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On July 11, the U.S. District Court for the Northern District of California issued an order setting March 31, 2023 as the deadline for the CFPB to issue a notice of proposed rulemaking (NPRM) on small business lending data. As previously covered by InfoBytes, the Bureau is obligated to issue an NPRM for implementing Section 1071 of the Dodd-Frank Act, which requires the agency to collect and disclose data on lending to women and minority-owned small businesses. The requirement was established as part of a stipulated settlement reached in 2020 with a group of plaintiffs, including the California Reinvestment Coalition (CRC), who argued that the Bureau’s failure to implement Section 1071 violated two provisions of the Administrative Procedures Act, and harmed the CRC’s ability to advocate for access to credit, advise organizations working with women and minority-owned small businesses, and work with lenders to arrange investment in low-income and communities of color (covered by InfoBytes here).
Find continuing Section 1071 coverage here.
Recently, the Office of Information and Regulatory Affairs released the CFPB’s spring 2022 rulemaking agenda. According to the preamble, the information in the agenda is current as of April 1, 2022 and identifies regulatory matters that the Bureau “reasonably anticipates having under consideration during the period from June 1, 2022 to May 31, 2023.”
Key rulemaking initiatives include:
- Consumer Access to Financial Records. The Bureau notes that it is considering rulemaking to implement section 1033 of the Dodd-Frank Act to address the development and use of standardized formats for information made available to consumers. The Bureau will release materials in advance of convening a panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA), in conjunction with the Office of Management and Budget and the Small Business Administration’s Chief Counsel for Advocacy.
- Amendments to FIRREA Concerning Automated Valuation Models. The Bureau is participating in interagency rulemaking with the Fed, OCC, FDIC, NCUA, and FHFA to develop regulations to implement the amendments made by the Dodd-Frank Act to FIRREA concerning appraisal automated valuation models (AVMs). The FIRREA amendments require implementing regulations for quality control standards for AVMs. The Bureau released a SBREFA outline in February 2022 and estimates in the agenda that the agencies will issue an NPRM in December 2022 (covered by InfoBytes here).
- Property Assessed Clean Energy Financing. The Bureau issued an ANPR in March 2019 to extend TILA’s ability-to-repay requirements to PACE transactions (covered by InfoBytes here). The Bureau is working to develop a proposed rule to implement Economic Growth, Regulatory Relief, and Consumer Protection Act section 307 in May 2023.
- Small Business Lending Data Collection Under the Equal Credit Opportunity Act. Section 1071 of the Dodd-Frank Act amended ECOA to require financial institutions to report information concerning credit applications made by women-owned, minority-owned, and small businesses, and directed the Bureau to promulgate rules for this reporting. The Bureau issued an NPRM in August 2021, and the comment period ended January 6 (covered by InfoBytes here). The agenda indicates that the Bureau estimates issuance of a final rule in March 2023.
- Adverse Information in Cases of Human Trafficking Under the Debt Bondage Repair Act. The National Defense Authorization Act amended the FCRA to prohibit consumer reporting agencies from providing reports containing any adverse items of information resulting from human trafficking. In June 2022, the CFPB issued a final rule implementing amendments to the FCRA intended to assist victims of human trafficking (covered by InfoBytes here).
On February 22, the CFPB filed its eighth status report in the U.S. District Court for the Northern District of California, as required under a stipulated settlement reached in February 2020 with a group of plaintiffs, including the California Reinvestment Coalition, related to the collection of small business lending data. The settlement (covered by InfoBytes here) resolved a 2019 lawsuit that sought an order compelling the Bureau to issue a final rule implementing Section 1071 of the Dodd-Frank Act, which requires the Bureau to collect and disclose data on lending to women and minority-owned small businesses. The current status report states that the Bureau has met the deadlines under the stipulated settlement, which included issuing its long-awaited proposed rule (NPRM) last September. As covered by a Buckley Special Alert, the NPRM would require a broad swath of lenders to collect small business loan data, including information about the loans themselves, borrower characteristics, and demographic information regarding the borrower’s principal owners. This information would be reported annually to the Bureau and published by the Bureau on its website. The Bureau notes in its status report that the NPRM’s comment period ended on January 6. The Bureau is currently reviewing approximately 2,100 comments submitted via the public docket and will confer with plaintiffs regarding an appropriate deadline for issuing a final rule.
Find continuing Section 1071 coverage here.
