CFPB’s Reach May Extend to PPP Lending

The CFPB’s Winter 2021 Supervisory Highlights Report that was published late last month, covered a section on small business lending. And it’s not related to the Bureau’s work on Section 1071.

The foray into non-consumer finance was instead driven by PPP lending.

“Consistent with its authority to ensure compliance with the Equal Credit Opportunity Act (ECOA), the Bureau conducted [Prioritized Assessments] to assess potential fair lending risks attendant to the institutions’ participation in the [PPP] program,” the report said.

Accordingly, the CFPB determined that small business lenders that restricted or limited eligibility such as banks who only permitted applications from existing customers, for example, “may have a disproportionate negative impact on a prohibited basis and run a risk of violating the ECOA and Regulation B.”

The CFPB conceded that it had not actually investigated if violations occurred and noted that the majority of institutions had argued that such limitations were either in place to comply with Know Your Customer legal requirements, to prevent fraud, or both.

The CFPB did not say that it had supervisory authority over non-banks that participated in PPP, but it did signal that its purview was larger than just consumers when it came to the institutions it supervised.

The report can be viewed here.

The CFPB is expected to have more proactive involvement in small business finance under its new incoming director, Rohit Chopra. Chopra’s nomination was formally submitted on February 13th. Dave Uejio, the Bureau’s Chief Strategy Officer, has been serving as Acting Director since President Biden took office.

Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.