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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.
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.
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.
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.
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.
- Jonice Gray Tucker to join CFPB panel at CBA’s Washington Forum
- Jonice Gray Tucker to moderate “Pandemic relief response and lasting impacts on access, credit, banking, and equality” at the American Bar Association Business Law Section Spring Meeting
- Jeffrey P. Naimon to discuss "Post-pandemic CFPB exam preparation" at the Mortgage Bankers Association Spring Conference & Expo
- Jonice Gray Tucker to discuss "Making fair lending work for you" at the Mortgage Bankers Association Spring Conference & Expo
- Jonice Gray Tucker to discuss "Reading the tea leaves of President Biden’s initial financial appointees" at LendIt Fintech
- Moorari K. Shah to discuss “CA, NY, federal licensing and disclosure” at the Equipment Leasing & Finance Association Legal Forum
- Jonice Gray Tucker to discuss "Compliance under Biden" at the WSJ Risk & Compliance Forum
- Jonice Gray Tucker to discuss “The future of fair lending” at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference