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CFPB issues small biz data collection proposal
The CFPB Wednesday issued a proposal to amend Regulation B under Section 1071 of the Dodd-Frank Act requiring "covered financial institutions" to collect and report credit application data for small, women-owned, and minority-owned businesses. In addition, the proposal addresses the bureau's broader approach to privacy interests, including the shielding of certain applicant demographic data from underwriters.
“Credit unions support fair and affordable access to credit in the small business lending market,” said NAFCU President and CEO Dan Berger in response to the proposal. “The proposed rulemaking, however, raises concerns about how significant new data collection requirements will impact borrowers and smaller financial institutions like credit unions. As the Bureau continues to move this proposed rulemaking through the process, NAFCU will work to ensure that the complexities of section 1071 data collection are minimized in order to ensure credit availability and lender participation in the small business lending marketplace.”
Berger discussed the proposal with CFPB Acting Director Dave Uejio yesterday.
The proposal clarifies that a “covered financial institution” is a financial institution that satisfies an origination threshold of at least 25 credit transactions classified as covered credit transactions – including loans, lines of credit, credit cards, and merchant cash advances – to small businesses in each of the two preceding calendar years.
Of note, the CFPB is seeking comment on the costs to small financial institutions of collecting and reporting Section 1071 data regarding applications for credit for women-owned and minority-owned businesses that are not classified as small businesses; the bureau's definition of a "small business" – included in the proposal – takes into account whether the business had $5 million of less in gross annual revenue for its preceding fiscal year.
Comments on the proposal will be due 90 days after its publication in the Federal Register; compliance with the finalized rule would not be required until approximately 18 months after publication.
NAFCU previously called on the CFPB to exclude credit unions from any rulemaking requiring financial institutions to collect and report data related to small business lending, noting the member business lending constraints credit unions face and the increased costs associated with implementation of the data collection. The bureau last year released its Small Business Regulatory Enforcement Fairness Act (SBREFA) outline of proposals related to Section 1071 of the Dodd-Frank Act, which served a starting point for "engaging small entity representatives through the consultative process required under the SBREFA."
The association will review the proposal and continue to work with the CFPB on this topic. For more information, tomorrow’s post on the NAFCU Compliance Blog will cover the proposal.
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