The National Community Reinvestment Coalition (NCRC) has issued a white paper that urges the CFPB to take an expansive approach in developing regulations on the collection of small business lending data to implement Section 1071 of Dodd-Frank. Section 1071 amended the Equal Credit Opportunity Act to require financial institutions to collect and maintain certain data in connection with credit applications made by women- or minority-owned businesses and small businesses.
The NCRC’s white paper includes the following recommendations:
- Section 1071 requires certain data elements to be collected, such as the race, gender, and ethnicity of the principal owners of the business, the gross annual revenues of the business, the action taken on an application, and the loan type and purpose. The NCRC recommends that the CFPB “drill down” on each of these elements to require expansive details. For example, it asks the CFPB to consider “sub-categories to fully capture the experiences of Asians and Hispanics of various nationalities,” expanded revenue categories (e.g., not just revenues above or below $1 million), and separate reporting of originations, renewals, lines of credit, and refinances.
- Section 1071 gives the CFPB discretion to require additional data elements that it “determines would aid in fulfilling the purposes of this section.” The NCRC recommends that the CFPB require collection of various categories of additional data including pricing and creditworthiness data (similar to the HMDA data required by Dodd-Frank), number of employees, collateral pledged by borrowers, and start-up status of the business.
- Section 1071 gives the CFPB discretion to grant exceptions from the data collection requirements. The NCRC urges the CFPB to develop a rule “that provides for broad and comprehensive inclusion” of depository and non-depository institutions that make small business loans and not to create exemptions that would exclude “significant numbers of financial institutions.”
In April 2011, the CFPB issued guidance indicating that it will not enforce Section 1071 until it has issued implementing regulations and, at the April 2014 Practicing Law Institute’s 19th Annual Consumer Financial Services Institute (co-chaired by Alan Kaplinsky), a CFPB representative indicated that the CFPB will not be issuing implementing regulations this year.