BofA Disputes Reports of Small Business Credit Cuts
Despite complaints from small business owners, Bank of America is calling recent reports that it is cutting or closing credit lines for all of its small business clients “speculation.”
The Charlotte, N.C.-based bank said it has put in a maturity date and annual renewal process in lines of credit, which are considered standard practices. The credit lines previously didn’t include these standard practices, “and the changes better align the terms and conditions,” the bank said.
“These changes were explained in letters to affected customers at least one year in advance of the new maturity date,” said Jefferson George, a BofA spokesperson, in a Jan. 4 email. “This allowed time for us to work with all affected clients to explore other products available to best meet their business needs.”
George told Credit Union Times the bank has been able to work with 98% of the clients in the affected group “and at this point the overwhelming majority of those solutions involve the same interest rate as before.”
The number of customers who have not renewed their lines of credit or agreed to another credit solution was about 0.1% of BofA’s nearly 1.5 million total small business credit customers, George said.
“The reality is that nearly all of the customers who were sent these notifications remain with Bank of America, and the number of customers with whom we’re still working to find a solution is very small,” George said. “Contrary to any speculation, we are not cutting or closing credit lines for our small business clients across the board.”
Some small business owners complained the alternatives BofA has offered have not been helpful. The Los Angeles Times recently reported that business owner Babak Zahabizadeh was offered several options, including paying off the debt at 12% interest over two years, which equaled $4,500 a month or nearly 10 times his current interest-only payment.
Another small business owner told the Times that she thought her $85,000 credit line would remain in place provided she did not default or miss any payments. Kathleen Caid said BofA said her $80,000 credit line debt is due in May.
George said BofA has a “strong commitment to supporting small businesses” and extended $13.2 billion in credit in the first nine months of 2011. This total lending included a 30% increase in new credit to small businesses, he noted, adding the bank also supports community development financial institutions, providing more than $200 million to finance small businesses that can’t qualify for traditional loans.
“Our CDFI grant program, created in 2010 to unlock low-cost capital for small businesses, has allowed CDFIs to access more than $93 million, serving more than 8,700 local businesses and helping create and retain more than 13,000 jobs,” George said.
This is not the first time in recent months that customers and the public have expressed outrage over the BofA’s policies. Bank Transfer Day got its start behind the bank’s failed attempt to levy a $5 monthly debit card usage fee. Hundreds of thousands of people joined credit unions on Nov. 5 in protest.
BofA also recently announced that it would no longer be issuing credit cards on behalf of credit unions saying “it was not core to our goal of building deeper relationships” and in many cases, its agent-bank business had serviced predominantly single-service card customers that presented limited opportunities to do more business with them.