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Bankers take issue with small-business rule change

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The American Bankers and Missouri Bankers associations are seeking to curtail a small-business revision to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Consumer Financial Protection Bureau in May launched a request for information soliciting feedback on the implementation of section 1071 of Dodd-Frank. The section would amend the Equal Credit Opportunity Act by requiring financial institutions to compile, maintain and report information about loan applications from small businesses, including those owned by women and minorities. Currently, financial institutions are not required to gather such data.

Meanwhile, Congress is considering the Financial Choice Act of 2017, which is said to be an alternative to Dodd-Frank. The act - last taken up by a Senate committee on July 13 - includes language that would repeal section 1071 of Dodd-Frank, according to Congress.gov.

The CFPB claims section 1071 would help identify the financing needs of small businesses, particularly women- and minority-owned companies. The bureau estimates small businesses access some $1.4 trillion in financing, but says sufficient data is lacking to adequately provide assistance for them.

“Small businesses fuel America’s economic engine, create jobs and nurture communities. Yet little is known about how well the lending market serves their financing needs,” CFPB Director Richard Cordray said in a news release.

Responding to the CFPB’s request for information in a letter issued Sept. 14, ABA Senior Regulatory Adviser Barry Mills said collecting and reporting the data is a “Herculean task.” Further, he said the data may have little value and urged a study to analyze what extent the data could facilitate reliable fair lending. “The study should be a predicate to further work on this rulemaking, as the failure to evaluate whether section 1071 can achieve its statutory purposes prior to adoption of a final rule will inevitably call for costly and market-disrupting rule revisions,” Mills writes.

The MBA issued a similar statement on behalf of the more than 280 financial institutions it represents in the Show-Me State. It calls on the CFPB to initially exempt community and regional banks.

Guaranty Bank President and CEO Shaun Burke, MBA’s chairman-elect, said the CFPB’s efforts are misguided.

“The bureau has no experience or institutional proficiencies to meet the requirements for gathering information on small business and understanding commercial lending,” he said via email. “Key questions and concerns center around the definition of small business, to what extent data points impose new challenges on banks and potential harm to customers as data may expose privacy or institution confidentiality.”

The ABA’s letter included suggestions on section 1071, such as:

• limiting the data collection to those identified by Congress;

• only collecting data from women and minority-owned small businesses; and

• reducing public disclosure of certain information, such as lender and borrower identities.

The CFPB’s request for information explores topics ranging from the definition of a small business to the types of products institutions offer to small businesses and the private impact of releasing small-business lending data.

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