CUNA Urges Caution on CFPB’s Small Business Data Proposal
The Credit Union National Association (CUNA) today expressed concern with the Consumer Financial Protection Bureau’s (CFPB) small business data lending proposal, emphasizing the regulatory strain it could bring to credit unions. The proposed rule would amend the Equal Credit Opportunity Act (ECOA) to require financial institutions to collect and report certain data regarding business credit applications.
“As community-based financial institutions, credit unions were designed to meet the needs of their local communities. They have a vested interest in helping the small businesses they serve in ways that are equitable and fair,” said Elizabeth Eurgubian, CUNA Deputy Chief Advocacy Officer and Senior Counsel. “We urge the Bureau to keep the proposed rule as manageable and tailored as possible so that financial institutions of all sizes can continue to deliver to their customers with minimal impact to small business borrowers.”
While CUNA supports the goals of Section 1071 to ensure fair and equitable financial opportunities, it cautions against overly broad data collection which could present unintended consequences to community institutions and present substantial compliance costs. Additionally, data collected from credit unions with restricted field of memberships would be inconsistent with lenders that serve a broad consumer base.
CUNA shared several recommendations with the Bureau to effectively balance consumer protection and the availability of credit for small businesses:
* Increase the covered financial institution threshold to at least 500 covered credit transactions in each of the two preceding calendar years and create a size-based exemption for entities of $600 million assets or less;
* Reduce the gross annual revenue threshold used to determine which businesses are “small businesses” for purposes of the rule to no more than $1 million in gross annual revenue in the preceding fiscal year;
* Exempt several types of credit transactions from the definition of covered credit transactions, including agriculture-purpose credit, HMDA-reportable transactions, consumer-designated credit, loans under $50,000, and government guaranteed loans;
* Exclude credit line increases from the definition of covered application for purposes of the rule;
* Consider the firewalling requirement’s potential for negative impacts on smaller lenders serving business borrowers;
* Reduce the section 1071 data set to only data points that are statutorily required and avoid unnecessary discretionary data points;
* Rescind the requirement for covered financial institutions to conduct a visual observation and surname analysis on applicants declining to provide responses to demographic questions;
* Consider the privacy and reidentification concerns in finalizing the rule and conduct a notice and comment period on the Bureau’s “balancing test” for publication of 1071 data; and
* Adopt a phased mandatory compliance schedule that begins no sooner than three years following the issuance of a final rule.
CUNA and the National Association of Federally-Insured Credit Unions (NAFCU) also submitted a joint response to the proposed rule sharing concerns.
Credit Union National Association (CUNA) is the only national association that advocates on behalf of all of America’s credit unions, which are owned by more than 120 million consumer members. CUNA, along with its network of affiliated state credit union leagues, delivers unwavering advocacy, continuous professional growth and operational confidence to protect the best interests of all credit unions. For more information about CUNA, visit cuna.org. To find your nearest credit union, visit YourMoneyFurther.com.