In Draft Plan, CFPB Rejects Request to Exempt Credit Unions from Loan Reporting Rule

The Consumer Financial Protection Bureau would not exempt credit unions from the requirement to report lending to women-owned businesses, minority-owned businesses, and small businesses to the agency, according to an initial proposal being circulated by the bureau.

Credit union trade groups have sought a blanket exemption from the reporting required under the Dodd-Frank Act.

The bureau on Tuesday released a draft proposal of the reporting rules. That draft will be reviewed next month by a Small Business Advocacy Review panel of officials from the CFPB, the Office of Management and Budget and the Small Business Administration. The CFPB is required to form a panel to review rules affecting small businesses before they are issued

Under Dodd-Frank, financial institutions are required to collect data regarding applications for credit from women-owned, minority-owned, and small businesses. The data must be reported to the CFPB on an annual basis.

Community development groups accused the CFPB of dragging its feet on issuing regulations governing that reporting, with the California Reinvestment Coalition filing suit against the agency. The bureau agreed to move ahead on the rules as part of a settlement of that lawsuit.

In its announcement of the small business panel, the definition of “financial institution” proposed by the CFPB would include credit unions.

In letters to the CFPB earlier this year, credit union trade groups argued that they should not be subject to the rule.

“The small business data collection is a clear example of when the CFPB should use its exemption authority in a broad and meaningful way to protect the financial well-being of consumers,” Alexander Monterrubio, CUNA’s senior director of advocacy and counsel told the agency. “Credit unions have shown no pattern or history of discriminatory lending that caused Congress to demand the study of the small business lending market in the first place.”

He said that credit unions are unique because they are not-for-profit cooperatives with a mission to promote thrift and provide credit, adding treating all financial institutions equally causes a huge regulatory burden for small financial institutions.

The data collected from credit unions could be misleading, Andrew Morris NAFCU’s senior counsel for research and policy told the agency. “The collection of small business lending data from credit unions will present challenges for the CFPB in terms of developing a methodology that controls for variables such as field of membership and statutory caps on [member business lending],” he wrote.

Credit unions were not alone in asking for an exemption. The Independent Community Bankers of America also said that community banks should be exempt. “Mandatory data collection and reporting is entirely inconsistent with the non-homogenous nature of community bank small-business loans—many of which have been a lifeline to entrepreneurs and their employees during this pandemic,” ICBA President/CEO Rebeca Romero Rainey said Tuesday, after the proposal was released.


CFPB Outline of Proposals Under Consideration to Implement Small Business Lending Data Collection Requirements

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

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