888 pages - oh joy!

Has anyone found the streamlined data collection form?

Just found it. Appendix E

A few changes from the NPRM I've noted so far:

• Phased implementation based on number of covered loans originated;
• Addition of LGBTQ+ status to demographic information to be collected;
• Increase of number covered loans to trigger reporting from 25 to 100;
• Factoring, leases, amendments, renewals (even renewals with increase in loan amount) are not covered; and
• There are no limits on the number of demographic classifications a business owner may choose.

Great observations, InFairness, CRCM. I hadn't caught the unlimited number of demographic classifications a business owner may choose, but who has had time to read all 888 pages yet. ;-)

For anyone interested, I put together an overview of the 1071 final rule (with a few of my observations) at: https://www.compliancecohort.com/1071-overview

I think i know the answer to this question (probably "yes") but the answer to this question will make a huge difference for my bank as far as counting covered transactions. I'm digging in to it as we speak, but the question is: are sole propietorships (self-employed folks) a covered "small business concern" under the new rule?

Thanks Adam (i obviously hadn't gotten to that definition yet). Appreciate it.

There are also some changes in the technical data specifications.

Will this cover all commercial loans? Like rental properties, etc? Or more like CRA applicable loans?

Rule does say that HMDA reportable loans are excluded. It has something to say about CRA ones too, but i don't recall off the top of my head.

BOL Admins - Since 1071 is part of the Dodd-Frank Act, should there be a designated section in the Dodd-Frank forum section for this final rule? Just asking as I'm sure many new threads will pop-up for 1071 in the coming months.

My own belief is that it is integral to Reg B which is Lending - and Fair Lending in particular. I'm also certain that as time goes on and folks work on implementation the threads will scatter elsewhere and keeping them tidy and organized would be like herding cats.

Brandon, coverage is based on borrower gross annual revenue and product type.

Interesting you say product type? We sometimes route small business loans through our consumer application process. For example if it is a small dollar vehicle loan or something similar. So, technically it is considered a consumer loan in our reports even those it is business purpose. My understanding is that these are covered under the rule by the "purpose" requirement.

We sometimes route small business loans through our consumer application process.

I hope you do not do the same thing for your call reporting.

Certain products are excluded in their entirety. Examples of excluded products include commercial insurance premium finance loans, loans covered by HMDA, trade credit, public utilities credit, and securities credit.

We do, because there is a threshold amount of $50,000 to be considered commercial for that purpose. I don't believe there is such a threshold for loan size in the new rule, is there?

Interesting. I have read the instructions for Schedule RC-C and I have never once run into a limit of $50,000 for reporting a loan as Commercial or Industrial.

Do you have a citation?

Line 4

Commercial and industrial loans. Report loans for commercial and industrial purposes to sole proprietorships, partnerships, corporations, and other business enterprises, whether secured (other than those that meet the definition of a “loan secured by real estate”) or unsecured, single-payment or installment. On the FFIEC 041, all banks should report the total of these loans in column B, and banks with $300 million or more in total assets should also report in the appropriate subitems of column A a breakdown of these loans between those loans to U.S. and non-U.S. addressees. On the FFIEC 031, all banks should report a breakdown of these loans between those to U.S. and non-U.S. addressees for the fully consolidated bank in the appropriate subitems of column A and for domestic offices in the appropriate subitems of column B.

Commercial and industrial loans may take the form of direct or purchased loans. Include loans to individuals for commercial, industrial, and professional purposes but not for investment or personal expenditure purposes. Also include the reporting bank's own acceptances that it holds in its portfolio when the account party is a commercial or industrial enterprise. Exclude all commercial and industrial loans held for trading.

Include loans of the types listed below as commercial and industrial loans. These descriptions may overlap and are not all inclusive.

