Under a new set of proposals from the Consumer Financial Protection Bureau, smaller lenders would be excluded from small business data collection requirements. The proposals are part of the implementation of section 1071 of the Dodd-Frank Act, which requires that data be collected and reported for small-business lending as well as lending to women- and minority-owned businesses.
The CFPB proposed two possible exemption thresholds, lenders with under $100 million in assets and under $200 million in assets. It also is considering exemptions for those who make a small number of loans, suggesting three possibilities: those who make fewer than 25 loans or $2.5 million in total originations; 50 loans or $5 million; and 100 loans or $10 million. The agency expressed concern that without such an exemption, smaller lenders “might reduce or cease their small business lending activity because of the fixed costs of” complying with the eventual rule.
The data currently required to be collected is similar to data required by the Home Mortgage Disclosure Act, such as census tract or the race, sex and ethnicity of the applicant’s principal owners.
The proposal might also add some discretionary data points to be collected on pricing, time in business, North American Industry Classification System code, and number of employees. It also seeks information on privacy considerations and applicants’ ability to opt out of providing certain information.
The bureau is convening a Small Business Advocacy Review panel in October to prepare a report that examines the rule’s potential impact.
Section 1071 requires financial institutions to collect certain data regarding applications for credit for women-owned, minority-owned, and small businesses, and to report that data to the bureau annually. It is designed to help with enforcement of fair lending laws and to determine business and community development needs and opportunities for women-owned, minority-owned, and small businesses.
In 2017, the CFPB estimated that small business financing market at that time was roughly $1.4 trillion, but said that “market-wide data on loans to small businesses currently is very limited,” prompting the creation of Section 1071.