Uncertain Terms: What Small Business Borrowers Find When Browsing Online Lender Websites

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This report discusses findings of a study conducted by the Federal Reserve Board and the Federal Reserve Bank of Cleveland to assess the information presented to prospective borrowers on small business online lender websites. The study considers the information that is important to prospective borrowers and the availability of such information on lender websites for the purposes of understanding and comparing product costs and features. The study includes a systematic analysis of the content on online lender websites, such as where and how credit products’ costs and other details are disclosed, how much product information is made available before website visitors are asked to supply the owner’s personal or business information, and the extent to which visitors are tracked.

Analysis of a sampling of online content finds significant variation in the amount of upfront information provided by lenders, especially on costs. On some lender websites, descriptions feature little or no information about the actual products and their rates, fees, and repayment terms. Lenders that offer term loans are likely to show costs as an annual rate, while others convey costs using terminology that may be unfamiliar to prospective borrowers. Ranges or average interest rates, if shown, are most often found in footnotes, fine print, or frequently asked questions (FAQs).

A number of websites reviewed for the study require prospective borrowers to furnish information about themselves and their businesses in order to obtain details on product costs and terms. Lenders’ policies permit any user-provided data to be used by the lender and other third parties to contact business owners, which may lead to the bothersome sales calls that have been reported by business owners. Moreover, online lenders make frequent use of trackers to monitor visitors on their websites. Even when visitors do not share identifying information with the lender, embedded trackers may collect data on how they navigate the website as well as other sites visited.

This study expands on the findings from two previous studies by the authors, Alternative Lending through the Eyes of “Mom & Pop” Small-Business Owners: Findings from Online Focus Groups and Browsing to Borrow: “Mom & Pop” Small Business Perspectives on Online Lenders.

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