(2) Loans for the purpose of financing capital expenditures and current operations.

https://ncua.gov/files/publications/regulations/call-report-instructions-march-2023.pdf
Schedule A Section 1
13. COMMERCIAL LOANS/LINES OF CREDIT NOT REAL ESTATE SECURED (ACCOUNTS 526, 900P, AND 400P)
Include the rate, number, and outstanding balance of all commercial loans defined
in §723.2 and not secured by real estate. Unused loan commitments must be
reported in the Off-Balance Sheet Commitments section.
Excluded from this definition per §723.2 are covered loans issued under the Small
Business Administration's Paycheck Protection Program, 15 U.S.C. 636(a)(36), as
well as loans:
• made by a corporate credit union;
• made by a federally insured credit union to another federally insured credit
union; (Reported on the Statement of Financial Condition as an investment)
• made by a federally insured credit union to a credit union service
organization; (Reported on Schedule C Credit Union Service Organization
Information)
• secured by a single 1- to 4-family residential property whether or not it is the
borrower’s primary residence; (Reported elsewhere on the Loans & Leases
schedule as secured by a single 1- to 4-family residential property.)
• fully secured by shares in the credit union making the extension of credit or
deposits in other financial institutions; (Reported as All Other Secured NonReal Estate Loans/Lines of Credit on the Loans & Leases schedule)
• secured by a vehicle manufactured for household use; (Reported as new or
used vehicle loans on the Loans & Leases schedule)
• that would otherwise meet the definition of commercial loan and which, when
the aggregate outstanding balances plus unfunded commitments less any
portion secured by shares in the credit union to a borrower or an associated
borrower, are equal to less than $50,000. In this case, the loan should be
reported on the Loan & Lease schedule according to the underlying collateral.

Ah - you are a credit union - that explains it.

We have set up the new forum, and I am transplanting this thread to it.

What's the error rate threshhold for Sec 1071 Business LAR? Not finding it.

I hope we all come up with an acronym for this rule.....BLAR, maybe?

Error rate thresholds would be communicated as part of the examination process. You would never see an error rate threshold outlined in the regulations. The regulation always is - you must comply - no exceptions.

Page 813 of the final rule does have a table with Register count, Sample size, Tolerance Threshold # and %

Wow - that is pretty unusual - I stand corrected.

We qualify for CRA due to our asset size. However, in 2022 we had under 100 small business loans, this year so far in the first quarter only 1. In 2021 we did 500 PPP, so what would be my scenario as far as reorting.

HMDA, if you did not meet the threshold, in the prior 2 years there was not reporting, Would this mean that come 12/31/2023 we may not be a reportable bank, until we reach the 100 threshold in two consequetive years?

Appreiate your input.

Love Cruising, yes, you must hit that 100 mark in each of the two preceding calendar years before you would have to report.

Thank you for your response. I'll have time to prepare.

The dollar amount of $1 million remained unchanged,correct?

Do you mean the gross annual revenue of the business? If so, that's $5 million or less in the prior fiscal year.

I have not been able to find if the dollar amount for CRA Small Business continues to remain at $1 million, I know the revenues went up to $5 million, but not clear on the loan amount.

Appreciate a response.
Thanks,

No the dollar amount that has always been up to $1 million, did it remain unchanged?

There is no loan amount ceiling for reportable loans..

Love Cruising, I think you are confusing CRA reporting and 1071 reporting. They are two different things with two different requirements.

We are a small bank and a majority of our commercial loans are Ag loans. When trying to determine coverage we only count loans made to business entities correct? So if a farm operating LOC was made to John Doe, that loan would not count, but if it was made to John Doe Farms LLC then it would? I just want to make sure I understand correctly.

In the final rule, these are the definitions:

§ 1002.106 Business and small business.
(a) Business has the same meaning as the term “business concern or concern” in 13 CFR 121.105.

(b) Small business definition—(1) Small business has the same meaning as the term “small business concern” in 15 U.S.C. 632(a), as implemented in 13 CFR 121.101 through 121.107. Notwithstanding the size standards set forth in 13 CFR 121.201, for purposes of this subpart, a business is a small business if its gross annual revenue, as defined in § 1002.107(a)(14), for its preceding fiscal year is $5 million or less.

(2) Inflation adjustment. Every 5 years after January 1, 2025, the gross annual revenue threshold set forth in paragraph (b)(1) of this section shall adjust based on changes to the Consumer Price Index for All Urban Consumers (U.S. city average series for all items, not seasonally adjusted), as published by the United States Bureau of Labor Statistics. Any adjustment that takes effect under this paragraph shall be rounded to the nearest multiple of $500,000. If an adjustment is to take effect, it will do so on January 1 of the following calendar year.

