Guest Post: CFPB Issues Request for Information Regarding Small Business Lending

By Vanessa Garrido

The CFPB has issued a Request for Information (RFI) to collect data that will shed light on how small businesses engage with financial institutions, with a particular focus on women-owned and minority-owned small businesses. Of the estimated 27.6 million small businesses in the United States, over 7 million of these businesses are minority-owned and over 8.4 million are women-owned. In order to learn more about how to encourage and promote small businesses, “it is vitally important to fill in the blanks on how small businesses are able to engage with the credit markets.”  Prepared Remarks of CFPB Director Richard Cordray at the Small Business Lending Field Hearing, CFPB (May 10, 2017),The RFI was issued pursuant to Section 1071’s business lending data collection rule under the Dodd-Frank Act which modifies the Equal Credit Opportunity Act to require financial institutions to report information concerning credit applications made by women-owned, minority-owned, and small businesses.

The purpose of the business lending data collection rule is to:

• Fill existing gaps in the general understanding of the small business lending environment;
• Identify potential fair lending concerns regarding small business, including women-owned and minority-owned small business;
• Facilitate enforcement of fair lending laws; and
• Identify the needs and opportunities for both business and community development.

In an effort to collect and report on small business lending data, the CFPB seeks comment on:

• How the lending industry defines small business and how that affects their credit application processes;
• The particular data points that financial institutions are compiling and maintaining in the ordinary course of business concerning their small business lending, the sources of information that financial institutions rely on in obtaining this data, and any challenges financial institutions foresee in collecting and reporting this data;
• How financial institutions integrate data collection into their application process;
• The ability to measure accurately the prevalence of lenders and the products they offer;
• Roles that marketplace lenders, brokers, dealers and other third parties may play in the application process for loans;
• Whether certain classes of financial institutions should be exempt from the requirement to collect and submit data on small business lending;
• Any financial products that finance small business, in addition to term loans, lines of credit, and credit card products; and
• Ways to protect the privacy of applicants and borrowers, as well as the confidentiality interest of financial institutions that are engaged in the lending process.

Comments are due on or before July 14, 2017.

 Vanessa Garrido is a rising third year law student at Wake Forest University and is clerking with Smith Debnam Narron Drake Saintsing & Myers, LLP.