On February 9, the Consumer Bankers Association (CBA) sent CFPB Director Rohit Chopra a letter regarding the supervision of nonbank small business lenders. The letter noted that the landscape for business lending has recently altered “substantially,” specifically with the alternative banking options offered by financial technology companies having “significant market share.” The letter considered small businesses to be “vulnerable” because the activities of fintechs engaged in small business lending are not supervised by the Bureau. The letter urged the Bureau to “evaluate all possible avenues for supervising these nonbank small business lenders, including adding nonbank small business lending to the larger participant rule.” The letter also pointed out that the “lack of supervisory authority over nonbank small business lenders” undermines the CFPB’s other regulatory efforts, such as identifying and addressing fair lending concerns through a final rule covering small business lending data collection pursuant to Section 1071 of Dodd-Frank. The CBA argued that the absence of authority over nonbank lenders “will negatively impact the accuracy and utility of any data the Bureau receives under a Section 1071 final rule.” The CBA also advised the Bureau to utilize its ability under 12 U.S.C. Section 5514 to increase its authority over larger participants in the small business lending market.
On January 31, the CFPB released its semiannual regulatory agenda in the Federal Register, as part of the Fall 2021 Unified Agenda of Federal Regulatory and Deregulatory Actions. According to the CFPB, it “reasonably anticipates having the regulatory matters identified below under consideration during the period from November 1, 2021 to October 31, 2022.” The next agenda will be published in Spring 2022, which will update the recently released agenda through Spring 2023. Among other things, the agenda noted that the Bureau made “significant progress” on the implementation of Section 1071 of the Dodd-Frank Act, which covers banks’ collection, reporting, and disclosure of information on credit applications made by women-owned, minority-owned, and small businesses. Other highlights of the agenda include the Bureau’s: (i) continued collaboration with other federal agencies on regulations for automated valuation models under the FIRREA amendments to Dodd-Frank; (ii) expectation to issue a final rule on the transition away from the LIBOR index, which aims to ensure that loans tied to LIBOR are transitioned “in an orderly, transparent, and fair manner”; (iii) assessment of a rule implementing HMDA; (iv) work on regulations for PACE financing and its “continu[ed] engagement with stakeholders and collect information” from a Advance Notice of Proposed Rulemaking, issued in March 2019 (covered by InfoBytes here); and (v) continued monitoring of consumer financial product markets and creation of working groups to focus on specific markets for potential future rulemakings.
On January 6, NYDFS issued a comment letter responding to the CFPB’s Notice of Proposed Rulemaking (NPRM), “Small Business Lending Data Collection under the Equal Credit Opportunity Act (Regulation B).” The NPRM—mandated under Section 1071 of the Dodd-Frank Act—would require a broad swath of lenders to collect data on loans they make to small businesses, including information about the loans themselves, the characteristics of the borrower, and demographic information regarding the borrower’s principal owners. This information would be reported annually to the Bureau, and eventually published by the Bureau on its website, with some potential modifications. According to the Bureau, the statute’s stated intent is to “facilitate enforcement of fair lending laws and enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses.” (Covered by a Buckley Special Alert.)
In its comment letter, NYDFS discussed its responsibilities for examining state-chartered banking institutions’ compliance with the New York Community Reinvestment Act (NYCRA), New York Banking Law § 28-b, which NYDFS noted largely mirrors the current federal Community Reinvestment Act (CRA). Additionally, NYDFS stated that it examines regulated institutions for compliance with state fair lending requirements and agreed with the Bureau that “collecting critical information about minority- and women-owned businesses (MWOBs) to address fair lending concerns and allow financial institutions to identify gaps in the market” is an important goal. To that end, NYDFS is in the process of implementing its own MWOB data collection regulation under the NYCRA, which would require New York state-chartered banking institutions to start collecting MWOB-related data. (Covered by InfoBytes here.) Due to similarities between the proposed regulation and the Bureau’s NPRM, and to avoid imposing an undue burden on institutions covered by both regulations, NYDFS’s proposed regulation includes language that would “permit, but not obligate, NYDFS to treat compliance with the CFPB’s rule implementing Section 1071 as compliance with the NYCRA’s MWOB-related data collection regulation.”
Two specific issues were raised in response to the Bureau’s NPRM. First, NYDFS expressed concerns about the NPRM’s silence as to whether the Bureau intends to share more detailed data with state regulators to help states identify fair lending violations and enforce anti-discrimination laws, even if this information is not made available to the public. NYDFS urged the Bureau to include specific language stating it “may share all data submitted by financial institutions with state regulators in accordance with information sharing agreements between the CFPB and the state regulators.” Second, NYDFS asked the Bureau to reconsider its proposal to require data collection only for MWOBs with a threshold of $5 million or less in gross annual revenue. In particular, NYDFS warned of the risk of “dissimilarity in data collected by lenders for submission to the CFPB and the NYDFS” as NYDFS’s proposed regulation “requires evaluation of MWOB lending without respect to size.” NYDFS stressed that this dissimilarity “may prevent the NYDFS from deeming compliance with the CFPB regulation sufficient to comply with the NYDFS regulation.”