If you cross reference 13 CFR 121.105, the definition of "business" includes "A business concern may be in the legal form of an individual proprietorship, partnership, limited liability company, corporation, joint venture, association, trust or cooperative, except that where the form is a joint venture there can be no more than 49 percent participation by foreign business entities in the joint venture."

1071 retains the definition of business credit from the existing Reg. B, which states, "Business credit refers to extensions of credit primarily for business or commercial (including agricultural) purposes, but excluding extensions of credit of the types described in § 1002.3(a)–(d)."

Putting those definitions together, I would conclude that the farm operating LOC made to John Doe in your example is reportable under 1071 because it is made primarily for commercial purposes, unless Mr. Doe had annual revenues in excess of $5 million.

Our portfolio is filled with mainly ag loans, we are expecting 99% of those loans to fall under the $5 million gross revenues for our sole props. All are reportable.

If you're like me, the incomplete and withdrawn apps are going to be a concern. It's something that wasn't tracked in the past.

What's your best estimate of how many of these loans you are originating annually? Your "start" date could be 10/1/24, 4/1/25, or as late as 1/1/26. But you can start implementing and training (and retraining -- commercial lenders are often not attuned to this sort of data gathering) before your start date.

We'll have to start reporting 10/1/24. We'd need a sizable decline in 2023, which I'm not anticipating. Implementation is dependent on technology. Until we know for sure when the various solutions we use will be ready, it's hard to set training dates and implementation timeframes. I already know I'll need to add staff as I'm anticipating approximately 1800 hours of additional work based on loan volume for validation not including the withdrawals/incomplete applications.

Here's another concern:

"The CFPB intends to use its enforcement and supervisory authorities to focus on covered lenders’ compliance with these requirements relating to the rule’s prohibition against discouraging applicants from submitting responsive information. The CFPB intends to pay particular attention to covered lenders’ response rates for data requested from applicants.8 As appropriate, the CFPB intends to consider how a lender’s response rates compare to financial institutions of a similar size, type, geographic reach, or other relevant factors, because, as noted in the rule, low response rates may indicate discouragement or other failure by that lender to maintain proper collection procedures consistent with the rule.9 Similarly, the CFPB intends to consider, among other things, irregularities in a particular response (for example, very high rates, relative to similar lenders, of an applicant response of “I do not wish to provide this information” or similar) because that may indicate steering, improper interference, or other potential discouragement or obstruction of applicants’ preferred responses."

CB#3, I'm with you on a couple points. First, the Ag loans tend to be one loan for seed, another for a new piece of equipment, and another loan over there to buy the neighbor's Ag land that came up for sale, and on and on. That drives our figures well past the threshold, past & future.

And your second point, I'd put it this way: The Ag landscape is notoriously suspicious of DC. "Mr. Lender, you've dealt with me for 5 (or 10, or 20) years, you know who I am. Why does the government suddenly need to know my ethnicity, when they've been paying me subsidies for (5, 10, or 20) years?" Out there for 2025, very high rates of "I do not wish to provide," looks like an iceberg from 2023.

Since most Ag folks are locked into their banks, and the banks find one way or another to extend the credit, I'm not all that concerned with withdrawn & incomplete apps. But that's only if everything stays the same in the national banking system, where the horizon looks a little cloudy.

I'm still digging into the rule, but i want to ask this while i'm thinking about it.....so HMDA reportable transactions are exempt from 1071 reporting. What about temporary financing loans exempt from HMDA? They are now reportable under 1071, since they are not HMDA reportable? (This is of course assuming that that the loan is a covered transaction under 1071 and made to a small business as defined in the rule.)

I guess that ^^^^ IS the case...it was just striking me as odd yesterday. Doesn't strike me as so odd today, if you look at it as them just not making you double report...so if it's not on the HMDA LAR, i guess you must consider it for the small business LAR.

Another coverage question - we're trying to figure out where to draw the line (if there is one) for real estate mortgages. We are not a HMDA reporter, so no relief there. At this point, we think we'll have to report on all 2-4 unit loans (regardless of occupancy) as well as any single unit home that's non-owner occupied. That could be really broad though - trying to get "business" information from a borrower who's buying a house to rent back to his son? Or just as a personal investment?

Anyone have any insight here?

Raitchjay, that is my understanding as well - no temporary financing exclusion for small business reporting.

