CFPB To Issue Data Collection Regulations for Small Business Lenders in September

Sheppard Mullin Richter & Hampton LLP
Contact

Sheppard Mullin Richter & Hampton LLP

The U.S. District Court for the Northern District of California recently issued an order setting September 30 as the deadline for the CFPB to issue a notice of proposed rulemaking (NPRM) on small business lending data based on Section 1071 of the Dodd-Frank Act.  Section 1071 amended the Equal Credit Opportunity Act to require financial institutions to collect, maintain, and report to the CFPB data on credit applications made by women-owned, minority-owned, and small businesses.  Such data includes the race, sex, and ethnicity of the principal owners of the business, and would be used to facilitate enforcement of fair lending laws and to help better identify the business and community development needs of these types of entities.  The order follows a complaint that was filed in 2019 alleging the wrongful delay by the CFPB in adopting regulations to implement Section 1071.  The deadline comes as a result of a stipulated settlement agreement reached in 2020, which established a timetable for the CFPB to engage in Section 1071 rulemaking.

Putting It Into Practice:  Given the CFPB’s top priority to address racial inequities in consumer finance, the potential implications of collecting and maintaining data on race, sex, and ethnicity hold even larger importance for companies financing small businesses.  The CFPB is likely to use 1071 data to launch supervisory exams and enforcement actions against such financial institutions where the CFPB believes there to be discriminatory decision-making on the basis of this data.  Although the effective date of the final rule will likely be some time in 2023, impacted companies may wish to consider proactive fair lending reviews.

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.

© Sheppard Mullin Richter & Hampton LLP | Attorney Advertising

Written by:

Sheppard Mullin Richter & Hampton LLP
Contact
more
less

Sheppard Mullin Richter & Hampton LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.