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#2283653 - 04/20/23 06:45 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Platinum Poster
Joined: Mar 2011
Posts: 503
Northern California
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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.
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#2283710 - 04/21/23 09:38 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Platinum Poster
Joined: Sep 2003
Posts: 730
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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?
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#2283767 - 04/25/23 12:31 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Gold Star
Joined: Dec 2019
Posts: 275
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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.
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#2283900 - 04/27/23 10:10 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Platinum Poster
Joined: Oct 2009
Posts: 604
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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?
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#2283975 - 04/30/23 03:21 AM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Diamond Poster
Joined: Oct 2004
Posts: 2,126
Connecticut
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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.
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#2284060 - 05/02/23 08:26 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Member
Joined: May 2022
Posts: 53
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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?
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#2284065 - 05/02/23 08:55 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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10K Club
Joined: Jul 2001
Posts: 84,564
Galveston, TX
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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).
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#2284125 - 05/04/23 01:16 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Platinum Poster
Joined: Oct 2002
Posts: 533
Edge of Sanity
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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.
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#2284133 - 05/04/23 02:54 PM
Re: CFPB releases 1071 final rule
PRiv#6
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Platinum Poster
Joined: Oct 2002
Posts: 533
Edge of Sanity
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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.
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#2284195 - 05/05/23 05:46 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Platinum Poster
Joined: Jan 2017
Posts: 635
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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.
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#2284209 - 05/05/23 10:54 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Diamond Poster
Joined: Apr 2013
Posts: 2,284
The West
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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!
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#2284222 - 05/08/23 01:12 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Diamond Poster
Joined: Oct 2004
Posts: 2,126
Connecticut
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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.
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#2284301 - 05/09/23 04:04 PM
Re: CFPB releases 1071 final rule
mtngrrl
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Gold Star
Joined: Sep 2016
Posts: 351
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(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????
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#2284361 - 05/10/23 02:36 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Platinum Poster
Joined: Feb 2003
Posts: 879
Big Sky Country
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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.
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#2284364 - 05/10/23 03:00 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Platinum Poster
Joined: Nov 2010
Posts: 967
USA
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I actually have a question into the CFPB on this topic. If I ever get an answer, I'll share with this group.
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#2284365 - 05/10/23 03:10 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Gold Star
Joined: Aug 2014
Posts: 413
TX
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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.
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#2284395 - 05/10/23 07:27 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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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.
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#2284397 - 05/10/23 07:37 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Gold Star
Joined: Aug 2014
Posts: 413
TX
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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)....
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