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Financial Services Law Insights and Observations

CFPB report anticipates data collection on small-business lending

Agency Rule-Making & Guidance Small Business Lending Section 1071 Dodd-Frank SBREFA CFPB

Agency Rule-Making & Guidance

On December 15, the CFPB released a report detailing the results of the panel convened pursuant to the Small Business Regulatory Enforcement Fairness Act (SBREFA), which discussed the Bureau’s pending rulemaking to implement Section 1071 Dodd-Frank Act. Section 1071 requires the Bureau to engage in a rulemaking to collect and disclose data on lending to both women-owned and minority-owned small businesses. In September, the Bureau released a detailed outline describing the proposals under consideration for Section 1071 implementation, including factors such as scope, covered lenders, covered products, data points, and privacy (details covered by InfoBytes here). The October panel was comprised of a representative from the Bureau, the Chief Counsel for Advocacy of the Small Business Administration, and a representative from the Office of Information and Regulatory Affairs in the Office of Management and Budget. The panel consulted with small entity representatives (SERs)—those who would likely be directly affected by the Section 1071 rulemaking—to discuss the economic impacts of compliance with the outline’s proposals, as well as regulatory alternatives to the proposals.

The report includes, among other things, the feedback and recommendations made by the SERs, and the findings and recommendations of the panel. Generally, the SERs were supportive of the proposal with “many expressly support[ing] broad coverage of both financial institutions and products in the 1071 rulemaking.” The SERs backed data transparency and simple regulations but expressed significant concern that the rulemaking would cause smaller financial institutions to “incur disproportionate compliance cost compared to large [financial institutions]” and would ultimately either decrease lending or increase costs for small businesses. The SERs also recommended that the Bureau take into account different types of financial institutions operating in the small business lending market, including non-depository institutions. The report also details specific recommendations by the panel, including that the Bureau issue compliance materials in connection with the rulemaking and consider providing sample disclosure language related to the collection of race, sex, and ethnicity information for principal owners as well as women-owned and minority-owned business status.