As the Consumer Financial Protection Bureau (CFPB) is preparing to begin drafting regulations to implement section 1071 of the Dodd-Frank Act, lenders look forward to a new regulatory chapter in the industry, resulting in significant new reporting requirements fair lending examinations and potential enforcement actions.
Section 1071 of the Dodd-Frank Act amends the Equal Credit Opportunity Act by ensuring that financial institutions gather, maintain and revert to the CFPB specific data from loan applications by small-scale businesses, women and minority-owned businesses, which includes the gender, ethnic groups and race of these business owners.
The Consumer Financial Protection Bureau (CFPB) released its long-awaited Outline of suggestions that it is examining as it prepares to draft regulations to implement Section 1071 (the “Outline”) on September 15, 2020. The CFPB’s current thinking on shaping these new regulations is highlighted in the Outline. The Outline covers lenders and financial institutions providing funds to a small-scale business which could be women or minority-owned.
According to the Outline, the CFPB’s new rules implementing Section 1071 would not apply to Women-Owned and Minority-Owned Businesses that are not Small Businesses. Term loans, lines of credit, and business credit cards that the lender does not label as consumer purpose loans are examples of business purpose loans that the Outline would cover.
The Outline also includes sections on privacy, record retention, data gathering, data submission, and public disclosure of data. Thus, all private lenders subject to the new Section 1071 data reporting requirements should be aware that the CFPB and state regulators will be able to utilize the data to perform fair lending exams and examine their lending approval and pricing procedures.
To read more about section 1071, the extent of the act, and its exemptions, click here.
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