I have not dug deep yet, but so far my understanding is that if it is business purpose it will be reported for 1071 UNLESS it was already reported for HMDA or the borrower has gross revenues exceeding $5 million/year.

I don't want to answer this authoritatively yet, but my understanding so far is that if the transaction would be HMDA reportable (regardless of whether you actually are a HMDA reporter), then it's NOT reportable under 1071.

Don't forget that they also have to meet the definition of a "small business". Not every loan to an individual for a non-owner occupied dwelling is going to meet that definition, especially consumer investments, which aren't business purpose at all.

Does the SBA clarify the difference between "consumer investments" and "small business"? Can anyone point me toward where to look for SBA's definition of small business? I tried researching the site, but could only come up with size thresholds, not a general definition.

Actually, I think I found it - not that it helps much.

13 CFR 121.105:
§ 121.105 How does SBA define “business concern or concern”?

(a)

(1) Except for small agricultural cooperatives, a business concern eligible for assistance from SBA as a small business is a business entity organized for profit, with a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor.

(2) A small agricultural cooperative is an association (corporate or otherwise) acting pursuant to the provisions of the Agricultural Marketing Act (12 U.S.C.A. 1141j) whose size does not exceed the size standard established by SBA for other similar agricultural small business concerns. A small agricultural cooperative's member shareholders are not considered to be affiliates of the cooperative by virtue of their membership in the cooperative. However, a business concern or cooperative that does not qualify as small under this part may not be a member of a small agricultural cooperative.

(b) A business concern may be in the legal form of an individual proprietorship, partnership, limited liability company, corporation, joint venture, association, trust or cooperative, except that where the form is a joint venture there can be no more than 49 percent participation by foreign business entities in the joint venture.

(c) A firm will not be treated as a separate business concern if a substantial portion of its assets and/or liabilities are the same as those of a predecessor entity. In such a case, the annual receipts and employees of the predecessor will be taken into account in determining size.

With the breakdown of implementing this new reporting, I'm understanding:

o Large Lenders (2,500+ loans): October 1, 2024;
o Medium Lenders (500 - 2499 loans): April 1, 2025; and
o Small Lenders (100 - 499 loans): January 1, 2026.

Does this mean large lenders would have had 2,500+ loans in 2022 & 2023? Or do you start counting loans on 10/1/24?

You look at 2022 and 2023. Here's the link to CFPB's info sheet about compliance dates:

https://files.consumerfinance.gov/f/documents/cfpb_sbl_info-sheet-regarding-compliance-dates.pdf

With the new threshold for collecting and reporting, do we begin following the new threshold for GAR starting October or do we start now.? Also, if you did not meet the threshold of 100 in the prior year and we don't believe we will meet the threshold this year, are we exempt from reporting in March 1, 2024?

Appreciate your guidance.

The final rule has not been published in the Federal Register. The effective date is 90 days after date of publication in the Federal Register. Until then, you wait and plan.

If you don't meet the 100 loan threshold, you do not need to worry as you need to meet the threshold for 100 in both 2022 and 2023. If you fall below, you do not have to report. You do need to track how many loans you make to see if you hit the thresholds going forward.

Correct, large lenders would need to meet the 2,500 loan threshold in both years. The October 1, 2024 date is when you start collecting the information that will be reported.

This might be a dumb question, but I am generally full of them. I have been waiting for this to be published in the Federal Register, but I have not seen it yet. Normally they are not 4 weeks behind. Has this changed?

No. This is unusual. If I had to guess, it may not come out until October. I will probably be wrong, but publishing October 1 would mean the effective date is January 1.

In Appendix F to Part 1002 there is a table showing the "Tolerance Threshold for Bona Fide Errors". It ranges from 2.5% to 6.4% based on the volume of records reported in the Small Business Lending Application Register Count. But it is based on sampling size (which is related to the record counts)..The error rate thresholds sound reasonable but you should understand that they are based on sample sizes ranging from 47 records to 159 records so the error counts are only 3-4 records per data field.

My turn for a dumb question. It was hinted to me that it may not happen because it's not in the Federal Register yet. Is it possible for it to just not be published in the Federal Register? Is it crazy to at least be trying to come up with a way to track these now if it hasn't been published in the Register yet?

