ICBA supports bill to mitigate impact of 1071 rule

ICBA expressed strong support for the Preventing Regulatory Overreach to Empower Communities to Thrive and Ensure Data privacy (PROTECTED) Act (S. 2352), which would mitigate the adverse impact of the CFPB’s rule under Dodd-Frank Section 1071 on America’s small businesses and community banks.

Background: In a letter to Sens. Katie Britt (R-Ala.) and John Boozman (R-Ark.), ICBA noted the CFPB’s 1071 rule requires community banks and other financial institutions to collect and report 81 pieces of data on every small-business loan application, well beyond what is required by statute.

Details: S. 2352 would:

• Raise the loan-volume threshold and asset level at which financial institutions would be required to collect and report small business lending data.

• Define a “financial institution” as one that has assets of $10 billion or more and originates at least 2,500 covered credit transactions for small businesses in each of the two preceding calendar years.

• Define a “small business” as one with gross annual revenues of $1 million or less in the most recently completed fiscal year.

• Create an exemption for community development financial institutions.

• Amend the collection and publication of applicant data to better protect applicants’ privacy and ensure they understand that participation is voluntary.

Other 1071 Legislation: The House Financial Services Committee in April advanced the ICBA-advocated 1071 Repeal to Protect Small Business Lending Act to repeal the statute that underlies the CFPB rule. Further, House Financial Services Committee Chairman French Hill’s (R-Ark.) ICBA-advocated Small LENDER Act (H.R. 941) would mitigate the impact of the 1071 rule by exempting more community banks and small businesses.

Latest on the CFPB’s Rule: As a result of three ongoing legal challenges to the 2023 final rule, some institutions—including all ICBA members—are protected by court orders that temporarily stay the 1071 rule’s compliance deadlines. In a court filing earlier this month in ICBA’s lawsuit challenging the Section 1071 rule, the CFPB confirmed that it plans to issue new 1071 rulemaking as soon as possible.

More: The CFPB’s rule—issued in March 2023—requires lenders to collect and report data on credit applicants, including the race, sex, and ethnicity of the principal owners as well as gross annual revenue.