Title: Consumer Financial Protection Bureau Implements Changes to Small Business Loan Regulations
Introduction:
The Consumer Financial Protection Bureau (CFPB) has recently announced a final rule that modifies regulations regarding small business loans under the Equal Credit Opportunity Act (ECOA). This rule, which is an outcome of the Dodd-Frank Wall Street Reform and Consumer Protection Act, aims to enhance access to credit for small businesses owned by women or minorities. In this article, we will delve into the details of the rule, its potential benefits and costs, and the impact it may have on small entities.
Overview of the Rule:
The CFPB’s final rule modifies 12 CFR part 1002 (Regulation B) to implement changes to the ECOA as mandated by the Dodd-Frank Act. Under Section 1071 of the Dodd-Frank Act, covered financial institutions are required to collect and report credit application data for small businesses, particularly those owned by women or minorities. The final rule addresses several aspects, including privacy interests, data publication, record-keeping requirements, enforcement provisions, and effective and compliance dates.
Cost-Benefit Analysis:
The CFPB provides a comprehensive analysis of the potential benefits, costs, and impacts of the final rule. The analysis includes considerations such as the need for the rule, a baseline for assessing costs and benefits, the agency’s approach to assessing data limitations, and the potential impact on covered financial institutions, small businesses, and depository institutions with $10 billion or less in total assets. Moreover, the analysis also considers the potential impact on small businesses in rural areas.
Regulatory Flexibility Act (RFA) Analysis:
The CFPB acknowledges that the final rule will have a significant economic impact on a substantial number of small entities. As a result, the agency has prepared a final RFA analysis, which covers the need and goals of the rule, issues raised by public comments, evaluation of such issues, changes made in response to comments, and the estimated number of small entities affected. The agency also highlights steps taken to minimize the economic impact on small entities and provides reasoning for selecting the adopted alternative.
Paperwork Reduction Act (PRA):
The CFPB determined that the final rule contains information collection requirements (ICRs) subject to the Paperwork Reduction Act. The agency has forwarded these ICRs to the Office of Management and Budget (OMB) for review. The final rule adds four ICRs to Regulation B under OMB Control Number 3170-0013, with an estimated total annual load hours of 8,302,000 hours.
Legal Authorization and Relevant Requirements:
The CFPB promulgated the final rule in accordance with the legal authority granted under sections 5512, 5581, 1691b, and 1691c-2 of the United States Code. Additionally, the agency has complied with administrative procedures, including those outlined in the Administrative Procedure Act.
Conclusion:
The CFPB’s final rule on small business loans under the ECOA brings about significant changes to ensure fair access to credit for small businesses owned by women or minorities. By amending Regulation B, the CFPB aims to enhance transparency, protect privacy interests, and enforce compliance with reporting requirements. The potential benefits of increased access to credit for underrepresented businesses must be weighed against the costs and potential economic impact on small entities. Overall, the final rule reflects the CFPB’s commitment to fostering a fair and inclusive financial marketplace.
Engaging Additional Piece:
Title: Unlocking Opportunities: Empowering Small Businesses Through Access to Credit
Introduction:
Small businesses are the backbone of the economy, driving innovation, creating jobs, and fueling economic growth. However, many small business owners, particularly those from underrepresented communities, face significant challenges when it comes to accessing capital. The recent final rule by the Consumer Financial Protection Bureau (CFPB) seeks to address these challenges by implementing changes to small business loan regulations.
Expanding Financial Inclusion:
The CFPB’s final rule recognizes the importance of diverse business ownership and aims to promote financial inclusion by requiring covered financial institutions to collect and report credit application data for small businesses owned by women or minorities. This data will help identify potential disparities in access to credit, allowing policymakers and financial institutions to take targeted steps towards addressing them.
Enhancing Transparency and Accountability:
One of the key aspects of the final rule is its focus on transparency and accountability. By collecting and reporting credit application data, financial institutions will be held accountable for their lending practices. This increased transparency can foster fair lending practices and help eliminate biases and discrimination in the loan approval process.
Unlocking Opportunities for Growth:
Access to credit is crucial for small businesses to grow and thrive. The final rule can unlock opportunities for small business owners, particularly those who have historically faced barriers in accessing capital. By providing a comprehensive view of credit application data, lenders can make more informed decisions, leading to a more equitable distribution of capital.
Empowering Economic Empowerment:
A stronger small business sector can have a significant impact on the overall economy. When small businesses thrive, they create jobs, revitalize communities, and foster economic empowerment. By ensuring fair access to credit, the final rule takes a step towards leveling the playing field and empowering small business owners to reach their full potential.
Conclusion:
The CFPB’s final rule on small business loans under the ECOA represents a significant milestone in promoting financial inclusion and empowering small businesses. By collecting and reporting credit application data, the rule aims to address disparities in access to credit and foster fair lending practices. This not only benefits individual small business owners but also contributes to a more inclusive and resilient economy. As we move forward, it is essential to continue supporting initiatives that promote equal opportunities for all entrepreneurs, irrespective of their gender, race, or background.
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B-335360
June 14, 2023
The Hon. Sherrod Brown
President
The Honorable Tim Scott
rank member
Banking, Housing and Urban Affairs Committee
United States Senate
The Hon. Patrick McHenry
President
The Honorable Maxine Waters
rank member
Financial Services Committee
House of Representatives
Subject: Consumer Financial Protection Bureau: Small Business Loans under the Equal Credit Opportunity Act (Regulation B)
Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on an important rule promulgated by the Consumer Financial Protection Bureau (CFPB) entitled “Loans for small companies under the Equal Credit Opportunities Law (Standard B)” (RIN: 3170-AA09). We received the rule on June 1, 2023. It was published in the federal register as final rule on May 31, 2023. 88 Fed. Reg. 35150. Effective date is August 29, 2023.
