84 House members recently wrote to the CFPB to urge it to expedite rulemaking to implement 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 their letter to Director Cordray, the House members urge the CFPB “to move forward this year” with Regulation B rulemaking to implement Section 1071. They assert that “[t]ransparency in small business lending data is the key to understanding the credit needs of women-owned and minority-owned small businesses. Public and private entities are collecting data on various aspects of small business lending. However, these groups offer a fragmentary and incomplete picture of lending in the small business marketplace. Regulation B is essential for facilitating the enforcement of fair lending laws. ”
Last month, a group of 19 Democratic U.S. Senators and a group of 13 Democratic members of the House Financial Services Committee sent similar letters to Director Cordray. (Nearly all of the 13 House Financial Services Committee members were among the 84 House members signing the new letter.) 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.
The growing pressure on the CFPB to issue rules implementing Section 1071 is also the subject of a new American Banker article. The article discussed industry’s concern that rushed action by the CFPB could result in rules that discourage rather than facilitate small business lending. It also noted the compliance burden the new rules will place on industry, with Alan Kaplinsky, Practice Leader of Ballard Spahr’s Consumer Financial Services Group, commenting that “[t]his is a going to be a major undertaking to be able to collect the data, and there’s always concern about how the data is going to be used.”