The Consumer Financial Protection Bureau backtracked on a suggestion that the agency made during the Trump administration that it would exempt a significant chunk of community banks from small-business loan reporting requirements, sparking concern among industry representatives that the rule will be too broad.
The agency released a long-awaited proposal Wednesday mandated by Congress that would force banks and other lenders to collect and send data meant to identify discrimination and barriers to credit in small-business lending.
The 918-page notice of proposed rulemaking would require data on a wide range of credit products including term loans, lines of credit, credit cards and merchant cash advances.
Data on loans to small businesses is currently very limited, an issue the CFPB said became apparent during the COVID-19 pandemic and the rush to provide loans through the Paycheck Protection Program.
“We don’t know enough about whether small businesses have fair access to the capital they need to generate new jobs and grow the American economy,” acting CFPB Director Dave Uejio said on a conference call with reporters. “Without this information, we cannot reach our potential economic growth as a nation, as we saw all too recently in the original design and implementation of the Paycheck Protection Program.”
The CFPB characterized the small business data collection – required by Section 1071 of the Dodd-Frank Act – as similar to mortgage data reported under the Home Mortgage Disclosure Act.
But banks have largely resisted any expansion of data collection including for women- and minority-owned small businesses by claiming it requires too much paperwork and is a regulatory burden.
The CFPB released a long-awaited proposal Wednesday mandated by Congress that would force banks and other lenders to collect and send data meant to identify discrimination and barriers to credit in small-business lending.
“Financial institutions and their vendors will also have to make significant changes to their systems and processes to meet new 1071 data collection and reporting requirements,” said Richard Hunt, president and CEO of the Consumer Bankers Association, in a statement. “The complexities of collecting and reporting credit application data on women-owned, minority-owned, and small businesses under Section 1071 cannot be overstated due to the nature of small business lending and the ways these applications are processed.”