collection of data they are required to report to the CFPB. They will also have to engage in ongoing training on, and compliance and risk oversight of, these processes. They will have to develop methods for meaningful review of their data in order to identify possible issues and take remedial actions. The CFPB estimates that, depending on the covered financial institution, costs associated with preparing and implementing this reporting system can rise to as much as $100,000, and require hundreds of hours spent by junior, mid-level and senior employees.24 Further, the CFPB estimates that the overall market impact of these costs to financial institutions could be as great as $160 million dollars.25 Following implementation the CFPB estimates that the ongoing cost of maintaining these systems and abiding by the rules could range from $8,300 to $243,000, depending on the institution.26 Even if one accepts the CFPB estimates, the costs of compliance with these rules will likely be significant for all institutions and have the potential to affect how these institutions run their businesses. As discussed above, in addition to the economic costs associated with these rules, financial institutions also face economic and reputational risks in relation to their lending practices. In making their credit decision process public information, financial institutions can be scrutinized for who they choose or choose not to lend to, running the risk of being labeled as a discriminatory lender. Even more, this data could be utilized by class action attorneys and advocacy groups to initiate investigations and litigation. Need to Begin Implementation Given the dangers associated with failing to comply with these rules, and the difficulty and complexity of building out, testing and implementing similar data processes, it would be a best practice for all financial institutions covered by this rule to further study and begin implementing this rule as soon as possible. The CFPB has communicated that they will aggressively enforce these regulations, so failure to be prepared once collection and reporting become mandatory could result in serious consequences. 1. Michael Flynn is Of Counsel in Buchalter’s Denver office and is a member of the Firm’s Commercial Finance Practice Group and Mortgage Banking Industry Group, and Co-Chair of Buchalter’s Financial Services Regulatory Group, and its Title Insurance & Escrow Industry Group. 2. Brett Voets is an Attorney in the Firm’s Los Angeles office and a member of the Commercial Finance practice group. 3. Small Business Lending under the Equal Credit Opportunity Act, Consumer Financial Protection Bureau (Docket No. CFPB-2021-0015) (March 30, 2023). 4. 12 CFR Part 1002. 5. 15 USC 1691 et. seq. 6. Small Business Lending under the Equal Credit Opportunity Act, at p. 55. 7. Id. at 3. 8. Id. at 2–3. 9. Id. 10. Id. at 4. 11. 12 CFR 1002.2(g) (definition of “Business Credit” under Regulation B). 12. Small Business Lending under the Equal Credit Opportunity Act, at p. 61. 13. 12 CFR Part 1003 14. 12 CFR Part 1003.2(e). 15. For a full list of the data that will be collected, refer to 12 CFR 1002.107. 16. Small Business Lending under the Equal Credit Opportunity Act, at p. 525. 17. Although generally available to the public, the CFPB intends to create a firewall that will prevent the employees of a financial institution involved in credit decisions from accessing demographic information reported by applicants. This is unless a financial institution can demonstrate it that an officer or employee should have access to the applicant’s responses and the institution’s inquiries about the applicant’s protected demographic information. If this is the case, these employees may access the data as long as the financial institution provides notice to applicant of this access at the time applicant provides the information. Id. at p. 62. 18. Id. at p. 63–64. 19. Id. at p. 38. 20. Id. at p. 64, 881. 21. Id. at p. 64, 813. 22. Id. at p. 814. 23. Id. at 882–883. 24. Id. at p. 752–53. 25. Id. at p. 756. 26. Id. at p. 760. 9 Colorado Banker
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