The CFPB has issued a final report on the impact on small businesses of a proposed rulemaking regarding collection of financial institution lending data covering lending to minority- and women-owned businesses and small businesses.
One provision of the Dodd-Frank Act calls for the CFPB to implement regulations which require financial institutions to collect data on lending to minority- and women-owned businesses and small businesses. This data 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 CFPB previously issued an outline of proposals and alternatives it would consider in developing these regulations (as addressed in a prior WBK article). As part of the process, the CFPB was also required to convene a panel to get input from small business lenders and creditors that would be collecting and producing the data to determine how to minimize burdens on these entities.
The new report was prepared in conjunction with the Small Business Administration and the Office of Management and Budget. The CFPB found that the new regulations would likely require one-time upfront costs—such as for creating new policies and procedures, updating computer systems, training staff, and compliance review. Likewise, there would be ongoing costs in the form of employee time and software management costs. The CFPB found that these costs would likely be passed on to borrowers.
According to the CFPB, the small businesses with which it discussed the new regulations were generally favorable to the collection of the data and supportive of the goals of fair lending compliance. However, they were also uniformly in favor of making the new rules simple, receiving clear written guidance and implementation support from the CFPB, and having any new rules be aligned with other federal data reporting regimes such as HMDA and the CRA.
The report contains a number of recommendations with respect to the ultimate rulemaking process, the scope of the rule, definitions of key terms, what data will be collected, how data will be reported to the CFPB, and implementation of the new rule.