CFPB Issues Final Rule for Small Business Lending Data Collection (Section 1071)

On March 30, 2023, the Consumer Financial Protection Bureau (CFPB) issued the small business lending rule (Final Rule), which implements the small business lending data collection requirements in Section 1071 of the Dodd-Frank Act (Section 1071). 

Section 1071 amended the Equal Credit Opportunity Act (ECOA) to require covered financial institutions to collect and report data regarding covered credit applications made by women-owned, minority-owned, and small businesses, including but not limited to: the purpose of the loan, amount applied for and approved, actions taken, and the race, sex, and ethnicity of the business owners.¹

Notably, the Final Rule defines a “covered financial institution” as a financial institution that originated at least 100 covered credit transactions (rather than 25, as proposed) for small businesses in each of the two preceding calendar years.² The Final Rule also includes key definitions for what are now considered a covered application,³ credit transaction,⁴ and small business.⁵ 

The CFPB has published a filing instructions guide for financial institutions to use in reporting the collected data. Data collected may be complied, aggregated, and made available to the public by the CFPB.⁶ 

Financial institutions will need to determine if they are a covered financial institution annually by counting their number of covered originations,⁷ and must begin complying with the Final Rule beginning October 1, 2024, April 1, 2025, or January 1, 2026.⁸ 

An executive summary of the Final Rule can be found here. 

Compliance Systems continues to monitor this new regulation for developments and any impact to our solution. 

¹ See 15 U.S.C. § 1691c-2.
² See 12 CFR § 1002.105(b).
³ “Covered application” means an oral or written request for a covered transaction that is made in accordance with procedures used by a financial institution for the type of credit requested with certain exceptions. See 12 CFR § 1002.103(a).
⁴ “Covered credit transaction” generally means an extension of business credit other than trade credit, Home Mortgage Disclosure Act-reportable transactions, insurance premium financing, public utilities credit, securities credit, or incidental credit. See 12 CFR § 1002.104.
⁵ “Small business” means a business, other than a governmental entity or a non-profit business, with gross annual revenue of $5 million or less in its preceding fiscal year. See 12 CFR § 1002.106(b).
⁶ See 12 CFR §1002.110.
⁷ A “covered origination” is a covered credit transaction that the financial institution originated to a small business. See 12 CFR 1002.114(b).
⁸ See 12 CFR § 1002.114(b).