The bureau’s final rule was enacted to increase transparency in small business lending and prevent unlawful discrimination.
04/03/2023 1:55 P.M.
4 minute read
The Consumer Financial Protection Bureau released a final rule required by Congress “to increase transparency in small-business lending, promote economic development, and combat unlawful discrimination,” according to a news release.
“In 2010, Congress enacted requirements that would result in lenders making data available to the public about their small business lending activity in Section 1071 of the Consumer Financial Protection Act. However, the CFPB did not issue rules to implement this requirement. The California Reinvestment Coalition sued the CFPB in 2019, leading to a court order requiring the CFPB to finalize the rule by March 31, 2023,” the bureau reports in its news release.
Under the rule, “lenders will collect and report information about the small business credit applications they receive, including geographic and demographic data, lending decisions, and the price of credit. The rule will work in concert with the Community Reinvestment Act, which requires certain financial institutions to meet the needs of the communities they serve. The increased transparency will benefit small businesses, family farms, financial institutions, and the broader economy.”
U.S. Rep. Patrick McHenry, R-N.C., chair of the House Financial Services Committee, issued a statement in response to the CFPB’s final rule implementing small business lending data collection as directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 1071.
“The Consumer Financial Protection Bureau’s disastrous small business lending data collection rule is another front in the Biden Administration’s assault on small businesses,” McHenry said. “By imposing overly burdensome reporting requirements on smaller lenders, Director Chopra is jeopardizing the privacy and security of small business owners’ personal and financial data. Yet again, the CFPB under Rohit Chopra is limiting access to credit for small businesses still struggling under the weight of Democrat-induced inflation. To hold the CFPB accountable for its harmful rulemaking, the House Financial Services Committee will explore all options—including the Congressional Review Act—to ensure it does not take effect.”
The bureau’s regulatory approach was on McHenry’s radar throughout the 117th Congress when he was ranking member of the House Financial Services Committee and regulatory oversight is one of his priorities as leader of the committee.
In November 2022, Bloomberg Law reported oversight of the CFPB was expected to increase when the Republicans took the majority in the House and under McHenry’s leadership.
McHenry has supported reform of the CFPB’s funding and leadership structure, reining in regulation by enforcement as well as the CFPB’s regulatory approach of interpretative rules and guidance that lack clarity for businesses, ACA International previously reported.
CFPB policymaking outside of the rulemaking process, medical debt credit reporting changes and data security are also expected to continue to be prominent issues at the federal level.
Meanwhile, U.S. Rep. Maxine Waters, D-Calif., the ranking member of the House Financial Services Committee, and U.S. Rep. Nydia Velázquez, D-N.Y., the ranking member of the House Small Business Committee, applauded the bureau’s finalization of the rule.
“Entrepreneurs are the economic engine of our nation and today’s final rule is the culmination of more than a decade of advocacy to provide better data on the extent of discrimination encountered by small business owners seeking access to credit,” Waters and Velázquez said in a statement. “This critical rule will shine a light on disparities in lending to small business owners and help Congress understand how to ensure that banks and other lenders are meeting the credit needs of all of our nation’s small businesses—especially those that are women-owned and minority-owned. This transparency will promote competition and help lenders, especially community financial institutions, identify new opportunities to serve the needs of small businesses.”
Advocate with ACA
The CFPB’s regulatory process is one of the critical issues you’ll hear about by attending ACA’s annual Washington Insights Fly-In May 15-17, 2023.
Activity in Washington, D.C., stands to have a major impact on our ability to operate and provide employment. We are excited to get members back into the Capitol to advocate for our industry’s latest pressing issues.
The 2023 Washington Insights Fly-In will return with the staple of the event—in-person meetings with legislators happening two different ways—combined with important updates on regulatory and legislative issues. This format will allow ACA members to learn the latest in ACA’s advocacy efforts and tell their stories—the best of both worlds.
Important: Make sure to register by April 14 so ACA’s team can arrange meetings on the Hill for you.
For more information on the annual advocacy event, visit the Washington Insights Fly-In website.