Treliant Takeaway…CFPB Finalizes Rule to Create a New Data Set on Small Business Lending in America

Fair & Responsible Banking Mortgage Regulatory Compliance and Operations

CFPB Finalizes Rule to Create a New Data Set on Small Business Lending in America

  • Source: Consumerfinance.gov

Treliant Takeaway:

Treliant’s experts know business lending. Our team of professionals can help ensure that you are in compliance with consumer and business lending laws, regulatory requirements, and industry best practices. With unique accelerators, Treliant can help you plan and implement this important rule.

Highlights:

On March 30, 2023, the Consumer Financial Protection Bureau (CFPB) announced that it had finalized a rule “to increase transparency in small business lending, promote economic development, and combat unlawful discrimination.”

As the industry has eagerly awaited the finalization of the rule, the CFPB, based upon comments from lenders nationwide, made a few changes to its initial proposed rule. The final rule under Section 1071 of the Consumer Financial Protection Act includes the following key components of which all small business lenders should be aware:

  • Who needs to report?
    • Lenders making more than 100 covered small business loans per year
    • Banks, savings associations, credit unions and non-repository financial institutions
  • What types of loans need to be reported?
    • Loans to small businesses (with gross revenues under $5 million during its last fiscal year) including:
      • Closed-end loans
      • Lines of credit
      • Business credit cards
      • Online credit products
      • Merchant cash advance by banks, credit unions, and other lenders
  • When must a lender start collecting data?
    • Lenders that originate at least 2,500 loans annually must start collecting data on October 1, 2024
    • Lenders that originate between 500 and 2,500 loans must start collecting April 1, 2025
    • Lenders that originate between 100 and 500 loans must start collecting January 1, 2026
  • What data needs to be collected?
    • Lenders must collect demographic and financial data including data related to women, minority, or LGBTQI owned
    • Loan officers will not be required to make their own determinations of an applicant’s race, ethnicity, or any other demographic information
  • What small business loans do not need to be reporting under the small business lending rule?
    • Loans that are reportable under HMDA
    • Loans that are submitted under the CFPB’s rule would satisfy CRA requirements
  • What other highlights are in the Press Release?
    • Lenders may work with third parties to collect and report data
    • The CFPB intends to issue a supplementary proposal that would, if finalized, provide additional implementation time for small lenders that have demonstrated high levels of success in serving their local communities, as measured by their performance under relevant frameworks like the Community Reinvestment Act and similar state laws.

What other resources are available about the Rule?