LENDERS COVERED BY NEW SMALL BUSINESS DATA RULE By William J. Showalter, CRCM, CRP; Senior Consultant; Young & Associates, Inc.; Kent, Ohio The Consumer Financial Protection Bureau (CFPB) has issued its final rule to implement the rule required by Congress that is intended to increase transparency in small business lending, promote economic development and combat unlawful discrimination. This is probably the last provision of the Dodd-Frank Act of 2010 to be implemented. The CFPB stated that it undertook significant planning to simplify implementation of the new rule and prepare for the submission of data from thousands of lenders. Many of these lenders already report mortgage data under the Home Mortgage Disclosure Act (HMDA). The CFPB recognizes that small business lending has important differences from mortgage lending. Background In 2010, Congress enacted requirements that would result in lenders making data available to the public about their small business lending activity in Section 1071 of the Consumer Financial Protection Act, as part of the Dodd-Frank Act. However, the CFPB did not issue rules to implement this requirement. The California Reinvestment Coalition sued the CFPB in 2019, leading to a court order requiring the CFPB to finalize the rule by March 31, 2023. The CFPB has undertaken significant planning to simplify implementation and prepare for the submission of data from thousands of lenders. While many of these lenders already report mortgage data, the CFPB recognizes that small business lending has a number of key differences from mortgage lending. After considering a wide range of feedback and thousands of public comments, the CFPB has finalized the rule and planning for implementation. Under the new rule, lenders will collect and report information about the small business credit applications they receive, including geographic and demographic data, lending decisions and the price of credit. The rule will work in concert with the Community Reinvestment Act (CRA), which requires certain financial institutions to meet the needs of the communities they serve. The increased transparency is expected to benefit small businesses, family farms, financial institutions and the broader economy. Covered Lenders The CFPB is defining the term “financial institution,” consistent with the definition in section 1071 of the Dodd-Frank Act, as any partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization or other entity that engages in any financial activity. William J. Showalter, CRCM, CRP is a Senior Consultant with Young & Associates, Inc. (www.younginc.com), with over 35 years of experience in compliance consulting, advising and assisting financial institutions on consumer compliance and compliance management issues. He also develops and conducts compliance training programs for individual banks and their trade associations and has authored or co-authored numerous compliance publications and articles. Bill can be reached at (330) 678-0524 or wshowalter@younginc.com. NEBRASKA INDEPENDENT BANKER 13
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