RSSEarly feedback indicates small businesses generally support measures to implement Dodd-Frank Act Section 1071, which governs the collection and reporting of small business lending data.
The Consumer Financial Protection Bureau released a panel report indicating small entity representatives likely to be impacted by such rules were generally supportive of bureau efforts to enact them. Several said a 1071 rulemaking is necessary to better understand the small business lending market. Panelists and SERs said the CFPB should issue implementation and guidance materials specifically to assist small financial institutions in complying with an eventual Section 1071 rule, and to consider providing sample disclosure language.
SERs “nearly uniformly suggested that the Bureau aim to draft simple regulations, and choose simpler options if possible, noting that more complex rules tend to make compliance more difficult and drive up compliance costs, which could potentially increase prices or reduce small businesses’ access to credit,” the report said.
Convened pursuant to the Small Business Regulatory Enforcement Fairness Act, the panel was comprised of representatives from the CFPB, the Office of Advocacy of the Small Business Administration, and the Office of Management and Budget. It consulted with representatives of small entities likely to be affected directly by a Section 1071 regulation, referred to as small entity representatives or SERs.
The SERs provided feedback on the bureau’s proposals under consideration for Section 1071 and the potential economic impacts of complying with those proposals. The panel and SERs also discussed regulatory alternatives to minimize potential impacts.
Section 1071 requires financial institutions to collect certain data — similar to current Home Mortgage Disclosure Act requirements — 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.
Under current proposals to implement Section 1071, some smaller lenders would be excluded from data collection requirements, although the precise cutoff of the exemption has not been finalized. 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.
In 2017, the CFPB estimated that the 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.”
