As the Consumer Financial Protection Bureau prepares to implement Section 1071 of the Dodd-Frank Act — which calls for the bureau to collect data on women-owned, minority-owned and small businesses — the American Bankers Association expressed concern today that the data collection will prove unable to fulfill its statutory objectives of providing insight on fair lending and community development needs.
“Small business lending at banks is highly individualized, and underwriting and loan pricing depend on many heterogeneous variables that are inherently unsuitable for mass-data fair lending analysis,” ABA said. “[T]he great variations and unique attributes of individual small business loans will make legitimate comparisons excessively difficult, if not impossible.” Moreover, once such a database is established, its inherent exposure to statistical manipulation could be used to “contrive assertions of discrimination in small business lending.”
ABA urged the bureau to partner with the Small Business Administration to study to what degree the data collection envisioned would support fair lending enforcement and promote community development. ABA also provided feedback on a number of matters in a May 2017 request for information from the bureau. In addition to ABA’s letter, several state bankers associations — including those in Georgia, Oklahoma, Missouri, Maryland, Nebraska and Pennsylvania — filed comments.
In a white paper for the Treasury Department in response to President Trump’s executive order on financial regulation, ABA said that Section 1071’s conflation of consumer and commercial lending is misguided and that Congress should repeal the provision. “We recommend the elimination of any vestige of Bureau regulatory, supervisory or enforcement authority over commercial credit or other commercial account and financial services,” ABA said at the time. For more information, contact ABA’s Barry Mills.