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  • CFPB proposes collection of small business lending data

    Federal Issues

    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.

    Federal Issues Agency Rule-Making & Guidance CFPB Section 1071 Small Business Lending Dodd-Frank Fair Lending

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  • CFPB to issue Section 1071 NPRM by September 30

    Federal Issues

    On August 23, the CFPB filed its sixth 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. 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 follows a July court order, which requires the Bureau to issue a notice of proposed rulemaking on small business lending data by September 30 (covered by InfoBytes here). Among other things, the Bureau notes in its status report that it expects to meet the September deadline and that it “is continuing to work on the significant legal and policy issues that must be resolved to implement the Section 1071 regulations.”

    Find continuing Section 1071 coverage here.

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

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  • California court orders CFPB to issue Section 1071 NPRM by September 30

    Courts

    On July 16, the U.S. District Court for the Northern District of California issued an order setting September 30 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 reached as part of a stipulated settlement reached in 2020 with a group of plaintiffs, including the California Reinvestment Coalition (CRC), that argued that the Bureau’s failure to implement Section 1071 violated two provisions of the Administrative Procedures Act, and has 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.

     

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

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  • CFPB updates status on women and minority-owned business data

    Federal Issues

    On May 24, the CFPB filed its fifth status report in the U.S. District Court for the Northern District of California as required under a stipulated settlement reached in February with a group of plaintiffs, including the California Reinvestment Coalition. 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.

    Among other things, the Bureau notes in the status report that it has satisfied the following required deadlines: (i) last September it released a Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) outline of proposals under consideration (InfoBytes coverage here); and (ii) it convened an SBREFA panel last October and released the panel’s final report last December (InfoBytes coverage here). The Bureau reports that its rulemaking staff continues to brief new Bureau leadership on significant legal and policy issues that must be resolved in order to prepare a notice of proposed rulemaking for the Section 1071 regulations, and states that the parties have met to discuss an appropriate deadline for issuing the NPRM. According to the status report, should the parties agree on a deadline they “will jointly stipulate to the agreed date and request that the court enter that deadline.”

    Find continuing Section 1071 coverage here.

     

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

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  • CFPB files Section 1071 status report, evaluates recommendations

    Federal Issues

    On February 22, the CFPB filed its fourth status report in the U.S. District Court for the Northern District of California as required under a stipulated settlement reached in February with a group of plaintiffs, including the California Reinvestment Coalition. 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. 

    Among other things, the Bureau notes in the status report that it has satisfied the following required deadlines: (i) last September it released a Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) outline of proposals under consideration (InfoBytes coverage here); and (ii) it convened an SBREFA panel last October and released the panel’s final report last December (InfoBytes coverage here). The settlement next requires the parties to confer about a deadline for the Bureau to issue a Section 1071 notice of proposed rulemaking (NPRM). According to the status report, the Bureau’s rulemaking staff is in the process of evaluating the panel’s recommendations as well as stakeholder feedback, and has begun briefing new Bureau leadership “on the significant legal and policy issues that must be resolved to implement the Section 1071 regulations” and prepare the NPRM. The Bureau notes that the parties continue to discuss an appropriate deadline for issuing the NPRM, emphasizing that if the parties agree on a deadline, they “will jointly stipulate to the agreed date and request that the court enter that deadline.” As previously covered by InfoBytes, acting Director Dave Uejio stated recently that he has “pledged” the Bureau’s Division of Research, Markets, and Regulations “the support it needs to implement section 1071 of the Dodd-Frank Act without delay.”

    Find continuing Section 1071 coverage here.

    Federal Issues CFPB Courts Section 1071 Small Business Lending Dodd-Frank SBREFA

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  • CFPB report anticipates data collection on small-business lending

    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.

