Consumer Groups to CFPB: Issue Tough Small Business Lending Rule

A Consumer Financial Protection Bureau rule to require financial institutions to report data on their lending to minority-owned and women-owned businesses should include as many banks and credit unions as possible, with the information easily accessible to the public, consumer and community groups said last week.

The National Community Reinvestment Coalition applauded the agency’s proposed rule for doing just that, saying that requiring all lenders that make at least 25 loans to report demographic information to the CFPB would ensure that most banks and credit unions are included.

Credit union trade groups last week called on the agency to increase that threshold to 500 loans.

If the CFPB increases the threshold to 50 loans, only 52% of all banks would be required to report data, the NCRC wrote in its comments on the proposed rule. If it is increased to 500 loans, only one-third of banks would have to report lending information, the group said.

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

Comments on the rule were due last week.

The NCRC also called on the CFPB to ensure that consumers can easily find lending data once it is made public.

“Data is a great motivator for changing behavior,” the group said. “Data illuminates which financial institutions are effectively lending to traditionally underserved small businesses and which institutions lag their peers in serving these small businesses.”

The CFPB should explicitly explain that it will not consider modifying or deleting data merely because a financial institution finds it embarrassing or fears reputational risk, the Center for Responsible Lending and a group of other public interest groups said in a joint comment letter.

The Credit Union National Association and the National Association of Federally-Insured Credit Unions have said that they are concerned that data on credit union lending to women- and minority-owned businesses could be skewed because credit unions can only lend money to businesses that fall under their fields of memberships.

The Center for Responsible Lending said a financial institution that believes its data leaves the wrong impression can correct the problem.

“If a lender believes that its 1071 data will provide an incomplete or misleading impression of its business practice, that lender can release additional data to provide greater context,” the groups said.


CU Trades: CFPB Plan Would Distort View of CU Lending


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