CBA Outlines Recommendations On Small Business Data Collection

 

The Consumer Bankers Association, in a comprehensive comment letter to the Consumer Financial Protection Bureau (CFPB), outlined recommendations to protect and expand access to credit for small businesses and underserved communities. The letter follows the Bureau’s Notice of Proposed Rulemaking (NPRM) in September 2021 to expand data collection requirements for financial institutions in the small business lending market under Section 1071 of the Dodd-Frank Act. 

“America’s leading banks for more than 200 years have been proud to support the hardworking families and small businesses serving our communities and driving our economy forward. At no time has this commitment been more apparent than over the last two years, when bankers across the country administered more than 4 million PPP loans to support small businesses, worth more than $400 billion and helped protect nearly 90 million jobs,” CBA General Counsel and Senior Vice President David Pommerehn said upon submitting the letter.

“When implemented thoughtfully and in partnership with key stakeholders, collecting more data on small business lending has great potential to advance our shared goals of financing the American Dream for minority- and woman-owned businesses and expanding access to credit in underserved communities. However, there is also an increased risk of collecting misleading or incomplete data that could negatively impact small businesses and stifle small business lending. 

“As we explain in our letter to the CFPB, to protect small business access to credit and ensure banks can deliver on the promise of Section 1071, a well-balanced final rule must include a phased approach to implementation and a carefully tailored set of data points requiring collection. The rule must also apply equally to all small business lenders – especially nontraditional banks and fintechs, which are not currently bound to the same level of consumer protection standards as traditional banks. We look forward to assisting the Bureau in this effort.”

To read CBA’s full comment letter to the CFPB, click HERE.

Background 

In its letter, CBA urges the Bureau to consider the following recommendations to expand access to credit among underserved communities and ensure the intent of Section 1071 is successfully delivered in the market: 

Compliance Lead
Time

Providing lenders adequate lead time to develop data collection platforms and comply with new requirements will help ensure data is accurately captured and reported without stifling efforts to expand small business’ access to credit. 

Standardized Definitions

Streamlining the standardized definition of what will constitute a “covered borrower” (small businesses whose information must be collected) will help ensure the collection of clear and reliable data that can be used to draw meaningful conclusions. 

Adherence To Existing Systems

Allowing lenders to satisfy new reporting requirements through the use of their own existing reporting systems will help minimize potential disruption to borrowers while ensuring the collection process is efficient and accurate. 

These recommendations build on provisions CBA has successfully advocated the Bureau to consider related to Section 1071, including: 

  • Narrowing the scope of data collection to women-owned or minority-owned “Small Business” entities.
  • Clarifying the definition of “Small Business” to prevent inconsistencies and confusion. 
  • Defining several transaction types not within scope, including:
  • Inquiries/pre-qualifications
  • Reevaluation, extension, and renewal requests, except requests for additional credit amounts
  • Lender initiated credit line increases
  • Solicitations and firm offers of credit

To read more about Section 1071 and CBA’s recommendations to the CFPB, click HERE.

To read CBA’s statement following the Bureau’s issuance of a Notice of Proposed Rulemaking (NPRM) for Section 1071 of the Dodd-Frank Act in September, click HERE

To read CBA’s December 2020 comment letter to former CFPB Director Kraninger regarding the pending rulemaking pursuant to Section 1071, click HERE.