GOVERNMENT

Advocacy Submits Comments on the CFPB’s Request for Information Regarding the Small Business Lending Market

On September 14, 2017, the Office of Advocacy submitted a letter to the Consumer Financial Protection Bureau regarding (CFPB) its Request for Information Regarding the Small Business Lending Market.

Section 1071 of the Dodd-Frank Act (section 1071) amends Equal Credit Opportunity Act to require financial institutions to report information concerning credit applications made by women-owned, minority-owned, and small businesses.In the RFI, the CFPB states that Section 1071 defines small business as having the same meaning as the term “small business concern” in section 3 of the Small Business Act (15 U.S.C. 632). SBA establishes detailed size standards to meet the criteria of section 3 of the Small Business Act.[1] At Advocacy’s roundtable, the participants stated that the SBA size standards are complex and confusing. Advocacy encouraged the CFPB to perform outreach with small entities and to work with Advocacy and SBA’s Office of Size Standards to develop a workable solution.

In the RFI, the CFPB states that Section 1071 defines small business as having the same meaning as the term “small business concern” in section 3 of the Small Business Act (15 U.S.C. 632). SBA establishes detailed size standards to meet the criteria of section 3 of the Small Business Act.[1] At Advocacy’s roundtable, the participants stated that the SBA size standards are complex and confusing. Advocacy encouraged the CFPB to perform outreach with small entities and to work with Advocacy and SBA’s Office of Size Standards to develop a workable solution.

Section 1071 specifies particular data points that financial institutions must compile and maintain, submit annually to the CFPB, and make available to members of the public upon request unless the CFPB permits the deletion or modification of certain data to advance a privacy interest.

At Advocacy’s roundtables, the participants stated that it will be costly to develop a computer system to collect the information that is required. According to the participants, it will be far more costly then the Home Mortgage Disclosure Act (HMDA) rulemaking. In HMDA, small entities added to an existing system. To comply with the requirements of section 1071, small entities will need to build an entirely new system.

Advocacy encouraged the CFPB to convene a SBREFA panel for the rulemaking on section 1071 and to have several pre-panel meetings/conference calls with the small entity representatives in order to obtain information about the possible economic impact.

At Advocacy’s August 4th roundtable, the small business representatives alluded to the differences between consumer and commercial lending. Moreover, when asked about less costly alternatives, they stated that they were not ready to have a meaningful discussion on alternatives. The consideration of meaningful alternatives is a crucial part of the RFA. Advocacy asserted that an ANPRM could assist the CFPB in learning more about the challenges associated with commercial lending and in ascertaining less costly alternatives.

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