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

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  • CFPB outlines plan to disclose data on small-business lending

    Agency Rule-Making & Guidance

    On September 15, the CFPB released its “Outline of Proposals Under Consideration and Alternatives Considered” (Outline) for implementing the requirements of Section 1071 of the Dodd-Frank Act, which instructs the Bureau to collect and disclose data on lending to women and minority-owned small businesses. The detailed Outline describes the proposals under consideration and discusses other relevant laws, the regulatory process, and potential economic impacts. The Bureau also released a high-level summary of the Outline. Highlights of the proposals include:

    • Scope. The Bureau is considering proposing that the data collection and reporting requirements would apply only to applications for credit by a small business. Financial institutions would not be required to collect and report data for women- and minority-owned businesses that are not considered “small,” as defined by the Small Business Act and the Small Business Administration’s (SBA) implementing regulations.
    • Covered Lenders. The Bureau is considering proposing a broad definition of “financial institution” that would apply to a variety of entities engaged in small business lending, but is also considering proposing exemptions based on either a size-based (examples include $100 million or $200 million in assets), or activity-based threshold (examples range from 25 loans or $2.5 million to 100 loans or $10 million), or both.
    • Covered Products. The Bureau is considering proposing exemptions from the definition of “credit” to include consumer-designated credit, leases, factoring, trade credit, and merchant cash advances.
    • Application. Because an “application” would trigger requirements under Section 1071, the Bureau is considering proposing a definition that is largely consistent with Regulation B; however, the Bureau is also considering “clarifying circumstances,” such as inquiries/prequalifications, that would not be reportable.
    • Data Points. The Bureau is considering a range of data points for collection, including, in addition to the mandatory data points required by Section 1071, “discretionary data points” to aid in fulfilling the purposes of Section 1071: “pricing, time in business, North American Industry Classification System (NAICS) code, and number of employees.”
    • Privacy. The Bureau is considering using a “balancing test” for public disclosure of the data. Specifically, data “would be modified or deleted if its disclosure in unmodified form would pose risks to privacy interests that are not justified by the benefits of public disclosure.”

    Additionally, the Bureau will convene a panel, as required by the Small Business Regulatory Enforcement Fairness Act (SBREFA), in October 2020 to “consult small entities regarding the potential impact of the proposals under consideration.” Feedback on the proposals is due no later than December 14.

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

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  • CFPB says it is on track to meet data collection deadlines

    Courts

    On August 24, the CFPB filed another status report in the U.S. District Court for the Northern District of California as required under a stipulated settlement reached in February with a group of plaintiffs, including the California Reinvestment Coalition. 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. Details on the Bureau’s first status update can be found here.

    Among other things, the Bureau noted in the status report that (i) on July 22, it released a “survey of lenders to obtain estimates of the onetime costs that lenders would incur to prepare to collect data required by Section 1071”; and (ii) on August 11, it provided the SBA and the Office of Management and Budget’s Office of Information and Regulatory Affairs a draft Small Business Regulatory Enforcement Fairness Act (SBREFA) outline regarding proposals under consideration and alternatives considered. The status report emphasizes that the Bureau is “on track” to release a SBREFA outline by September 15 and convene a SBREFA panel by October 15, as required by the settlement.

    Courts Federal Issues CFPB Fair Lending Small Business Lending Dodd-Frank Section 1071

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  • CFPB status report provides Section 1071 implementation updates

    Courts

    On May 26, the CFPB filed its first status report in the U.S. District Court for the Northern District of California as required under a stipulated settlement reached in February with a group of plaintiffs, including the California Reinvestment Coalition. 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. Under the settlement’s terms, the Bureau agreed to outline a proposal for collecting data and studying discrimination in small-business lending by September 15, and to create a Small Business Advocacy Review panel by October 15 in order to prepare a report on the proposal. The Bureau is also required to submit status reports, which must detail the Bureau’s progress and address whether it is on track to meet all relevant deadlines to the plaintiffs and the court every 90 days until the final rule is issued.

    Updates on the following items are provided within the first status report: (i) the Bureau is continuing to work to resolve legal and policy issues in order to implement Section 1071; (ii) Bureau staff have begun drafting sections of the outline and started preliminary internal work to select small entity representatives who will consult with the panel; (iii) a survey seeking information from lenders on one-time costs for preparing and collecting data required by Section 1071 (covered by InfoBytes here) was postponed due to the Covid-19 pandemic, but the Bureau believes it can conduct the process without these results if necessary; (iv) the Bureau believes it is on track to meet the September and October deadlines, but notes that the Covid-19 pandemic may “introduce uncertainty with respect to the Bureau’s future ability to meet these deadlines,” and may also impact the Bureau’s ability to recruit small entity representatives to participate in the process; and (iv) the Bureau will notify the plaintiffs should it believe that a deadline extension is needed.

    Courts Federal Issues CFPB Fair Lending Dodd-Frank Section 1071 Covid-19

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