March 5, 2018 / 12:07 PM / a year ago

Online lender Kabbage to restrict weapons lending

BOSTON (Reuters) - Kabbage Inc, a U.S. online lender for small businesses, said it will cut ties with clients that make or sell assault-style rifles or that sell weapons or ammunition to people under 21 years old, one of the strongest steps by any financial firm after last month’s high school massacre in Florida.

Assault rifles are displayed during the NRA Annual Meeting & Exhibits in Phoenix, Arizona May 15, 2009. REUTERS/Joshua Lott

“We believe this is an issue of health and safety in the general population,” said Rob Frohwein, chief executive of the Atlanta-based financial technology company that made loans to tens of thousands of customers last year.

“We don’t want to impose our beliefs on someone else, but we’re also not required legally to be participating” in such lending, Frohwein said in a telephone interview Friday evening.

Kabbage’s steps go further than bigger financial companies including Bank of America Corp, which said on Feb 24 that it would speak with such clients “to understand what they can contribute to this shared responsibility” to end mass shootings.

Bank of America spokespeople have since declined to offer more details about what else the bank might do. Last week large retailers announced new restrictions on gun sales including Dick’s Sporting Goods and Wal-Mart Stores Inc.

On Friday BlackRock Inc, the largest U.S. asset manager, described a series of tough questions it planned to ask gunmakers and retailers following the shooting in Parkland, Florida that left 17 people dead.

Kabbage, which aims to automate lending by using data generated by small businesses’ bookkeeping systems, is not as well-known as the larger firms.

But its move is more than symbolic because it will affect current clients unless they change their practices.

The company says it made 250,000 loans to roughly 50,000 different customers in 2017, originating a total of $1.5 billion. It counts investors including Japan’s SoftBank Group Corp (9984.T) Reverence Capital Partners, and Thomvest Ventures. The company’s board including members from those companies is supportive of its action, Frohwein said.

Frohwein said its clients likely include both specialty gun shops and stores such as pawnshops or sporting-goods retailers where weapons are not the main business. It is still identifying which clients would face changes under the new terms, and plans to speak with them starting on Monday.

“Our goal is not to put anyone out of business or cause any harm to those businesses,” Frohwein said.

Reporting by Ross Kerber; Editing by Daniel Wallis

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