OFN Applauds Release of Long-Awaited Small Business Data Collection Rule
After more than a decade since the passage of the Dodd-Frank financial reform legislation, the Consumer Financial Protection Bureau (CFPB) finally put forth its Section 1071 small business lending data collection proposed rule. Section 1071, which amended the Equal Credit Opportunity Act, requires financial institutions to collect certain data regarding applications for credit for women-owned and minority-owned businesses and other small businesses, and to report that data annually to the CFPB.
OFN President and CEO Lisa Mensah stated, “Community development financial institutions (CDFIs) specialize in lending to very small, minority and women-owned businesses. I commend the CFPB for putting forth a strong proposed rule which will expand our understanding of pricing, products, and access to credit for the small businesses that have historically struggled to access responsible loans to support their businesses.”
The CFPB proposal is a significant step forward in bringing much-needed transparency to the small business lending market, providing the first comprehensive dataset on access to capital for small businesses. The rule is key to assessing the ability of our nation’s small businesses — especially businesses owned by women and people of color — to access affordable, responsible credit.
For mission-driven lenders like CDFIs, increasing access to capital for underserved businesses is a key component of their strategy. Section 1071 will help determine which lenders are truly meeting the credit needs of small businesses, highlighting the financial products and business models best designed to reach underserved entrepreneurs. The rule’s enforcement of fair lending laws is also critically important to identifying patterns of discrimination for small businesses seeking access to credit.
OFN is pleased to see many of the recommendations put forth in our December 2020 comment letter in the proposed rule, including defining financial institutions broadly to include most types of institutions that serve small businesses with few exemptions; product coverage that includes merchant cash advance products; and collecting data on pricing and fees.
The CFPB is accepting comments on the proposed rule for 90 days after its publication in the Federal Register. Comments will be due sometime in December 2021.
In the coming months, OFN will engage with our members and other industry stakeholders to develop comments on the rule. For more information on our small business advocacy, please contact OFN SVP, Public Policy Dafina Williams.