The Bureau’s final rule was adopted to increase transparency in small business lending and to prevent unlawful discrimination.
04/03/2023 1:55 p.m
4 minutes of reading
The Consumer Financial Protection Bureau has published 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 will require lenders to provide the public with data about their small business lending activity in Section 1071 of the Consumer Financial Protection Act. However, the CFPB has not issued rules implementing this requirement. The California Reinvestment Coalition sued the CFPB in 2019, resulting in a court order requiring the CFPB to finalize the rule by March 31, 2023,” the bureau said in its news release.
According to the rule, “lenders will collect and report information about the small business loan applications they receive, including geographic and demographic data, lending decisions and cost of credit. The rule would work in concert with the Community Reinvestment Act, which requires certain financial institutions to meet the needs of the communities they serve. Increased transparency will benefit small businesses, family farms, financial institutions and the economy as a whole.
U.S. Rep. Patrick McHenry, RN.C., chairman 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 Credit Reform Act. Dodd-Frank on Wall Street and Consumer Protection, Section 1071.
“The Consumer Financial Protection Bureau’s disastrous small business lending data collection rule is another front in the Biden administration’s attack 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. And yet again, the CFPB under Rohit Chopra is restricting 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 doesn’t go into effect.
The Bureau’s regulatory approach was on McHenry’s radar during the 117th Congress, when he was the ranking member of the House Financial Services Committee, and regulatory oversight is one of his priorities as the committee’s leader.
In November 2022 Bloomberg’s Law reported oversight of the CFPB was expected to increase when Republicans took the House majority and under McHenry’s leadership.
McHenry supported reform of the CFPB’s funding and leadership structure, limiting regulation through enforcement, as well as the CFPB’s regulatory approach to interpretive rules and guidelines that lack clarity for businesses, ACA International previously reported.
CFPB policymaking outside of the rulemaking process, changes to medical debt credit reporting, and data security are also expected to continue to be important issues at the federal level.
Meanwhile, U.S. Rep. Maxine Waters, D-Calif., ranking member of the House Financial Services Committee, and U.S. Rep. Nydia Velasquez, D-N.Y., ranking member of the House Small Business Committee, applauded the finalization of the Bureau 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 faced by small business owners seeking access to credit,” said Waters and Velasquez 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 meet the credit needs of all small businesses in our nation — especially those that are owned of women and minorities -owned. This transparency will encourage competition and help lenders, especially community financial institutions, identify new opportunities to serve the needs of small businesses.
Attorney with ACA
The CFPB’s regulatory process is one of the critical issues you’ll hear about when you attend the annual ACA Washington Insights Fly-In event on May 15-17, 2023.
Activity in Washington, DC can have a major impact on our ability to operate and secure employment. We’re excited to bring members back to the Capitol to advocate for our industry’s newest pressing issues.
The 2023 Washington Insights Fly-In will return with the core of the event – face-to-face meetings with lawmakers in two different ways – combined with important updates on regulatory and legislative issues. This format will allow ACA members to learn the latest in ACA advocacy efforts and tell their stories—the best of both worlds.
Important: Don’t forget to register to April 14 so the ACA team can arrange meetings on the Hill for you.
For more information about the annual advocacy event, visit the Washington Insights Fly-In website.
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