April 19, 2022
SBA Hot Topic Tuesday – ICBA is Advocating for Adjustments to the Small Business Lending Data Collection Proposal
“While ICBA firmly supports the intention behind the Proposal and the desire to expand access to credit for minority-owned, women-owned, and small businesses, we remain deeply concerned that the proposal’s overly broad coverage will uniquely disadvantage the business customers of community banks,” reads the Independent Community Bankers of America’s comments on the Small Business Data Collection proposal by the Consumer Financial Protection Bureau.
“Specifically, we believe that the Proposal will threaten the privacy of small business customers, increase the cost of credit, discourage ‘loan shopping’ for the best product, increase compliance costs, and most unfortunately – erode the customized, relationship-banking model in which community banks take pride.”
In the ICBA’s comments, they provide nine concerns with the proposed rulemaking:
- The smallest community banks will be inappropriately covered by the scope of the rule.
- It will disproportionally increase the cost of and decrease access to credit for “truly” small businesses.
- Doubling the number of data points will increase the burden of complying with the law and increase the threat to small business applicants’ privacy.
- The proposal will unnecessarily risk the privacy of small business applicants.
- Community banks will not have ample time to comply in good faith with this rule.
- The firewall requirement cannot feasibly be met by community banks, and the proposed solution will create a chilling effect for community banks, granting larger FIs and fintech companies a competitive advantage.
- Compliance with this proposal will be a new environment for many community banks.
- While recordkeeping is a necessary part of data collection rulemaking, it will prove difficult for many community banks.
- Verifying small business applicant information causes additional burdens beyond the collection of information.
Read the ICBA’s recommendations on addressing these issues.
In addition, the ICBA is supporting three bills from Representatives Hill, Luetkemeyer, and Williams that address some of the concerns that the ICBA shares.
The Small Business Lenders Exempt from New Data and Excessive Reporting Act – Rep. French Hill
This bill would:
• Define a “financial institution” as one that originates at least 500 covered credit transactions for small businesses in the two preceding calendar years.
• Define a “small business” as one with gross annual revenues of $1 million or less in the most recently completed fiscal year
• Extend the effective compliance data to three years after publication along with a two-year grace period.
The Business Loan Privacy Act – Rep. Blaine Luetkemeyer
The bill would require the CFPB to conduct a rulemaking on the proposed modifications and deletions to the data being published to protect the privacy of credit applicants. This would also allow for public comment from financial institutions and small business credit applicants.
The Preventing Racial Profiling in Lending Act – Rep. Roger Williams
This would eliminate the requirement that loan officers guess the race or ethnicity of an applicant based on their last name and physical appearance.