CFPB Issues Small Business Lending Rule

The Consumer Financial Protection Bureau on Wednesday proposed requiring financial institutions, including credit unions, to report information about their small business lending, in an attempt to root out discriminatory practices.

“We don’t know if small businesses have the necessary access to capital,” Acting CFPB Director Dave Uejio told reporters during a briefing on the 918-page proposed rule. He called the proposal “an important step toward more transparent and fairer business lending.”

Lenders that made at least 25 credit transactions in each of the past two years would be required to report demographic information about their small business credit applicants, under the rule.

The type of data that would be required is modeled after the Home Mortgage Disclosure Act, Uejio said.

If an applicant does not provide ethnicity, race, or sex information for at least one principal business owner, the bureau is proposing that the financial institution collect at least one principal owner’s race and ethnicity—but not sex—via visual observation.

The CFPB is soliciting comment on the proposal for 90 days, starting after the rule is published in the Federal Register.

In May 2019, the California Reinvestment Coalition and other groups sued the CFPB, accusing agency officials of dragging their feet by failing to implement Section 1071 of the Dodd-Frank Act. The two sides settled the suit during the Trump Administration, with the agency agreeing to issue a proposed rule.

Credit union trade groups have argued that they should be exempt from the reporting requirement since credit unions do not have a history of unfair lending. In addition, they have said that since they serve limited fields of membership, any reporting of such data might be skewed.

Elizabeth Eurgubian, deputy chief advocacy officer and senior counsel at the Credit Union National Association said CUNA is examining the rule. “We believe the Bureau’s Section 1071 rulemaking should aim to balance the advancement of fair lending with the need to preserve access to credit for small businesses,” she said.

B. Dan Berger, president/CEO of the National Association of Federally-Insured Credit Unions, said that NAFCU already has some concerns about the rule. “The proposed rulemaking… raises concerns about how significant new data collection requirements will impact borrowers and smaller financial institutions like credit unions,” he said.

Rebeca Romero-Rainey, president/CEO of the Independent Community Bankers of America, blasted the agency for setting the reporting threshold so low. “The bureau’s proposal — covering community banks that originate 25 loans or more — would ensnare even the smallest community banks in rural and other underserved areas, where barriers to credit should be reduced,” she said. “The CFPB should reconsider the impact of this proposed rule on small-business lending and access to credit before proceeding with a final rule.”


CFPB to Issue Proposed Rule on Credit Data Collection by Sept. 30

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