Proposed CFPB rule would make fairness harder

Published by: Sean Brown

November 3, 2021 | Regulatory

Increasing regulatory burdens under the guise of fair lending laws serve to do one thing: prevent Ohio’s credit unions from fairly serving their more than three million members. Ohio’s credit unions are already complying with rigorous reporting requirements of the Dodd-Frank Act; however, the CFPB wants more.

On Oct. 8, 2021, the CFPB published a proposed rule regarding expanded data collection under the Dodd-Frank Act. In general, the rule applies to any entity originating at least 25 covered credit transactions to small businesses in the prior two calendar years with no exemption based on asset size or other factors. The rule itself is over 900 pages, and the summary is over 250 pages, but here are the key provisions:

  • Covered Financial Institutions: A financial institution would be required to comply with the data collection if it originated at least 25 “covered credit transactions” to “small businesses” in each of the two preceding calendar years.
  • Scope of Covered Credit Transactions: Any transactions that meet the definition of business credit under Regulation B would be considered “covered credit transactions,” including loans, lines of credit, credit cards, and merchant cash advances.
  • Definition of Small Businesses: The Bureau is seeking SBA approval of an alternative small business size standard. However, the proposed definition of “small businesses” would look to whether the business had $5 million or less in gross annual receipts during the preceding fiscal year.
  • Data Points: Covered entities would be required to collect and report 23 data points to the Bureau. While many of those data points are required by the Dodd-Frank Act, the Bureau proposes additional discretionary data points.
  • Data Collection & Reporting: Covered financial institutions would be required to collect data on a calendar-year basis and report their data to the Bureau by June 1 of the following year.
  • Publication of Data: The Bureau intends to make the reported data publicly available on an annual basis subject modification or deletion based on a “balancing test” assessing the risks and benefits of public disclosure.
  • Firewall: Covered financial institutions would be required to limit certain employees’ and officers’ access to the data collected or to provide the credit applicant a disclosure if such a “firewall” is unfeasible.
  • Compliance Deadline: The Bureau expects to establish a mandatory compliance deadline of approximately 18 months after the final rule’s publication in the Federal Register.

With the personal privacy of Ohio’s credit union members being under attack, the League is working on a coordinated opposition strategy to this rule. First, it requests Director Rohit Chopra to exercise his director exemption authority.

Does your credit union want to help us oppose the rule? Reach out and connect with the League’s Director of Regulatory Affairs, Sean Brown, with your reactions to the proposal.

Contact Sean Brown for questions or assistance.

Sean Brown
Sean Brown Director, Regulatory Affairs E: sbrown@ohiocul.org
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