AFSA Responds to CFPB’s RFI on the Small Business Lending Market

On Sept. 14, AFSA submitted a letter to the Consumer Financial Protection Bureau (CFPB or Bureau) in response to its request for information (RFI) about the small business lending market. The CFPB is in the process of implementing Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Section 1071 requires financial institutions to compile, maintain, and report information concerning credit applications made by women-owned, minority-owned, and small businesses.

Although Dodd Frank was enacted in 2010, the CFPB said that financial institutions did not have to comply with Section 1071 until the Bureau published rules implementing this section.

The RFI is one of the early steps in the CFPB’s rulemaking process. The CFPB has also been meeting with stakeholders, including AFSA, and coordinating with other agencies.

AFSA’s letter emphasized four key points. The letter:

  • Supported the CFPB’s focus on small businesses. “In collecting data on small businesses,” AFSA wrote, “the CFPB will obtain information on many of the women-owned and minority-owned businesses;”
  • Stressed that the CFPB’s final rule should require financial institutions to collect and report information only from applicants that self-identify as business entities at the time of application and that also meet the small business data definition;
  • Stated that financial institutions should be able to rely on the information submitted by the applicant in its request for credit and should not be subject to any independent verification requirements regarding the information; and
  • Argued that the CFPB should define “small business” using a gross annual revenue threshold with the determination made based on the revenue information provided in an applicant’s request for credit.

The next step in the rulemaking process is a proposed rule.