On December 13, the Office of Information And Regulatory Affairs released the CFPB’s fall 2021 rulemaking agenda. According to a Bureau announcement, the information released represents regulatory matters the Bureau plans to pursue during the period from November 2, 2021 to October 31, 2022. Additionally, the Bureau stated that the latest agenda reflects continued rulemakings intended to further its consumer financial protection mission and help advance the country’s economic recovery from the Covid-19 pandemic. Promoting racial and economic equity and supporting underserved and marginalized communities’ access to fair and affordable credit continue to be Bureau priorities.
Key rulemaking initiatives include:
- Small Business Rulemaking. This fall, the Bureau issued its long-awaited proposed rule (NPRM) for Section 1071 regulations, which would require a broad swath of lenders to collect data on loans they make to small businesses, including information about the loans themselves, the characteristics of the borrower, and demographic information regarding the borrower’s principal owners. (Covered by a Buckley Special Alert.) The NPRM comment period goes through January 6, 2022, after which point the Bureau will review comments as it moves to develop a final rule. Find continuing Section 1071 coverage here.
- Consumer Access to Financial Records. The Bureau noted that it is working on rulemaking to implement Section 1033 of Dodd-Frank in order to address the availability of electronic consumer financial account data. The Bureau is currently reviewing comments received in response to an Advance Notice of Proposed Rulemaking (ANPR) issued fall 2020 regarding consumer data access (covered by InfoBytes here). Additionally, the Bureau stated it is monitoring the market to consider potential next steps, “including whether a Small Business Review Panel is required pursuant to the Regulatory Flexibility Act.”
- Property Assessed Clean Energy (PACE) Financing. As previously covered by InfoBytes, the Bureau published an ANPR in March 2019 seeking feedback on the unique features of PACE financing and the general implications of regulating PACE financing under TILA (as required by Section 307 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which amended TILA to mandate that the Bureau issue certain regulations relating to PACE financing). The Bureau noted that it continues “to engage with stakeholders and collect information for the rulemaking, including by pursuing quantitative data on the effect of PACE on consumers’ financial outcomes.”
- Automated Valuation Models (AVM). Interagency rulemaking is currently being pursued by the Bureau, Federal Reserve Board, OCC, FDIC, NCUA, and FHFA to develop regulations for AVM quality control standards as required by Dodd-Frank amendments to FIRREA. The standards are designed to, among other things, “ensure a high level of confidence in the estimates produced by the valuation models, protect against the manipulation of data, seek to avoid conflicts of interest, require random sample testing and reviews,” and account for any other appropriate factors. An NPRM is anticipated for June 2022.
- Amendments to Regulation Z to Facilitate LIBOR Transition. As previously covered by InfoBytes, the Bureau issued a final rule on December 7 to facilitate the transition from LIBOR for consumer financial products, including “adjustable-rate mortgages, credit cards, student loans, reverse mortgages, [and] home equity lines of credit,” among others. The final rule amended Regulation Z, which implements TILA, to generally address LIBOR’s eventual cessation for most U.S. dollar settings in June 2023, and establish requirements for how creditors must select replacement indices for existing LIBOR-linked consumer loans. The final rule generally takes effect April 1, 2022.
- Reviewing Existing Regulations. The Bureau noted in its announcement that it decided to conduct an assessment of a rule implementing HMDA (most of which took effect January 2018), and referred to a notice and request for comments issued last month (covered by InfoBytes here), which solicited public comments on its plans to assess the effectiveness of the HMDA Rule. Additionally, the Bureau stated that it finished a review of Regulation Z rules implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009, and that “[a]fter considering the statutory review factors and public comments,” it “determined that the CARD Act rules should continue without change.”
Notably, there are 14 rulemaking activities that are listed as inactive on the fall 2021 agenda, including rulemakings on overdraft services, consumer reporting, student loan servicing, Regulation E modernization, abusive acts and practices, loan originator compensation, and TILA/RESPA mortgage disclosure integration.
On November 22, the CFPB filed its seventh status report in the U.S. District Court for the Northern District of California as required under a stipulated settlement reached in February 2020 with a group of plaintiffs, including the California Reinvestment Coalition, related to the collection of small business lending data. The settlement (covered by InfoBytes here) resolved a 2019 lawsuit that sought an order compelling the Bureau to issue a final rule implementing Section 1071 of the Dodd-Frank Act, which requires the Bureau to collect and disclose data on lending to women and minority-owned small businesses. The newest status report states that the Bureau has met its deadlines under the stipulated settlement, which included issuing its long-awaited proposed rule (NPRM) in September. As covered by a Buckley Special Alert, the NPRM would require a broad swath of lenders to collect data on loans they make to small businesses, including information about the loans themselves, the characteristics of the borrower, and demographic information regarding the borrower’s principal owners. This information would be reported annually to the Bureau and published by the Bureau on its website. Comments on the NPRM are due January 6, 2022. Among other things, the Bureau notes in its status report that once the Section 1071 NPRM comment period concludes, it will meet and confer with plaintiffs to discuss an “appropriate deadline” for issuing the final rule, consistent with the stipulated settlement.