According to the CFPB, this final rule modifies 12 CFR part 1002 (Regulation B) to implement changes to the Equal Credit Opportunity Act (ECOA) made by section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) . See Dodd-Frank Act, pub. L. No. 111-203, § 1071, 124 Stat. 1376, 2056–2059 (July 21, 2010). The CFPB stated that covered financial institutions, pursuant to section 1071, are required to collect and report to the CFPB credit application data for small businesses, including those owned by women or minorities. The CFPB also stated that this final rule addresses its approach to privacy interests and the publication of data; protect certain demographic data of subscribers and others; record keeping requirements; enforcement provisions; and the effective and compliance dates of the rule.
Attached is our assessment of CFPB’s compliance with the procedural steps required by title 5 section 801(a)(1)(B)(i) through (iv) with respect to the rule. If you have any questions about this report or would like to contact GAO officials responsible for review work related to the rule’s subject matter, please contact Shari Brewster, Assistant General Counsel, at (202) 512-6398.
Shirley A. Jones
Managing Deputy General Counsel
Enclosure
cc: Edward J. Lovett
Congressional Senior Liaison
Consumer Financial Protection Bureau
ENCLOSURE
REPORT UNDER 5 USC § 801(a)(2)(A) ON A MAJOR RULE
ISSUED BY THE
BUREAU OF CONSUMER FINANCIAL PROTECTION
NOBLE
“LOANS FOR SMALL BUSINESSES
UNDER THE EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)”
(RIN: 3170-AA09)
(i) Cost-benefit analysis
CFPB provided an analysis of the potential benefits, costs, and impacts of the final rule. The analysis includes 1) a statement of need; 2) the establishment of a baseline for the consideration of costs and benefits; 3) the CFPB approach to considering benefits, costs, and data limitations; 4) coverage of the final rule; 5) methodology for generating cost estimates; 6) potential benefits and costs for covered financial institutions and small businesses; 7) potential impact on depository institutions and credit unions with $10 billion or less in total assets; and 8) potential impact on small businesses in rural areas.
(ii) Agency actions related to the Regulatory Flexibility Act (RFA), 5 USC §§ 603–605, 607, and 609
The CFPB stated that the final rule will have a significant economic impact on a substantial number of small entities. Accordingly, the CFPB prepared a final RFA analysis for this final rule. The analysis included 1) a statement of the need and goals of the final rule; 2) a statement of the significant issues raised by public comments in response to the initial regulatory flexibility analysis, a statement of the agency’s evaluation of such issues, and a statement of any changes made to the proposed rule in the final rule as result of said comments; 3) the agency’s response to any comments submitted by the Small Business Administration’s Chief Advocacy Counsel in response to the proposed rule, and a detailed statement of any proposed rule changes made in the final rule as a result of the comments; 4) a description and estimate of the number of small entities to which the rule will apply; 5) Projected reporting, recordkeeping, and other compliance requirements of the final rule, including an estimate of the classes of small entities that will be subject to the requirement and the type of professional skills necessary for preparation of the report or record; and 6) a description of the steps the agency has taken to minimize the significant economic impact on small entities in accordance with the stated objectives of the applicable statutes, including a statement of the factual, political, and legal reasons for selecting the adopted alternative. in the final decision. rule and why each of the other significant alternatives to the rule considered by the agency affecting the impact on small entities was rejected; and for a covered agency, a description of the steps the agency has taken to minimize any additional credit costs for small entities.
(iii) Agency actions relevant to sections 202–205 of the Unfunded Mandates Reform Act of 1995, 2 USC §§ 1532–1535
As an independent regulatory agency, the CFPB is not subject to the Act. See 2 USC §§ 658(1), 1502(1).
(iv) Other relevant information or requirements under laws and executive orders
Administrative Procedure Act, 5 USC §§ 551 And next.
On October 8, 2021, the CFPB’s proposed rule was published in the federal register. 86 federal. registration 56356. According to the CFPB, it received approximately 2,100 comments on the proposal during the comment period. CFPB stated that these commenters included lenders such as banks and credit unions, community development financial institutions, community development companies, Farm Credit System lenders, online lenders, and others; national and regional industry trade associations; software providers; business advocacy groups; community groups; research, academic and advocacy organizations; members of Congress; federal and state government offices/agencies; small companies; and individuals CFPB further stated that it considered comments received after the close of the comment period through approximately 17 ex parte submissions and meetings. CFPB indicated that it considered all the comments it received regarding the proposal and made certain modifications.
Paperwork Reduction Act (PRA), 44 USC §§ 3501–3520
The CFPB determined that this final rule contains information collection requirements (ICRs) under the PRA and forwarded them to the Office of Management and Budget (OMB) for review. According to the CFPB, the final rule modifies 12 CFR part 1002 (Regulation B), which implements the Equal Credit Opportunity Act (ECOA). The CFPB stated that the OMB control number for Regulation B is 3170-0013. The CFPB also stated that the final rule adds four ICRs to Regulation B under OMB Control Number 3170-0013. The CFPB estimates the total annual load hours of the ICRs imposed by this final rule to be 8,302,000 hours.
Legal authorization of the rule
CFPB promulgated this final rule pursuant to sections 5512 and 5581 of title 12; and sections 1691b and 1691c-2 of title 15, United States Code.
Executive Order No. 12866 (Planning and Regulatory Review)
As an independent regulatory agency, the CFPB is not subject to the Order.
Executive Order No. 13132 (Federalism)
As an independent regulatory agency, the CFPB is not subject to the Order.
https://www.gao.gov/products/b-335360
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