This past year, the Consumer Financial Protection Bureau (CFPB) finalized a rule implementing Section 1071, which applies to institutions that originated at least 100 small business loans in each of the two preceding calendar years. A provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act, the rule requires covered financial institutions to collect and report data on small business lending.

The new reporting requirements will be phased in over time based on the loan volume of the institutions, which must collect and report data on small business lending, including information on the race, ethnicity and gender of business owners, as well as the size of the loan, the interest rate and the business’s revenue (among other data points).

The rule has faced numerous legal challenges since being introduced. Last year, ICBA, the Independent Bankers Association of Texas and Texas First Bank filed a Complaint in Intervention in the United States District Court for the Southern District of Texas, asking the court to declare the rule invalid under the Administrative Procedures Act. At the time of this writing, this lawsuit is ongoing, and while the rule is still in effect, the original compliance dates have been delayed for 290 days due to ICBA’s ongoing legal challenge.

Be prepared for 1071

Michael Emancipator
Michael Emancipator

Regardless of how or when the 1071 rule is officially implemented, community banks that lend to small businesses should stay informed on developments that may affect their operations and compliance efforts. Michael Emancipator, ICBA’s SVP and senior regulatory counsel, says the highest-volume covered lenders—which must collect data starting July 18, 2025—face the most immediate and onerous burdens in preparing for compliance.

“A good first step is to familiarize yourself with the rule itself,” Emancipator suggests, pointing banks to ICBA’s summary of the rule on icba.org and its Compliance Vault FAQ (icba.org/compliancevault) for more information. The ICBA summary is a good starting point, but anyone who wants more details on the 1071 rule may want to check out the CFPB’s frequently asked questions and a small entity compliance guide available at consumerfinance.gov. The bureau also recently announced the availability of the beta platform to test the bank’s ability to report the date, available at sbl-beta.cfpb.gov.

Emancipator says the bureau’s resources include “some helpful examples that lenders can use to gain a better understanding of the rule.” For instance, the guide outlines several scenarios that banks can use to properly handle and report on data collected directly from small business loan applicants.  

More than changing a few lines of code

The CFPB’s rule is far-reaching and affects not just community banks but also credit unions, large fintechs and large banks. However, community banks could bear the brunt of the compliance pressure under the rule. 

According to Emancipator, this is namely because larger institutions that use standardized small business lending may be able to just “change a few lines of code and some standard operating procedures in order to get up to snuff with the rule’s requirements.” 

With this in mind, he tells community banks to start thinking now about what training and systems should be put in place to ensure compliance with the new rule. The human element is particularly important in a financial sector where notes were signed and processed with few other obligations on the bank’s part. 

“There’s going to be a lot more elbow grease involved now on the part of the loan officer,” says Emancipator. He cautions community banks against over-standardization on the small-business-lending front, knowing that doing so can reduce the institution’s ability to “customize” based on borrower wants, needs and abilities. 

“That’s been our fear since this rule was enacted, and it’s still our concern,” says Emancipator. “If this winds up homogenizing the small business market, it obviously won’t be great for community banks, and it will also negatively impact small businesses that don’t meet the cookie-cutter lending parameters.”

Mitigating risks and ensuring compliance

As the financial industry awaits a final outcome on the 1071 rule, now is a good time for community banks to review how many small business loans they’ve originated over the past two to three years and determine their compliance requirements. (Note: The CFPB says a financial institution that is not a covered financial institution is permitted to voluntarily compile data in certain circumstances.) 

“If you were originating 100 or more small business loans or trending close to that threshold, it may behoove you to take a closer look at the rule and its requirements,” Emancipator says.   

Next, assess your loan origination system’s data-capturing and reporting capabilities and determine what upgrades may be needed for compliance. For example, you may need solutions that can help facilitate data collection, support good analysis and generate accurate reports. 

Through ICBA, you can also engage with industry peers to discuss 1071-related strategies and keep your employees educated on the potential changes that may be coming should the rule go into effect. 

Stay up to date on any further updates regarding the rule at icba.org and take tentative steps to ensure your community bank is prepared for any outcome.