On May 1, the Consumer Financial Protection Bureau (CFPB) issued a final rule which makes significant changes to the small business lending data collection requirements found in Subpart B to Regulation B.
First, let’s look at what is changing:
Previously, there were 3 different mandatory compliance dates based on the number of covered transactions originated by the covered financial institution. Now, all covered financial institutions will begin collecting data on January 1, 2028.
Under the original rule, a financial institution that originated at least 100 covered credit transactions in each of the two preceding calendar years was required to collect and report data. Under the revised rule, that threshold has been raised to 1,000 covered credit transactions in each of the two preceding calendar years.
Previously, any extension of business credit was considered a covered credit transaction unless specifically exempted. The revised rule adds three new types of exempt transactions:
Under the original rule, a small business was one with gross annual revenue of $5 million or less during its preceding fiscal year. Now, a small business is one with gross annual revenue of $1 million or less during its preceding fiscal year.
The revised rule removes the following data points from the list of those required to be collected in connection with each covered credit transaction:
Furthermore, under the revised rule, when collecting ethnicity, race, and sex of the principal owners of the small business, credit unions need now only use the aggregated categories for ethnicity and race and either male or female for sex.
There are several items from the original rulemaking that were not changed by the CFPB. Let’s look at those next:
An oral or written request for a covered credit transaction, except for reevaluation, extension, or renewal requests that do not see new money. In addition, inquiries and prequalification requests are excluded from the definition of covered application.
No person involved in making any determination concerning the application may have access to business ownership status and/or principal owner demographic information. In addition, this information must be kept separate from the remainder of the application or loan file.
A covered financial institution’s small business loan application register must be submitted not later than June 1st of the year following data collection.
A covered financial institution must post a notice of availability on its website.
Provided by Michael Christians at InfoSight360.
For more information, email Lisa Quaranta.
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For more information, email Lisa Quaranta.
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