CFPB to Form Small Business Panel to Review Impact of Credit Reporting Requirements

With a federal court settlement holding their feet to the fire, Consumer Financial Protection Bureau officials still are attempting to gauge the impact that the collection of race, sex, and ethnicity from credit applications would have on small financial institutions.

In a court-required update on the rulemaking process this week, the CFPB said that on July 22, the agency sent lenders a survey to measure the cost of collecting that data.

The agency said it intends to convene a panel by Oct. 15 that is required under the Small Business Regulatory Enforcement Fairness Act. That panel would be scheduled to issue a report by Dec. 14, with proposed rules following that.

In May, the California Reinvestment Coalition and other groups sued the CFPB in the U.S. District Court for the Northern District of California, accusing agency officials of dragging their feet by failing to implement Section 1071 of the Dodd-Frank Act, which requires the collection of race, sex and ethnicity of business owners in connection with credit applications.

The two sides settled the suit, with the CFPB agreeing to provide updates on the rulemaking process.

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 would be skewed.

“Given the unique characteristics of credit unions and their limited capacity to absorb additional regulatory costs, the CFPB should seek to exempt credit unions from any future rulemaking that compels disclosure of small business lending information,” Andrew Morris, NAFCU’s senior counsel for research and policy, wrote in a letter to the agency earlier this year.

The CFPB has the power to exempt classes of financial institutions from agency rules, but the power has seldom, if ever, been used.

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