CFPB Proposes Small Business Lending Data Collection Rules

Client Alert

On September 1, 2021, the US Consumer Financial Protection Bureau (CFPB) proposed new requirements for financial institutions to collect and report data on small businesses’ access to credit. The proposed rule would require financial institutions to report for small businesses the amount and type of credit applied for and extended, demographic information, and key elements of the price of the credit offered. The goal of the proposed rule is to boost transparency and fair lending.

The 918-page proposal falls under Section 1071 of the Dodd-Frank Act, which amends the Equal Credit Opportunity Act (ECOA) to require financial institutions to collect and report to the CFPB certain data regarding certain business credit applications.

The CFPB is considering the breadth and scope of its rulemaking and related impact on those it regulates, including whether to narrow the definition of “financial institution”; limit or clarify the definitions of “small business,” “minority-owned business,” and “women-owned business”; and/or carve out certain financial products that otherwise would fall under the definitions of “application” and “credit,” triggering data collection. The CFPB also is considering which additional discretionary data points financial institutions must collect and timing considerations related to collection, reporting, and implementation.

The requirements would apply to a range of products, including lines of credit, term loans, merchant cash advances, and credit cards. Applications covered under the proposal would exclude reevaluation and extension requests, renewal requests on an existing business account (unless seeking additional credit), and inquiries and prequalification requests. The proposed requirements are part of the broader Wall Street reforms in the wake of the 2008 financial crisis.