federal Reserve’s emergency lending facilities, both Senators and business groups stressed the need to tweak and expand the $600 billion MSLP to attract more businesses that could potentially stay afloat and keep employees on payroll. Senator Mark Warner (D-VA), who has been a proponent of expanding loan eligibility requirements for the MSLP, has also emphasized that Treasury should be more willing to lose money on the MSLP to help sustain the economy during this public health crisis.
AFSA will continue to urge our partners on Capitol Hill, the Small Business Administration, and the Federal Reserve, to designate state-licensed and regulated finance companies as eligible businesses to receive federal assistance as Congress intended in the bipartisan-passed CARES Act.
June 5th, 2020
