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The CFPB proposed requirements for collecting small business lending data pursuant to Dodd-Frank Section 1071 ("Small business data collection"). The proposal would add a new Subpart B ("Small Business Lending Data Collection") under Regulation B ("Equal Credit Opportunity Act"). If adopted, the requirements would apply to any entity engaged in financial activity that has "originated" 25 or more credit transactions to small businesses, as defined under the Small Business Act, in the two calendar years preceding the effective date of the rule.
Mandated by the proposed requirements would be the collection and reporting of data on small business applications including:
- the type of credit requested by the application, and the nature and revenue of the applicant's business; and
- the applicant's demographics, including (i) minority- or women-owned business status and (ii) ethnicity, race and sex.
The proposal details specifications on how such data would be collected, including that (i) certain demographic data must be collected using "aggregate categories as well as disaggregated subcategories," (ii) such data must be collected and reported annually, barring certain exceptions, and (iii) such data must be made publicly available.
The proposal would also impose limitations, which the CFPB refers to as a "firewall," on which employees of the financial institution can access certain demographic data. Specifically, employees or officers of an institution who have any involvement in the determination of an application cannot access the applicant's response as to their (i) minority- or women-owned business status and (ii) ethnicity, race and sex.
Comments on the proposal must be submitted within 90 days of its publication in the Federal Register.
In remarks on the proposed rule, CFPB Acting Director Dave Uejio emphasized the lack of information the CFPB has as to small businesses' fair access to credit. Mr. Uejio praised the proposal for its potential to "shed much-needed light" on the type of credit small businesses need and to ensure that businesses can obtain it.
Primary Sources
- CFPB Press Release: CFPB Proposes Rule to Shine New Light on Small Businesses' Access to Credit
- CFPB Statement, Dave Uejio: Remarks of Acting Director Dave Uejio at the Press Call on the Small Business Lending Proposed Rule
- CFPB Proposed Rule: Small Business Lending Data Collection under the Equal Credit Opportunity Act (Regulation B)
- CFPB Guidance: Summary of Proposed Rulemaking - September 2021 Proposal Regarding Small Business Lending Data Collection
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