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House Small Biz Committee chairman looks to overturn 1071 rule
House Small Business Committee Chairman Roger Williams, R-Texas, along with Reps. Andy Barr, R-Ky., and Andy Ogles, R-Tenn., introduced a Congressional Review Act (CRA) resolution in opposition to the CFPB’s recently finalized section 1071 rulemaking related to small business lending data collection. If passed by Congress and signed by the president, the CFPB would be forced to halt implementation and redo the rulemaking.
NAFCU Vice President of Legislative Affairs Brad Thaler sent a letter to Williams offering NAFCU’s support for the effort, noting the association’s concerns about the rule stifling credit unions’ small business lending.
“…[T]his rule would require significant one-time costs to implement new data collection systems and long-term, ongoing costs in training staff, information technology, and auditing expenses," Thaler said. "Small institutions like community-based credit unions cannot afford the cost of complying with these new regulatory burdens. These costs would result in fewer lenders supporting our nation’s small businesses, which would in turn result in less availability of credit for small businesses.”
Testifying before a House Small Business subcommittee last week, NAFCU representative Mike Wilson, chief experience officer of Members 1st Federal Credit Union (Enola, Pa.), told lawmakers how the small business lending data collection requirements could drive some credit unions out of the market all together.
Of note, the final rule defines a small business as any business with prior-year gross annual revenue of $5 million or less, ignoring NAFCU’s request to lower this definition to $1 million or less. NAFCU alerted the bureau that setting an artificially high gross annual revenue will not only unnecessarily raise the cost of small business borrowing but will make it more difficult to draw significant conclusions about the health and financial needs of truly small businesses.
While the final rule does not include a controversial provision that would have established visual observation requirements related to reporting protected demographic information, it requires credit unions and credit union service organizations (CUSOs) that originated at least 100 covered small business loans per year to collect and report small business credit application data. This threshold adjustment is an improvement from the 25 loans in the proposed rule, but is still too low and will add significant compliance burdens to credit unions.
NAFCU will continue to work with the CFPB and lawmakers to address credit union concerns related to this issue.