April 3, 2023
Main Street Monday – CFPB Finalizes Rule to Collect Small Business Lending Data
On March 30, the Consumer Financial Protection Bureau (CFPB) finalized a rule that increases transparency in small business lending, promotes economic development, and combats unlawful discrimination. Crucial for small business lenders to know:
• Traditional and alternative financial institutions will collect and share information about small business loan applications including details about location, demographic aspects, lending decisions, and credit pricing.
• The playing field for bank and non-bank institutions will be leveled. Both types of lenders must collect and report data about their lending activity and be subjected to oversight.
The data collected will create a more comprehensive market view and will empower data-driven decision-making. All lenders that make more than 100 small business loans per year will be required to report data, and lenders originating less than 100 loans per year will still be required to adhere to fair lending laws. The rule also covers diverse forms of credit such as closed-end loans, lines of credit, business credit cards, online credit products, and merchant cash advances.
The phases for implementation of the final rule are as follows:
• Lenders that originate at least 2,500 small business loans annually must collect data starting October 1, 2024.
• Lenders originating at least 500 small business loans annually must collect data starting April 1, 2025.
• Lenders that originate at least 100 small business loans must collect data starting January 1, 2026.
SBA Administrator Isabella Casillas Guzman says about the final rule: “With today’s announcement, lenders and policymakers can more clearly understand gaps in small business lending. The SBA will now have access to crucial data needed to inform its work and better serve America’s small business owners. I commend Director Rohit Chopra and the CFPB team for advancing Section 1071 and look forward to using this data to help more Americans achieve the dream of business ownership.”