Unless it is not published by 90 days prior to the first effective date of Oct 1, 2024, I am not sure how it would be delayed.

DATES: This final rule is effective [INSERT DATE 90 DAYS AFTER DATE OF
PUBLICATION IN THE FEDERAL REGISTER].

Compliance dates: Covered financial institutions must comply with the final rule beginning
October 1, 2024, April 1, 2025, or January 1, 2026, as set forth in § 1002.114(b).

Okay, stupid question time.

If we don't get the GAR for a non-originated application, how are we supposed to determine if it meets the definition of small business? We apparently have the option of saying that the GAR was not obtained for that data point, but without the GAR we also don't know if it even has to be reported. So is everyone going to make the GAR 'required' in order to call it an application and without the GAR it is just an inquiry and doesn't have to be reported? Or are we supposed to assume that every application that we didn't get a GAR has to be reported?

Maybe the answer is in the rule somewhere and I just haven't run across it yet (or overlooked it) - I am only up to page 384.

It is code 988 for Field 36. Filing instructions page 37 gives some insight. Basically, you still report, but report it wasn't provided or able to be determined.

So what you are saying is we may have an application from a business with a GAR of $25M but because we didn't get the GAR and it wasn't originated, we are still supposed to report it as a small business loan anyway and gather all the information we can like it is a small business.

Yeah, that should skew the data nicely.

In the next couple years, I would start a process to gather that information from the borrower at application. I don't know how any bank required to report will get away with not having a more robust application process that will likely include a written application (or electronic equivalent). There's too much information required too early in the process.

Agree with Inherent Risk - clearly, we will need to know if we have a reportable application from the get go. Be prepared to include a field on your business loan application or have a means to collect the information - perhaps with a statement from the applicant. If you don't do this, you risk not obtaining the required monitoring information. The statement could be as simple as asking the applicant if their GARs are over/under $5M. But when you go to report you will need the actual amount and if not known you do what CB#3 indicated - report that the GARs are not known.

In other words, you must determine at the time of application if the applicant is covered by 1071. This will dictate if the required monitoring information applies.

Training commercial lenders is going to be lots of fun!

The CFPB made it clear in the preamble they expect lenders to ask for the information required to determine if an application is for a "covered transaction" that's not excluded in 104(b). Any institution that extends commercial loans of any volume approaching 100 originations per year will need to collect that information, even if they are not a covered lender because the determination of covered lender status is made every year in light of the volume of covered transactions for each of the last 2 calendar years.

These determinations are made all the more confusing by the fact that what's included depends if you are a covered lender or not a covered lender. Moreover, the exclusions cited in 104(b) are not all inclusive. There are additional exclusions cited in the Official Interpretations relevant to that subsection.

I've had several discussions with CFPB attorneys about these issues and more. Even the attorneys can't answer every question. I've already broadcasted one webinar about 1071 and we are planning on another. We also are starting a blog. During the webinar there were lots of good questions from lenders.

(b) A business concern may be in the legal form of an individual proprietorship, partnership, limited liability company, corporation, joint venture, association, trust or cooperative, except that where the form is a joint venture there can be no more than 49 percent participation by foreign business entities in the joint venture

Okay, question here....does the 'individual proprietorship' part of the definition above cover those loans to John Farmer as the borrower to purchase a tractor for his farming business? In some States, proprietorships have to be registered with the Secretary of State or Dept. of Revenue but other States do not require it. Are they including the 'proprietorships' that are registered only?

Why can't we have one rule that covers all reporting and all definitions the same.....too easy????

crcmnot, that is the big question I've come down to as well. (cross reference this thread.) In talking with my SBA lenders, an "individual proprietorship" includes John Farmer acting just as an individual in his ag operations without any formal business filing.

Randy Carey (in that other thread) also gives credence to an individual proprietorship being broadly defined, and not requiring a state filing of some sort.

But I haven't yet found anything official.

I actually have a question into the CFPB on this topic. If I ever get an answer, I'll share with this group.

I too am concerned because my interpretation was that any sole proprietor loan could qualify, whether it was purchased on an account that is designated as a commercial account or not. We don't do commercial lending, and don't have a large number of business accounts, but we are located in an ag community.

I brought my "theory" about what this meant to my supervisors, but their interpretation of it differs from mine.

