On September 15, 2020, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) released an Outline of Proposals under Consideration and Alternatives Considered for the small business data collection rulemaking mandated by Section 1071 of the Dodd-Frank Act and a High-Level Summary of the outline of proposals.  The release signals that a Small Business Advisory Panel will convene in October 2020 as required by the Small Business Regulatory Enforcement Fairness Act of 1996 (“SBREFA”) to assess the impact of the Bureau’s outline of proposals under consideration.  Participants in the SBREFA panel are invited to submit written comments by November 9, 2020; other interested stakeholders are invited to submit written comments by December 14, 2020.

Section 1071 amends the Equal Credit Opportunity Act to require financial institutions to collect certain data regarding applications for credit for women-owned, minority-owned, and small businesses, maintain records of responses, and report the data to the CFPB on an annual basis, in accordance with rules and guidance issued by the CFPB.  The purpose of Section 1071 is “to facilitate enforcement of fair lending laws and enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses.”  15 U.S.C. § 1691o-2(a).

The Bureau’s proposals under Section 1071 have been long-awaited by industry associations, consumer groups, state regulators, Congress, and many other stakeholders, and the convening of the SBREFA panel represents the start of a rigorous and potentially lengthy rulemaking process.

A short list of highlights of the proposals follows after the jump, and we plan to publish a more detailed client alert on the CFPB’s outline of proposals in the near future.

The CFPB is considering proposing a rule that would:

  • Limit the scope of the rule to small businesses, and not covering women- and minority-owned business that are not small;
  • Cover a broad range of lenders as “financial institutions,” including depository institutions, online lenders/platform lenders, community development financial institutions, equipment and vehicle financing lenders, commercial finance companies, government lending entities, and non-profit, non-depository institution lenders;
  • Exempt certain financial institutions from the rule using size-based and/or activity-based exemptions;
  • Establish a simplified size standard with approval from the Small Business Administration;
  • Exclude certain products from the rule, specifically consumer-designated credit, leases, factoring, trade credit, and merchant cash advances;
  • Not require reporting of renewals, extensions, and reevaluations of credit with no additional credit amounts, inquiries and pre-qualifications, and solicitations and firm offers of credit even if they may be considered applications under Regulation B;
  • Require the collection and reporting of certain additional data points not mandated by the statute, specifically, pricing, time in business, North American Industry Classification system (“NAICS”) code, and number of employees;
  • Limit underwriter access solely to information about women- and minority-owned business status;
  • Apply a balancing test to weigh the privacy considerations of public disclosure; and
  • Establish a three-year record retention period and two calendar year implementation period after the final rule is issued.
Tags: CFPB, Dodd Frank Section 1071, Fair Lending, SBREFA, Section 1071, Small business data collection
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Photo of David Stein David Stein

David Stein advises clients on credit reporting, financial privacy, financial technology, payments, retail financial services, and fair lending issues. He assists a broad range of financial services firms, consumer reporting agencies, financial technology companies, and their vendors with regulatory, compliance, supervision, enforcement, and…

David Stein advises clients on credit reporting, financial privacy, financial technology, payments, retail financial services, and fair lending issues. He assists a broad range of financial services firms, consumer reporting agencies, financial technology companies, and their vendors with regulatory, compliance, supervision, enforcement, and transactional matters.

Mr. Stein has significant experience advising clients on compliance with the FCRA, GLBA, ECOA, EFTA, E-Sign Act, TILA, TISA, FDCPA, Dodd-Frank Wall Street Reform and Consumer Protection Act, and FTC Act, as well as state financial privacy laws. Mr. Stein is a member of the firm’s fintech and artificial intelligence initiatives and works with clients on issues related to cutting edge technologies, such as blockchain, virtual currencies, big data and data analytics, artificial intelligence, online lending, and payments technology.

Mr. Stein previously served in senior regulatory, policy-making, and management positions at the Consumer Financial Protection Bureau (CFPB) and the Federal Reserve Board (FRB). He played a significant role in developing regulations and policy on credit reporting, financial privacy, retail payments systems, consumer credit, fair lending, overdraft services, debit interchange, unfair or deceptive acts or practices, and mortgage origination and servicing. Mr. Stein draws upon his government experience in representing clients before the CFPB, the FRB, and other regulatory agencies and leverages his insights into the regulatory process to provide clients with practical, actionable advice.

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