The Consumer Financial Protection Bureau has finalized revisions to its small-business lending data rule to scale back the scope of data collection, according to a notice in the Federal Register.
The CFPB released a final rule in 2023 to implement Section 1071 of the Dodd-Frank Act, which requires financial institutions to report data on small-business lending. Several lawsuits followed, including one brought by the Texas Bankers Association and American Bankers Association, which resulted in a stay of the mandatory compliance dates for members of the associations pending the outcome of the case.
Last year, the CFPB proposed a new streamlined rule in response to legal challenges. The finalized rule to be published on Friday adopts “a narrower scope to ensure its quality and to limit, as much as possible, any disturbance of the provision and availability of credit to small businesses,” according to the notice. “The statutory purposes of the rule are not well served by an expansive rule that could create disruptions in small business lending markets.”
Among the changes, the final rule:
- Raises the origination threshold for which institutions are covered from 100 to 1,000 credit transactions for each of two consecutive years.
- Removes the following discretionary data points added by the 2023 final rule: Application recipient and method, denial reasons, pricing information and number of workers.
- Excludes merchant cash advances, agricultural lending and small-dollar loans from the definition of covered credit transaction.
- Excludes Farm Credit System lenders from coverage.
- Decreases the gross annual revenue threshold in the rule’s definition of a small business from $5 million or less to $1 million or less.
- Extends the rule’s compliance date provisions to Jan. 1, 2028, for all covered financial institutions.
In a statement, American Bankers Association President and CEO Rob Nichols applauded the bureau for finalizing a streamlined rule “that addresses significant legal and operational concerns from the prior rule while providing clearer, more workable requirements for banks.”
“This final 1071 rule appropriately refocuses on core lenders, products and data points without imposing undue compliance costs that would make it harder for America’s banks to serve their customers and communities,” Nichols said. “While we welcome the bureau’s action, we continue to urge Congress to pass legislation implementing Section 1071 reporting relief so banks of all sizes can remain focused on providing credit to as many small businesses as possible and growing our economy.”