If a farmer applies for a loan to purchase a tractor to be used on his 6-acre farm, whether he is running a business concern for profit as a sole proprietor likely will depend on what he is doing with whatever he is raising on he 6 acres. If he sells it, he's likely a for-profit business and the loan will be covered under the rule. If instead of selling the output he feeds his family with it, it's a consumer-purpose loan.

Ah, it's the Colorado ice law. If you use ice to preserve food, it's non-taxable, but if you put it in a beverage, it's taxable. (it's been a few years - maybe the ice law has been amended)....

You need to chase down the rabbit hole of 1002.106 for the list of organizational types. Sole proprietorship is listed.

I'd keep it simple. Unless the transaction fits into the excluded transactions or the business exceeds the limit, it's probably going to need to be reported if it's business or ag purpose.

This is a pond of dirty swamp water

In regards to the firewall, i'm getting confused.....it would seem that the LO involved would not have access to the DI and ownership answers of the applicants.....but if the bank is like mine, there's a high chance that the LO would be the one actually gathering that DI and ownership information from the applicant. So i guess in that scenario, you just say it isn't feasible, give the disclosure, and go on?

I'm planning on a memo as a CYA to cover why it is not feasible. Then have plans to separate out the GMI forms from the file and limit access from others.

So, CB#3, for banks the size of mine and Raitchjay's are you suggesting if our commercial loan officer gets an affirmative answer to if the business is a small business they hand the application off to an assistant or another loan officer to gather the DI before proceeding with the loan request? If you are a small to medium sized community bank that is not, IMO, a feasible solution and it is going to alienate a lot of your business customers.

Not sure how that was interpreted from what was written. The memo details why it is not feasible to have someone other than the loan officer gather the GMI. They'll ask, you might as well be ready to answer.

The firewall after gathering is still an issue. You have record retention requirements for 3 years after reporting. But you have to remove from a credit file and store separately with some sort of safeguards to limit access to.

Firewall. The CFPB’s rule implements a requirement in section 1071 that certain data
collected from applicants be shielded from underwriters and certain other persons (or, if a
firewall is not feasible, a notice is given instead); the CFPB refers to this as the “firewall.”

Firewall (§ 1002.108). Section 1002.108 implements section 1071’s requirement that
certain data collected pursuant to section 1071 be shielded from certain persons if feasible; the
CFPB refers to this as the “firewall.” Pursuant to § 1002.108(b), if an employee or officer of a
covered financial institution or a covered financial institution’s affiliate is involved in making
any determination concerning a covered application from a small business, that employee or
officer is prohibited from accessing the applicant’s responses to regarding protected
demographic information requested under this final rule.


I can't speak for raitchjay but the way we are structured this takes our commercial loan officer out of the picture in processing the loan request. For us that isn't feasible.

I think almost everyone is in that boat for anyone that takes an application. Most loan officers are involved in decisioning, and anyone taking applications would be covered by the notice/feasibility exception. I think the question is about where to store that information after it is collected. To my knowledge, the feasibility determination is at the employee level, not the institution level, so even if you use the disclosure for the commercial loan officer, you STILL need to put up a firewall for any other employees that can be feasibly firewalled. Where that line is drawn is going to be tricky. A back office underwriter or credit officer doesn't need to see that information and likely wouldn't ever look at it, but setting up systems and controls to make sure there is a firewall... that could be tricky.

We're looking at setting up a new doc type in our imaging system where we will store this info. The doc type would be limited to certain security groups only (audit, compliance, loan ops, examiners, etc.). Front line security groups (loan officers, loan assistants, etc.) would not even see that the doc type exists when they're in the loan file.

I like that approach. We may explore the same.

In regards to the reporting under HMDA, our bank does a large number of non-owner occupied rental property business loans reportable under HMDA.

Are these loans reportable under HMDA, exceptions from the 1071 reporting? Also, would they count towards the 100 originations as business loans or would they not be counted as they are reported under HMDA? Thanks.

If it's HMDA reportable, it's not reportable under 1071, nor is it a covered credit transaction for coverage purposes. My understanding of it anyway.

1002.104(a) Covered credit transaction.

