CFPB declares no enforcement of small business data gathering regulation
The Consumer Financial Protection Bureau (CFPB) has announced that it will not enforce its small-business data collection rule, initially introduced in March 2023, as per a statement released on Wednesday. This decision comes after a series of legal challenges and extended compliance deadlines.
The rule, part of the Dodd-Frank Act, would have required lenders originating 2,500 or more small-business loans per year to collect race, gender, LGBTQ status, and demographic data from borrowers. However, the CFPB is not enforcing this compliance at present, and lenders may risk penalties from future iterations of the CFPB if they don't, unless the current CFPB issues a rule that supersedes the one finalized in March 2023.
The CFPB's decision to deprioritize enforcement of the small-business lending rule has been met with criticism from consumer advocates, who argue that it subverts the rule of law. Some lawmakers, including Sen. John Kennedy, R-LA, have also voiced their concerns, stating that the rule perverts the intention of Section 1071 of the Dodd-Frank Act and violates entrepreneurs' privacy.
Community groups and small business advocates have filed lawsuits against the CFPB, seeking court orders to vacate the non-enforcement policy and compel compliance with statutory data collection and publication requirements. These lawsuits aim to compel the CFPB to implement the rule promptly, citing the importance of access to critical data for small businesses and the need to combat discriminatory lending practices.
The compliance time frame for the small-business lending rule has been delayed by 290 days, pushing the deadline for lenders originating 2,500 or more small-business loans per year to begin collecting data to July 2025. Under the revised time frame, lenders originating at least 500 per year must collect data by Jan. 16, 2026, and lenders that originate at least 100 each year must comply by Oct. 18, 2026.
Despite the current non-enforcement stance, the CFPB has stated that it looks forward to resolving the status of the small-business lending regulation and ensuring fair, consistent treatment for all entities impacted by the regulation. The CFPB's CEO, Jesse Van Tol, has also emphasized that the decision to disregard the small-business lending rule will prevent transparency for the public, shield financial institutions from unfair practices coming to light, and delay prosperity for small businesses.
[1] Source: https://www.cfpb.gov/about/regulations/rules/small-business-lending/final-rule [2] Source: https://www.cfpb.gov/about/regulations/rules/small-business-lending/proposed-rule
- The non-enforcement of the small-business lending rule by the Consumer Financial Protection Bureau (CFPB) has sparked debates in both politics and general news, with critics arguing it undermines the rule of law and privacy rights, while supporters contend it safeguards financial institutions from scrutiny and delays transparency for small businesses.
- The decision not to enforce the small-business data collection rule by the CFPB has led to lawsuits from community groups and small business advocates, who seek court orders to compel the CFPB to implement the rule promptly, citing the need for access to critical data for small businesses and the fight against discriminatory lending practices in business and finance.
