On 9/1/2021, the CFPB proposed a rule that would implement section 1071 of the Dodd-Frank Act, and require lenders to report the amount and type of small business credit applied for and extended, demographic information about small business credit applicants, and key elements of the price of the credit offered.

See BankersOnline's Top Story for details.

My biggest gripe with this whole thing, is it doesn't do away with CRA data collection or HMDA business loan collection (at least it didn't mention it in the summary). We will be reporting the same information twice, and if it's an affordable housing complex, maybe three times.

How many definitions of "Small business" will exist once CRA and 1071 are both implemented? I'm sure all of the commercial lenders will love our slide shows on when a business is "small" for different regulations.

On my first perusal, that's exactly what i was wondering...

I guess I was thinking (hoping) that with CRA Modernization, this would be addressed. We aren't currently a CRA reporter, but if the threshold is maintained, we, along with a lot of other small institutions are going to have some work to do.

I found the 25 loan threshold curious. Not because it is low, which it is, but because it was the prior number of closed-end HMDA loans originated to become a mandatory reporter. I wonder if this stands if we will see a reversion to the lower number for HMDA as well.

So many questions, so little time. Just from first glance, here's a couple:
1) If I own a business and I indicate I identify as female (I'm not), does that make my business a woman-owned business subject to data collection and reporting?
2) We make a number of loans to newly formed single-purpose LLCs formed to acquire a specific piece of property. Is that single-purpose LLC a small business and that loan subject to data collection and reporting? If so, and I run a real estate operation where I'm the sole member in 50 different single purpose LLCs and generate $25 million in annual revenue from those 50 LLCs, am I a small business owner?

That's just from first glance. Oh joy. Maybe I'll get to retire before this becomes final and we have to start collection and reporting.

On the bright side, we all know that commercial loan officers are sticklers for details and enjoy complying with new regulations so this should be a breeze.

I am hoping that once there is a final rule, the FDIC, FRB, and OCC will take steps to align CRA reporting with CFPB business loan data reporting.

I asked on a Q&A with the Fed's CRA modernization efforts several months ago how there efforts were being aligned with the 1071 rule, and I got crickets for a response. I also hope they do create consistency, but I don't hold out much hope.

Lender: You said this wasn't a small business loan!
Compliance: No I said it wasn't a Small loan to a business for CRA. It is a loan to a small business for 1071 purposes, so we did need to collect information, but don't worry it's not a small business loan for purposes of 1002.9, so we don't need to provide them written adverse action if we deny. Got all that?

Having different definitions for the same thing, even from within the same reg is not new. I think what chaps me is that I feel like the end result will be a rule that has good intentions - transparent credit for those deserving it. Unfortunately that isn't going to happen with this. It's like people who want a home security camera to stop a robbery. It may help you find the bad actor, but will it influence them not to do it, or will it more so penalize everyone else in this case who pays to comply. The objective will be the focal point and the lenders who have to comply - well that is a cost of doing business. And that cost is not a concern of the rulemakers.

This is nothing more than a data grab by an agency run on a foundation that data is the answer to everything. They want all the data they can get their grubby little hands on because they are convinced they can manipulate the data to say whatever they want it to say. But I believe this data will be unreliable at best (see my post above about ever-changing gender identities above) and to Andy's point, expensive as all get-out to gather.

They will embrace this in the same way they embrace Regulation B.

I'm trying to locate where to submit comments? Has it been filed in the Federal Register yet?
Thanks in advance.

It has not yet been published and is not in the Public Inspection queue yet, either. Often these huge Federal Register documents it takes a few days for the document to hit the press.

Thank you John. I have been searching with no luck. Glad to know I am not losing my mind!

At least some of that is true, Jim, but we also should remember that this isn't entirely the Bureau's idea. Section 1071 of the Dodd-Frank Act is the product of a Congress with a much different outlook than the current membership of that currently gridlocked group, and the Bureau itself was part of the 2010 reaction to the financial collapse of 2008. But I do agree that both the expansion of HMDA data reporting and these Section 1071 proposals stem from a belief that regulators need data -- loads of it -- to ensure that ECOA is being adequately enforced. Whether you and I share that belief is another matter.

The Biden-Harris Administration's suggestion that banks start reporting balance changes in deposits and other accounts to the IRS along with traditional 1099 and 1098 reporting is at least a big a deal as the section 1071 proposal, and there's a lot of negative feedback being generated on that already, before it even morphs from concept to legislation or regulation.

No, not yet, JWills. That will come if the rule becomes final in this form or with changes.

You'll see a mention in this thread and/or BOL's Daily Compliance Briefing when the proposal hits the Federal Register.

Thank you John.

I've been away from the bank for awhile, but i had some of the same questions...particularly 2) above.

John, WRT Yellin's testimony Tuesday on the IRS' idea to track $600 transactions.....what Law (exactly) is this proposed Federal Regulation (which would be Administrative Law taken from actual U.S. Code) is being cited as the authority to take such action? I fail to hear anyone discussing the source of authority to even make such a proposal. Of course the media isn't smart enough to ask.

You sort of jumped ship from lending reporting that was included in the DFA to some pie in the sky proposal for the banks to report all of this information related to transactions. It would cost the Federal gov't billions and years to develop the storage and retrieval capacity. It is one of those things that sounds great on paper.

Maybe to the IRS wonks, but it sure is getting a lot of pushback from bankers. The Senate Banking Committee didn't sound very receptive to the idea yesterday, either. There's also a lot of questions about the added risk of a data breach at the IRS with all the extra private information tucked away in aged computer storage.

To answer your question, NE Weather Forecast - Frosty, there would have to be amendments to the Internal Revenue Code and IRS regulations to authorize the hugely expanded reporting of bank account information.

It was published in the 10/8/21 Federal Register. 251 pages.
https://www.govinfo.gov/content/pkg/FR-2021-10-08/pdf/2021-19274.pdf

In that tiny print 3-column print version (which is, by the way, the official version). I find the web (HTML) version more workable since you can easily link to it or to any paragraph within it, etc. https://www.federalregister.gov/d/2021-19274

Has anyone submitted a comment letter yet? I periodically review and note only 31 comments as of right now. My CEO would like me to submit a comment, but I'm struggling to find the time to dig into the rule and figure out how to draft a coherent response.

Today a comment letter was posted that was submitted by the ABA and numerous state banking agencies asking the CFPB to extend the comment period to February 20. A large part of their argument is the size and scope of the proposal, and the ability of the small shops that will be most impacted by the rule to review and comment in the time suggested by the Bureau.

https://www.regulations.gov/comment/CFPB-2021-0015-0109