Congressman Patrick McHenry has commented on the Consumer Financial Protection Bureau’s (CFPB) release of its final rule for small business lending data collection as directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 1071. McHenry is the Chairman of the House Financial Services Committee.
In a recent announcement, the CFPB said that lenders will need to collect and report information about small business credit applications, including geographic and demographic data, lending decisions, and the price of credit.
The decision was said to be aligned with the Community Reinvestment Act, which seeks to encourage certain institutions to meet the credit needs of communities, including low- and moderate-income.
As outlined by the CFPB, the rule will:
- Provide a comprehensive view of small business lending: The rule covers lenders making over 100 covered small business loans per year, which accounts for more than 95 percent of small business loans by banks and credit unions. Like with mortgages, lenders will submit data points required by Congress, as well as additional data points that are typically already included in lender files.
- Cover diverse forms of credit by all types of lenders: The rule covers closed-end loans, lines of credit, business credit cards, online credit products, and merchant cash advances by banks, credit unions, and other lenders. Non-depository financial institutions — a growing sector accounting for roughly $550 billion in financing to small businesses — will be required to collect and report data, as will banks, savings associations, and credit unions. Online lending by nonbanks is a rapidly evolving market that particularly impacts minority entrepreneurs.
- Use straightforward definitions and streamlined forms: To make it easy for lenders to know on which applications to collect data, the rule defines a small business as one with gross revenue under $5 million in its last fiscal year. The rule also includes a streamlined sample form for lenders to use, if they so choose, to collect demographic data from small business credit applicants.
McHenry called the CFPBs decision “disastrous,” describing the small business lending data collection rule as an assault by the Biden Administrations on small businesses:
“By imposing overly burdensome reporting requirements on smaller lenders, Director Chopra is jeopardizing the privacy and security of small business owners’ personal and financial data. Yet again, the CFPB under Rohit Chopra is limiting access to credit for small businesses still struggling under the weight of Democrat-induced inflation. To hold the CFPB accountable for its harmful rulemaking, the House Financial Services Committee will explore all options—including the Congressional Review Act—to ensure it does not take effect.”