CFPB Issues Final Rule to Amend Small Business Data Collection Rule

The CFPB recently issued a final rule to amend its 2023 final rule, which implemented Section 1071 of the Dodd-Frank Act and required financial institutions to report lending information submitted by small businesses. 

Due to continued feedback and ongoing litigation, and upon its own consideration, the CFPB is narrowing the scope of its 2023 small business data collection regime.  The CFPB stated it now believes that its data collection requirements should be “[more modest], focusing on core lending products, lenders, and data” and that a narrower scope will “ensure quality, and to limit, as much as possible, any disturbance of the provisions of credit to small businesses.”

Key changes in the new final rule include:

• Covered Credit Transactions– Exclude merchant cash advances (MCAs), agricultural lending, and small dollar loans ($1,000 or less) from the definition of covered credit transactions.

• Covered Financial Institutions– Exclude farm credit system lenders from coverage and raise the origination threshold from 100 to 1,000 covered credit transactions for each of two consecutive years under the definition of covered financial institutions.

• Small Business– Lower the gross annual revenue threshold from $5 million or less to $1 million or less under the definition of small business.

• Data Collection – Eliminate certain discretionary data points, including application method, application recipient, denial reasons, pricing information, and number of workers; and narrow applicant responses regarding LGBTQI+ identity, gender, and race to align with executive agency directives.

• Time and Manner of Collection – Remove certain anti-discouragement and monitoring requirements with respect to obtaining applicant-provided data to provide financial institutions with flexibility to maximize responses in a manner consistent with their operations.

• Compliance Dates – Establish a compliance date of January 1, 2028, but with a one-year grace period through December 31, 2028.

The final rule is effective June 30, 2026.