April 19, 2017
By Bob Coleman
Editor, C-Suite Wednesday
C-Suite Wednesday — Small Business Lenders Next on CFPB’s List
The CFPB says it will target small business lenders in 2017 to ensure fair lending.
I assumed, along with most in the industry, that the CFPB would announce its rules about small business lending data collection so lenders would know the environment, before they start fining lenders. CFPB says it’s in a “pre-rule” stage which is good enough for them to start analyzing data that no one has told you how to collect.
Says the CFPB (pages 47 and 48)
“Section 1071 of the Dodd-Frank Act requires financial institutions to compile, maintain, and submit to the Bureau certain data on credit applications for women-owned, minority-owned, and small businesses.
“Congress enacted Section 1071 for the purpose of facilitating enforcement of fair lending laws and identifying business and community development needs and opportunities for women-owned, minority-owned, and small businesses.
“The amendments to ECOA made by the Dodd-Frank Act require that certain data be collected and maintained, including the number of the application and date the application was received; the type and purpose of loan or credit applied for; the amount of credit applied for and approved; the type of action taken with regard to each application and the date of such action; the census tract of the principal place of business; the gross annual revenue of the business; and the race, sex, and ethnicity of the principal owners of the business.
“The Bureau’s Fall 2016 Unified Agenda and Regulatory Plan indicates that rulemaking pursuant to Section 1071 is now in the pre-rule stage.
“This first stage of the Bureau’s work will be focused on outreach and research and on the potential ways to implement section 1071, after which the Bureau will begin developing proposed rules concerning the data to be collected and determining the appropriate operational procedures and privacy protections needed for information-gathering and public disclosure.
“The Bureau has begun to explore some of the issues involved in the rulemaking, including through ongoing engagement with industry and other stakeholders. In addition, current and future small business lending supervisory activity will help expand and enhance the Bureau’s knowledge in this area, including the credit application process; existing data collection processes; and the nature, extent, and management of fair lending risk. The Bureau is also considering how best to work with other agencies to, in part, gain insight into existing business lending data collection efforts and to explore possible ways to cooperate in future efforts.
“Congress expressed concern that women-owned and minority-owned businesses may experience discrimination when they apply for credit, and has required the CFPB to take steps to ensure their fair access to credit. Small business lending supervisory activity will also help expand and enhance the Bureau’s knowledge in this area, including the credit process; existing data collection processes; and the nature, extent, and management of fair lending risk.”
In 2015, I wrote about the difficulties associated with the CFPB’s oversight. And 76% of you said an applicant’s gender or minority status should not include the underwriting decision.
You may read the CFPB report here