CFPB proposes rule for small business data collection

On Wednesday, September 1, 2021, the CFPB published a long-awaited proposed rule that implements Section 1071 of the Dodd-Frank Act. This part of the Act amended the Equal Credit Opportunity Act (ECOA) and directed the bureau to establish a framework for collecting data about certain small business loans, data that is somewhat like what is collected under the Home Mortgage Disclosure Act (HMDA) and its implementing Regulation C. The proposal is over 900 pages long, but the rule text, sample forms and commentary amount to about 140 pages. The rule will be housed in Regulation B once finalized. Since the rule is long, so this blog runs a bit long too. Here are a few highlights to note, and NAFCU will seek member feedback in the coming weeks to formulate comments on this proposal.

Scope and Key Definitions

For most regulations, the definitions of key terms help determine the scope of the rule and this proposal is no exception. Much like HMDA, the rule has a specific definition of “financial institution” that would determine which credit unions must follow the rule. However, the definition used in the proposal is much broader than the HMDA definition, with the only carve out for those under a minimal transactional threshold. A “covered financial institution” is one “that originated at least 25 covered credit transactions for small businesses in each of the two preceding calendar years.” Note that unlike HMDA, there is no carve out for a credit union under a certain asset threshold (currently set at $48 million or less) or for those not operating in a Metropolitan Statistical Area. So as proposed, credit unions that are currently exempt from HMDA reporting could be subject to this rule if they are above the transactional threshold and offer the kinds of products to the kinds of entities covered by the rule.

 

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