Senators Have Mixed Reaction to CFPB Lending Proposal

Credit unions and consumer groups are not the only ones vehemently disagreeing over the Consumer Financial Protection Bureau’s proposed rule to require financial institutions to report their lending to minority-owned and women-owned businesses.

Members of the Senate are dividing along philosophical lines as well.

One Republican senator has told the agency that the rule goes too far, while five Democratic senators said it does not go far enough.

The CFPB has been soliciting comments on a proposed rule requiring financial institutions to report to the agency information about their lending to minority-owned and women-owned businesses. The CFPB is required to collect the information under the Dodd-Frank Act. Comments on the rule were due last week.

South Carolina Republican Sen. Tim Scott was joined by Rep. William Timmons of his state in a comment letter that said they are particularly worried about the impact the proposed rule would have on their state’s farmers. They said the rule would have a disproportionately negative impact on farmers and Farm Credit institutions.

“In short, we feel that these actions being proposed by the CFPB are misguided and ill-informed, especially considering the challenges that farmers are currently facing due to rising inflation, prolonged supply chain disruptions, and labor shortages,” they wrote. In addition, they wrote, the rule would pose a significant burden on small financial institutions.

They accused the bureau of ignoring numerous requests for additional time on which to comment on the rule.

On the other hand, Senate Banking Committee Chairman Sen. Sherrod Brown, D-Ohio, and four colleagues commended the CFPB for issuing the rule, but also had some reservations.

“The proposed definitions for ‘covered financial institutions,’ ‘covered credit transactions,’ and ‘small businesses,’ helpfully cover the field of small business lending while limiting the scope of collection so as to not overburden certain financial institutions who may not engage in such activity, though they may opt into submitting data,” Brown and Democratic Sens. Ben Cardin of Maryland, Richard Durbin of Illinois, Ron Wyden of Oregon, and Cory Booker of New Jersey, wrote in a letter commenting on the rule.

They said that the bureau’s decision to use a 25-loan threshold for financial institution reporting will cover a wide range of lenders. They said, however, that they are concerned that the agency has chosen to exempt factoring, leases, consumer-designated credit used for business purposes, and credit secured by certain investment properties.

They added that they also are worried about the proposal to use a balancing test to assess the risks and benefits of public disclosure of the loan data. “We understand the Bureau’s approach to consider industry concerns of reputational harm that weigh in favor of keeping some data private, but we wish to stress that there is a strong public interest in publishing as much data as practicable,” they wrote.


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