A recent American Banker article written by officials of three community groups urges President Obama to publicly denounce Director Cordray for failing to issue regulations implementing the small business lending data requirements of Dodd-Frank Section 1071.
Section 1071 amended the ECOA 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. Such data includes the race, sex, and ethnicity of the principal owners of the business. In April 2011, the CFPB issued guidance indicating that the CFPB would not enforce Section 1071 until it issued implementing regulations. Section 1071 was not mentioned in the CFPB’s most recent semiannual rulemaking agenda issued in May 2015.
In their article, the community group officials state that “[p]utting a spotlight on banks’ business lending practices can help diminish redlining and prod them to market to a relatively untapped business sector. Large banks in particular have a lot of room for improvement.” They further state that “[f]air lending practices are a crucial step in easing our nation away from the ravages of the Great Recession, and putting Section 1071 into action is an important part of this effort.”
In August 2014, the National Community Reinvestment Coalition issued a white paper that urged the CFPB to take an expansive approach in developing regulations to implement Section 1071. Given its numerous other pending regulatory initiatives that are in various stages of completion, we hope the CFPB will resist pressure to move forward hastily on Section 1071 regulations and not place further burdens on the consumer financial services industry, which is already struggling to cope with what is becoming a regulatory avalanche.