Story Series: Section 1071
CFPB Officially Begins Work on Small Business Data Collection Rule
November 23, 2015
On Friday, the CFPB issued its semiannual update to its rulemaking agenda. The agenda lists the Bureau’s major current and long-term initiatives. Long listed as a long-term item, the Small Business Data Collection rule required by section 1071 of Dodd-Frank is listed on the update as a current initiative.
The move is unsurprising given the number of lawmakers that have publicly called for implementation of the rule. CFPB director Richard Cordray also recently mentioned that the Bureau would begin its initial work on the rule early next year.
In the update, the Bureau states that it plans to build off of its recent revision to the home mortgage data reporting regulations as it develops the new Small Business Data Collection rule. The first stage of the CFPB’s work will focus on outreach and research. This will be followed by the development of proposed rules concerning the type of data to be collected as well the procedures, information safeguards, and privacy protections that will be required of the small business lenders that will report information to the Bureau.
CFPB Signals Alarming Interest in Small Business Lending
November 10, 2015
The Consumer Financial Protection Bureau posted an alarming job opportunity on LinkedIn last month for the position of Assistant Director for Small Business Lending Markets. Ominously self-labeled as an “Expression of Interest” rather than a job opening since the job is not currently open to applications yet, the CFPB has inadvertently revealed its own expression of interest in small business lending.
If there was any doubt that data collection required under Section 1071 of Dodd Frank was never going to happen, the CFPB also revealed that there will not only be a person responsible for small business lending, but in fact an entire team. And they won’t just be collecting data, but they’ll be monitoring it, analyzing it, interpreting it, and advising on rulemaking, according to the listing.
Candidates are being offered a once-in-a-career opportunity to make the market for small business finance fairer and more transparent.
So much for just collecting data, the CFPB apparently plans to directly insert itself into the fairness of transactions conducted between commercial entities.
Perhaps, we are not too far off from a world like this:
Check out my thoughts about the troubling narrative developing around small businesses in the Sept/Oct magazine issue of deBanked.
Lenders Subject to Section 1071 of Dodd-Frank May Find Silver Lining in CFPB’s Roll Out of New HMDA Rules
October 23, 2015
Last week, the CFPB finalized its update to the reporting requirements of the Home Mortgage Disclosure Act (HMDA) regulations. Under the new rules, the CFPB expects that the number of non-depository institutions that will be required to report may increase by as much as 40 percent. This will lead to a sizable increase in the total number of records reported.
Given the breadth of the new rules and the additional compliance efforts they will require, the CFPB has set January 1, 2018 as the effective date of the new regulations. Given that the Bureau could have chosen January 1, 2017 as the effective date, the longer lead time is welcome news for many in the mortgage industry.
The longer lead time may also be positive news for small business lenders that will be subject to the new Small Business Data Collection rule required by the Dodd-Frank act. Section 1071 of the act requires the CFPB to issue implementing regulations. The Bureau has yet to begin its work on the new rule but some small business lenders have already voiced concerns about the costs of other regulations implemented pursuant to Dodd-Frank. They argue that these costs have already begun to restrict access to small business credit.
A well-timed roll out of the new data collection rule could reduce some of these costs. Having adequate time to develop and implement regulatory compliance procedures in a cost-effective manner will lessen the financial impact to small business lenders. This in turn will allow lenders to minimize the new rule’s impact on credit availability to small businesses.
Once the Small Business Data Collection rule is finalized, small business lenders should be given a sufficient period to adjust to the new requirements, just as the CPFB has done for mortgage lenders with the new HMDA rules. HMDA was enacted in 1975 and lenders have been subject its reporting rules for decades. Yet the increased reporting requirements of the revised rules more than justify a two year lead period.
A similar lead period is just as, if not more important for the small business lenders that will be subject to the new data collection rule. The Dodd-Frank act was enacted just five years ago and requires reporting about small business lending that has never been required before. Lenders will need adequate time to develop the new systems required to meet their reporting obligations.
The CFPB’s conscientious roll out of the HMDA revisions is a rare regulatory silver lining. Let’s hope small business lenders get one too.
Former SBA Administrator Karen Mills Urges CFPB to Enact Small Business Data Collection Rule
August 11, 2015
Last week a handful of small business lenders announced the formation of the Responsible Business Lending Coalition. The announcement was made at an event held at the National Press Club in Washington, DC. The event’s Keynote speaker was former SBA Administrator Karen Mills.
During her presentation, Ms. Mills called on the CFPB to implement the Small Business Data Collection Rule of the Dodd-Frank Act. Ms. Mills’ request echoes the recent letter signed by 19 US senators urging the Bureau to issue the regulations contemplated by section 1071 of the Act. Ms. Mills argued that the data collection rule will be critical to understanding small business credit availability, especially for women and minority owned businesses.
Ms. Mills’ statements are the most recent in a series of requests to the CFPB to implement 1071. In addition to the 19 senators, multiple community activist groups along with the National Community Reinvestment Coalition have demanded that the Bureau take action.
The White House has remained silent on the issue so far. If the Bureau does decide to act, the new rule could be added to its list of action items as early as this winter.