Find continuing Section 1071 coverage here.
On November 5, CFPB Deputy Director Zixta Martinez spoke before the Bureau’s Academic Research Council (ARC) meeting, in which she discussed recent research efforts taken to inform future rulemaking and identify root causes of challenges facing consumers. Martinez highlighted Section 1022 orders recently sent to several big tech payment platforms seeking information on their products, plans, and practices (covered by InfoBytes here). She noted that the evaluation of these companies’ payments platform data will help inform the Bureau on the future of the payments system as well as potential emerging risks, and will provide insights that may impact future rulemaking under Section 1033 concerning the disclosure of consumer data by regulated entities. Among other things, Martinez also discussed the importance of small business lending research to better understand whether these businesses provide fair and equitable access to credit and referred to the Bureau’s Section 1071 notice of proposed rulemaking issued in September (covered by a Buckley Special Alert). Martinez also noted that one of the Bureau’s priorities is ensuring access to fair and affordable credit for low-income, minority, or traditionally underserved communities, and said the Office of Research will solicit “suggestions and advice for ways to integrate racial and economic equity analyses into the CFPB’s research agenda.”
On September 1, the CFPB released a notice of proposed rulemaking (NPRM) and request for public comment on a proposed rule to implement Section 1071 of the Dodd-Frank Act, which requires the agency to collect and disclose data on lending to women and minority-owned small businesses. The NPRM would create a new subpart B to existing Regulation B, the implementing regulation for ECOA, in order to increase transparency in the lending marketplace. Covered financial institutions would be required to collect and report to the Bureau a broad set of data points relating to applications for several small business credit products with the stated goal of facilitating the enforcement of fair lending laws and enabling the identification of business and community development needs and opportunities for women-owned, minority-owned, and other small businesses.
The NPRM defines a covered “financial institution” as an entity that meets a specific origination threshold where at least 25 “covered credit transactions” are originated to small businesses in each of the two preceding calendar years. A “covered credit transaction” under the NPRM would include transactions that meet the definition of business credit under Regulation B, as well as loans, lines of credit, credit cards, merchant cash advances, credit transactions for agricultural purposes, and transactions covered by HMDA. The definition of a small business would be one that had less than $5 million in gross annual revenue for the preceding fiscal year. Additionally, the NPRM defines a “covered application” as “an oral or written request for a covered credit transaction that is made in accordance with procedures used by a financial institution for the type of credit requested.” Data points that covered financial institutions would be required to collect on a calendar-year basis to be reported by June 1 of the following year are also provided.
The Bureau proposes that an eventual final rule would become effective 90 days after publication in the Federal Register; however, compliance would not be required until approximately 18 months after publication. Additionally, the Bureau proposes certain transitional provisions that would allow covered financial institutions to begin collecting data prior to the compliance date and would permit covered financial institutions to “use either the two calendar years immediately preceding the effective date or the second and third years preceding the compliance date to determine coverage.” (See also the Bureau’s summary on the NPRM here.) Comments on the NPRM will be received for 90 days following publication in the Federal Register.
“This data will be used to support business and community development and foster fair lending,” acting Director Dave Uejio noted in a statement following the announcement of the NPRM. He added that the “rule is about providing greater transparency into which small businesses get credit and which ones do not.”
A Buckley Special Alert is forthcoming.
- Kathryn L. Ryan to host the affiliate members meeting at AARMR’s 2022 Annual Regulatory Conference & Training
- Kathryn L. Ryan and Jedd R. Bellman to discuss “Risk and compliance management: Are you covered?” at a Mortgage Bankers Association webinar
- Melissa Klimkiewicz and Daniel A. Bellovin to discuss “Things to know about flood insurance” at a NAFCU webinar
- Hank Asbill to discuss “Ethical issues at sentencing” at the 31st Annual National Seminar on Federal Sentencing
- Max Bonici will moderate a panel on “Enforcement risk and other regulatory and compliance issues related to crypto and digital assets” at the American Bar Association’s 2022 Annual Meeting
- John R. Coleman to provide a “CFPB Update” at MBA’s 2022 Regulatory Compliance Conference
- Amanda R. Lawrence to discuss “The shifting data privacy and data protection landscape” at MBA’s 2022 Regulatory Compliance Conference
- Benjamin W. Hutten to discuss “Fundamentals of financial crime compliance” at the Practicing Law Institute
- Benjamin W. Hutten to discuss “Ongoing CDD: Operational considerations” at NAFCU’s Regulatory Compliance & BSA Seminar