The Consumer Financial Protection Bureau (CFPB) released its small business lending data collection and reporting rule in late March, requiring lenders to provide demographic information about certain mortgage applications and loans for each calendar year. The rule is required by Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Banks and non-bank entities that make 100 or more small business loans must amass and report data including loan application, origination, and pricing information, as well as certain applicant/borrower demographic information. Non-bank entities may include online lenders, community development financial institutions, and nonprofit lenders. A small business is defined as having no more than $5 million in gross revenues in its most recent fiscal year.
The transactions included in the rule are loans, lines of credit, credit cards, merchant cash advances, and agricultural credit products to small businesses, excluding nonprofit organizations and governmental agencies. Among transactions not covered by the rule are trade credit, HMDA-reportable transactions, insurance premium financing, public utilities credit, securities credit, incidental credit, factoring, and leases.
As for what must be collected and reported, data about the loan process and outcomes, such as a unique identifier, application date, action taken, and, if applicable, the amount approved and pricing information or denial reasons, will qualify under the rule. Collected data will also include details from the applicant or a third-party source about the potential loan and the applicant, including credit type and purpose, requested loan amount, census tract, and number of employees.
Also, a financial institution must request demographic information from the applicant, including its minority-owned, women-owned, and/or LGBTQI+-owned business status, as well as the ethnicity, race, and sex of the applicant’s principal owners, though the owners are not required to provide it.
Deadlines for compliance differ according to the lender’s volume of loans.