Acting CFPB Director Uejio Reiterates Commitment to Issuing Regulations Enacting Dodd-Frank 1071

Bradley Arant Boult Cummings LLP

On February 4, 2021, acting CFPB Director Dave Uejio published a blog post sharing statements recently made to the staff of the CFPB’s Division of Research, Markets, and Regulations (RMR). In his post, Uejio stressed two policy priorities for the CFPB: “(1) relief for consumers facing hardship due to COVID-19 and the related economic crisis and (2) racial equity.” Although the acting director outlined several policies related to COVID-19 forbearances, as well as the QM and debt collection rules, a substantial portion of the comments related to the CFPB’s use of “data, market intelligence, and analysis.” In particular, Uejio identified Dodd-Frank 1071 as an area of focus for the bureau.

As we have discussed previously, Section 1071 of the Dodd-Frank Act amends the Equal Credit Opportunity Act to mandate certain reporting requirements for lenders making business loans. Specifically, the provision requires that lenders identify women-owned, minority-owned, and small businesses and collect data related to the race, sex, and ethnicity of the business owners, the purpose of the loan, the action taken with regards to the loan, the business’s gross annual revenue, and “any additional data that the [CFPB] determines would aid in fulfilling the purposes of this section.”

Although Section 1071 is part of the 2010 Dodd-Frank Act, the CFPB has yet to issue enacting regulations. However, due in part to a May 2019 lawsuit and a resulting settlement, the CFPB has been working to issue a rule. For instance, in August 2020, the CFPB issued an online survey designed to collect information from “institutions engaged in small business financing” regarding one-time costs of compliance with Dodd-Frank 1071. More recently, in September 2020, the bureau released an outline of proposals in preparation for a small business review panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA). Among other things, the outline (1) suggests that data reporting requirements will be limited to loans made to “small businesses,” (2) contains various potential exemption options, and (3) specifies that various alternative credit products such as factoring agreements and merchant cash advance could be exempt. However, the recent change in administration means that the bureau may elect to issue a broader rule.

While rulemaking regarding Dodd-Frank 1071 has been delayed, Uejio’s comments suggest that we will see a notice of proposed rulemaking (NPRM) sooner rather than later. Specifically, the acting director expressly asks the RMR to “resume data collections paused at the beginning of the pandemic, including . . . the previously completed 1071 data collection.” More directly, Uejio “pledged [to the RMR] the support it needs to implement section 1071 of the Dodd-Frank Act without delay.”

Takeaways

Dodd-Frank 1071 is coming, and it is coming soon. The regulation will require substantial data collection and reporting by banks, non-bank lenders, and possibly alternative finance companies that make loans to businesses. Moreover, because the acting director has made it a priority to “enforce[] critical laws that protect small business owners, including from harmful discrimination, in their access to and use of credit[,]” it is conceivable that the proposed rule might be much broader in scope than what was suggested by the SBREFA outline. In other words, compliance with Dodd-Frank 1071 will likely require a substantial amount of time, effort, and resources. Stakeholders should start paying close attention to developments at the bureau in order to understand the potential compliance challenges posed by Dodd-Frank 1071. We will continue to monitor for developments.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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