The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), among other things, required the Consumer Financial Protection Bureau (CFPB) to adopt regulations governing the collection of certain small business lending data. Section 1071 of the Dodd-Frank Act amended the Equal Credit Opportunity Act (ECOA), as follows: “in the case of any application to a financial institution for credit for [a] women-owned, minority-owned, or small business, the financial institution shall – (1) inquire whether the business is a women-owned, minority-owned or small business.” The amendment requires financial institutions to compile and maintain certain mandatory information related to the application for credit, as well as discretionary data points that the CFPB believes will further support the purpose of Section 1071. A “financial institution” is defined broadly under Section 1071 as “any partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity that engages in financial activity.”
The CFPB is in the process of rulemaking to implement section 1071. On September 25, 2020, the CFPB published its Outline of Proposals Under Consideration and Alternatives Considered. It also has engaged with small business representatives for input and, on December 15, 2020, published its Final Report of the Small Business Review Panel. The current status of the CFPB’s rulemaking process can be found here.
The CFPB continues to consider the breadth and scope of its rulemaking and related impact on those it regulates, including: (i) whether to narrow the definition of “financial institution;” (ii) whether to limit or clarify the definitions of “small business,” “minority-owned business,” and “women-owned business;” (iii) whether to carve-out certain financial products that would otherwise fall under the definitions of “application” and “credit” triggering data collection; (iv) what additional discretionary data points financial institutions must collect; and (v) timing considerations related to collection, reporting and implementation.
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