1. General. The term “covered credit transaction” includes all business credit (including loans, lines of credit, credit cards, and merchant cash advances) unless otherwise excluded under § 1002.104(b).

(b) Excluded transactions. The requirements of this subpart do not apply to:

(2) Home Mortgage Disclosure Act (HMDA)-reportable transactions. A covered loan, or application therefor, as defined by Regulation C, 12 CFR 1003.2(e).

Just be careful because there are certain dwelling secured transactions that aren't reportable under HMDA and if they are for a business purpose and extended to a small business could be covered transactions under 1071. See §1003.3(c) which identifies HMDA-excluded transactions and in subsection (10) states that a "primarily business purpose" closed-end or open-end line of credit that is not a home improvement loan under § 1003.2(i), a home purchase loan under § 1003.2(j), or a refinancing under § 1003.2(p) is excluded from reporting under HMDA. Therefore, if the borrower is a small business under 1071, the transaction may be a covered transaction.

That's what we are watching in our loan origination process. Most of these business loans are for the purchase or refinance of the rental
properties.

Thanks all.

Yes, going to be a bit odd that most if not all of our temporary financing business purpose loans that aren't HMDA reportable will be reportable under 1071.

Agree with your comment raitchjay!

The rule was published in today's Federal Register. 422 pages. https://www.federalregister.gov/doc...qual-credit-opportunity-act-regulation-b

Sorry if this was located elsewhere but I'm trying to determine if loans that are on the CRA Lar are also going to be reported on the new 1071 Lar as well.

Example: Will a working capital line of credit for a business with revenues less $5 million be reported on both the CRA LAR as a small business and on the 1071 LAR?

Well under the proposed CRA rule, CRA small business/farm reporting will be going away and be replaced by 1071, but... it's not final. If they both exist at the same time, there will be significant duplication.

That will depend on your 1071 implementation tier and the timing and details of the CRA modernization rule. If you are currently filing small business/small farm data for CRA, you will continue to do so until CRA modernization is implemented. If you have to implement 1071 before CRA modernization, there will be a period where you have to file both LARs for small business data. In your example, the LOC would be reported on the 1071 LAR. Whether it is also reported on the CRA LAR depends on the line size.

Thanks for the responses. That was what I thought as well.

Has anyone seen the letters from NCRC and Rise Economy (f.k.a. California Reinvestment Coalition) to bank CEOs asking if they support the ABA's lawsuit regarding the 1071 rule?

What exactly is the story today about the Senate passing a bill that would repeal 1071? That sounded like a pipe dream to me, but i really don't know much about what the bill entails.

Senate Approves Resolution to Overturn CFPB Data Collection Rule
The Senate yesterday voted 53-44 to approve a resolution of disapproval seeking to overturn the CFPB’s final rule implementing Section 1071 of the Dodd-Frank Act, which requires the collection and reporting of credit application data for small businesses, including women-owned and minority-owned small businesses. The legislation passed with Republicans and a few Democrats and independents voting in favor of it.

S.J. Res. 32 by Sen. John Kennedy (R-La.)—which is supported by ABA—would need to be approved by both houses of Congress and signed by the president to overturn the rule. An identical resolution has been introduced in the House and has passed out of committee. President Biden is expected to veto the legislation.

In a September statement in support of the resolution, ABA said that banks support complying with the nation’s fair lending laws, but the enormity of data points to be collected under the rule, and the 100-loan threshold for determining which lenders must report, would place a significant burden on banks. “We are concerned that the costs associated with collecting the data and the anticipated reliance on statistical manipulation in fair lending supervision and enforcement will discourage bank lending to small businesses, particularly by community and midsize banks, and we strongly urge Congress to advance S.J. Res. 32 as soon as possible,” the association said. Read the ABA letter.

Even if the House becomes functional and takes up that particular resolution, the later of which is unlikely as it's not a House priority, Congress don't have the votes to override a Presidential veto.

Judge Extendes TBA & ABA's §1071 Injunction to Nationwide Coverage

US District Court Judge Randy Crane extended the partial injunction issued to TBA, Rio Bank, and the ABA to apply nationwide to all entities subject to the §1071 Final Rule.

Watch for related press releases.

