Senators' Letter on Dodd-Frank Section 1071 Rulemaking — Consumer Financial Protection Bureau

Summary

A comment letter dated January 13, 2022 to Rohit Chopra, Director of the Consumer Financial Protection Bureau, on the Dodd-Frank Section 1071 rulemaking, signed by United States Senators Sherrod Brown, Cory A. Booker, Benjamin L. Cardin, Ron Wyden and Richard J. Durbin. The senators express support for the proposed rule amending Regulation B to collect data on small business credit applications, including those by women-owned and minority-owned businesses. The letter endorses the proposed definition of a small business as one with $5 million or less in gross annual revenue and the 25-loan origination threshold. It asks the CFPB to reconsider excluding factoring, leases, consumer-designated credit used for business purposes and certain investment-property credit. It also urges the Bureau to weigh the public interest in disclosure when applying a balancing test to publishing 1071 data.

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                                           January 13, 2022


The Honorable Rohit Chopra
Director
Consumer Financial Protection Bureau
1700 G Street NW
Washington, DC 20552

Re: Dodd-Frank Section 1071 Rulemaking

Dear Director Chopra:

Thank you for the opportunity to comment on the Consumer Financial Protection Bureau’s
(CFPB or Bureau) proposed rule amending Regulation B to implement Section 1071 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). We write to
express our support of the proposed rule that CFPB gather and report data about small business
credit applications made by small businesses, especially those owned by women or minorities.

Section 1071 of the Dodd-Frank Act amended the Equal Credit Opportunity Act (ECOA) to
require financial institutions to report information regarding credit applications made by
“women-owned, minority-owned, and small businesses.”1 Section 1071 mandates that the data
be submitted to the CFPB annually and enables the Bureau to prescribe rules and issue guidance
to carry out its statutory purposes: to facilitate the enforcement of fair lending laws and to enable
the identification of business and community development needs for women-owned, minority-
owned, and small businesses. For years, we have pushed the CFPB to move forward on this
important rulemaking, and we are pleased that you are doing so now. It is the CFPB’s
responsibility to carry out this mandate by issuing a final rule as soon as practicable.

We are encouraged to see that the CFPB’s proposed rule provides clarity to the scope of 1071
data collection. First, the proposed definitions for “covered financial institutions,” “covered
credit transactions,” and “small businesses,” helpfully cover the field of small business lending
while limiting the scope of collection so as to not overburden certain financial institutions who
may not engage in such activity, though they may opt into submitting data under 1071.2 More
specifically, the Bureau’s proposed definition for “small business” – one that has $5 million or
less in gross annual revenue for the preceding fiscal year – makes it easier across the industry to
identify covered small businesses.3 Additionally, the Bureau’s decision to implement a 25-loan
origination threshold will cover a broader scope of both banks and non-depository lenders that
make small business loans so that the CFPB and the public can get an accurate picture of where
these loans are made and to whom. Finally, the Bureau’s inclusion of a sample data collection
form streamlines next steps for covered financial institutions to adhere to the rule once it goes
into effect.

1
  15 U.S.C. 1691c-2.
2
  https://files.consumerfinance.gov/f/documents/cfpb_section-1071-nprm_summary_2021-09.pdf
3
  See id.
We believe there are a few areas that warrant further consideration. We understand the Bureau’s
decision to exclude certain credit transactions from the group of “covered credit transactions”
subject to the proposed rule’s reporting requirements. The exclusions include factoring, leases,
consumer-designated credit used for business purposes, and credit secured by certain investment
properties. We are concerned that these exclusions would lead to a gap in our understanding of
the small business lending marketplace and whether entities are in compliance with fair lending
laws. These types of credit are often utilized by underserved borrowers because they offer easier
access to capital.4 In order to further Section 1071’s specific statutory purpose to “enable
communities, governmental entities, and creditors to identify business and community
development needs and opportunities of women-owned, minority-owned, and small businesses,”5
we request that the CFPB reconsider its decision to exclude these types of credit from the data
collection and reporting requirement.

Additionally, the CFPB’s plan to propose a “balancing test” assessing the risks and benefits of
public disclosure of 1071 data is concerning. We understand the Bureau’s approach to consider
industry concerns of reputational harm that weigh in favor of keeping some data private, but we
wish to stress that there is a strong public interest in publishing as much data as practicable.
Further, we appreciate that the Bureau will decide how to exercise its discretion to modify or
delete data prior to publication after collecting a year’s worth of 1071 data. We respectfully ask
that as you analyze the data collected, you weigh institutional privacy interests and small
business owners’ personal privacy interests alongside the public’s paramount interest in
transparency and disclosure.

Ultimately, we commend the CFPB for initiating this long overdue rulemaking to fulfill a
statutory mandate from Dodd-Frank. We are eager to see a final rule that will bring much-
needed transparency to small business lending and facilitate enforcement of fair lending laws.


                                                    Sincerely,




    Sherrod Brown                                                            Cory A. Booker
    United States Senator                                                    United States Senator




4
    See generally https://www.forbes.com/advisor/business-loans/how-to-get-a-business-loan-with-bad-credit/.
5
    15 U.S.C. 1691c-2(a).

                                                         2
Benjamin L. Cardin          Ron Wyden
United States Senator       United States Senator




Richard J. Durbin
United States Senator




                        3


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