On November 6, 2019, the Consumer Financial Protection Bureau (CFPB) hosted a symposium on Section 1071 of the Dodd-Frank Act.  Section 1071 amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to collect and make public certain information concerning credit applications made by women-owned, minority-owned, and small businesses.  Section 1071(g) authorizes the CFPB to conduct a rulemaking to specify the nature and scope of the data collection, although the CFPB has yet to act on this authority. 

CFPB Director Kraninger made opening remarks providing some context on Dodd-Frank Act Section 1071: “Small businesses, including those owned by women and minorities, are critical engines for economic growth…Section 1071 would increase public data about small business lending.  Congress wanted the Bureau, and the public generally to better understand the landscape for all small businesses, and specifically those owned and operated by women and minorities.”

There are many competing constraints that may impact a rulemaking that were discussed at the symposium, many of which parallel concerns with HMDA.  Stakeholders are concerned about the reporting burden to small entities as well as privacy considerations of applicants.  Stakeholders were concerned that the rule would constrain credit to small, women-owned and minority-owned businesses.  Furthermore, small business lending is not easily defined.  At the symposium, participants highlighted the complexity of this market, including the wide range of lending products and lending institutions. 

Although not a topic of the panelists’ written statements, another potential issue with the rule is how the CFPB and the public will use the data to enforce fair lending laws.  For instance, there are concerns whether the data will be used to allege violations of ECOA under the disparate impact theory, because there are questions whether the disparate impact theory is available under ECOA.

Despite the long wait for a rule, there are signs that the CFPB will initiate a rulemaking soon.  In addition to the symposium, in its 2019 Spring Rulemaking Agenda, the CFPB scheduled a pre-rule activity for January 2020.  We will see if this schedule changes in the forthcoming Fall 2019 Rulemaking Agenda. 

Garris Horn frequently provides guidance on CFPB initiatives.  For more information contact Richard Horn directly at rich@garrishorn.com.