Source: TBA

In his Order, Judge Crane enjoined the CFPB from implementing and enforcing the Sec. 1071 Final Rule against the members of TBA and ABA, intervenors from the ICBA and IBAT, the Credit Union National Association, the Equipment Leasing and Finance Association, and all covered financial institutions pending the USSC’s rendering of its opinion in the Community Financial case on the constitutionality of the CFPB’s funding structure. “Defendants shall immediately cease all implementation or enforcement of the Final Rule against Plaintiffs and their members, Intervenors and their members, and all covered financial institutions.” As was the case in the original preliminary injunction, deadlines for compliance will be tolled until after the USSC issues its Community Financial decision.

Just headlines from credible sources. Not mis- or dis- information.

IMO, this is a huge win for the industry for the time being!

If anyone wants to read the full order, I found it at https://www.bloomberglaw.com/public...al/4?doc_id=X4OE7GFH9228909KMU4N0LJJP2C.

Enjoy, but don't make any significant decisions or operate heavy machinery immediately after reading.

Anyone read whether the stay is retroactive to the previous stay? Will the compliance dates be pushed back based on the first order or will there still be staggered compliance dates?

In addition to IR's question above, I'm also wondering, does this nationwide extension of the injunction also move out the date when institutions can legally begin collecting the information from customers? Do we need to worry about risk exposure from collecting the information too early (for those of us continuing with preparation to ensure we're ready if SCOTUS rules in favor of the CFPB & legislative effort fails)?

I was on BCC's 'A Look Back & What Lies Ahead' webinar yesterday and they brought this up. According to them, it does push back the compliance date for everyone by however long it takes the supreme court to make a decision. The compliance dates would still be staggered, but you'd get an extra x number of months from when you were initially supposed to begin collecting and reporting.

I was on an ABA monthly 1071 working group earlier this week, and gathered the same as you did.

I meant are they staggered between ABA members to non-ABA members. ABA stay is from 7/31 until there is an SC decision. Does the more recent order pull everyone into that or does it create a new stay running from the October? Assuming a January decision, ABA members would be able to push their compliance dates about 5 months. Will everyone get that or will non-ABA only be able to push their compliance dates 2-3 months?

According to the BCC webinar, it brought everyone into the stay. The webinar was recorded and free if you are interested in their take.

Does anyone know when the resolution is supposed to be on the President's desk to sign? I can't find any updated information on if he still plans to veto it or not. Thanks!

He has stated he will veto it.

As promised, Biden vetoed S.J. Res. 32 yesterday (https://www.reuters.com/world/us/bi...pbs-small-business-loan-rule-2023-12-19/).

No surprise there. But the rule is still subject to the injunction against enforcement from the Federal District Court for the Southern District of Texas pending a ruling by SCOTUS on the constitutionality of the Bureau's funding mechanism.

The US Supreme Court ruled that the CFPB's funding is constitutional in the CFPB vs CFSA case. https://www.supremecourt.gov/opinions/23pdf/22-448_o7jp.pdf

Compliance date extensions: Compliance Date Extensionshttps://www.consumerfinance.gov/1071-rule/

I have not read this yet. We are in Tier 3 - will we still be looking at loans made in 2022 to determine when we begin reporting?

Might need to wait for: The CFPB now plans to issue an interim final rule to extend compliance deadlines.

Not sure why the lookback periods would not change also.

It really depends on whether the CFPB also changes more than just the compliance and first reporting dates in section 1002.114. If they push the effective date of August 29, 2023, back 290 days, it will change to June 14, 2024 (they didn't mention changing that date in the information posted on their "1071 rule" page). Theoretically they could still use loan activity in 2022 and 2023 to determine tier levels, etc. But they could also change the base years to 2023 and 2024, since the earliest of the revised compliance dates will be July 18, 2025.

I imagine the folks at the Bureau are mulling that all over before they issue the interim final rule.

We will have to wait and see.

The Order of the U.S. District Court for the Southern District of Texas, McAllen Division, requires the Bureau to adjust the compliance dates in the regulation for the period of the stay, which was 290 days. The effective date of the regulation is essentially meaningless. So it will be possible that the Bureau will leave that alone, and not change the years 2022 and 2023 as the period during which covered loans are to be counted to determine whether a bank is covered and, if so, what tier it belongs to.

But I think the Bureau will change those years to 2023 and 2024 to make the determination of coverage and tier based on more current data.