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#2284539 - 05/15/23 08:45 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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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?
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#2284554 - 05/16/23 03:21 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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10K Club
Joined: Aug 2002
Posts: 47,744
Bloomington, IN
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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.
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#2284578 - 05/16/23 06:27 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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10K Club
Joined: Aug 2002
Posts: 47,744
Bloomington, IN
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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.
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#2284588 - 05/16/23 07:20 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Platinum Poster
Joined: Jan 2017
Posts: 647
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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.
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#2284597 - 05/16/23 08:39 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Joined: Dec 2002
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SC
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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.
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#2284612 - 05/17/23 11:53 AM
Re: CFPB releases 1071 final rule
Cowboys Fan
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Power Poster
Joined: Oct 2000
Posts: 5,992
Soaring over Georgia
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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.
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#2284875 - 05/23/23 06:23 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Platinum Poster
Joined: Sep 2007
Posts: 937
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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.
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#2284876 - 05/23/23 06:37 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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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.
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#2284884 - 05/23/23 08:23 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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10K Club
Joined: Jul 2001
Posts: 84,678
Galveston, TX
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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).
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#2284890 - 05/23/23 09:15 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Diamond Poster
Joined: Oct 2004
Posts: 2,132
Connecticut
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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.
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#2284917 - 05/24/23 04:20 PM
Re: CFPB releases 1071 final rule
Len S
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Platinum Poster
Joined: Sep 2007
Posts: 937
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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.
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#2284919 - 05/24/23 04:21 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Power Poster
Joined: Oct 2009
Posts: 9,288
OK
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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.
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#2284961 - 05/24/23 10:06 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Diamond Poster
Joined: Apr 2013
Posts: 2,285
The West
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Agree with your comment raitchjay!
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#2285150 - 06/01/23 03:02 AM
Re: CFPB releases 1071 final rule
TryingtoComply
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Diamond Poster
Joined: Nov 2004
Posts: 2,310
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#2286069 - 06/28/23 05:35 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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New Poster
Joined: Jun 2023
Posts: 2
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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?
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#2286072 - 06/28/23 05:51 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Platinum Poster
Joined: Jan 2017
Posts: 647
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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.
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#2286079 - 06/28/23 06:29 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Platinum Poster
Joined: Nov 2010
Posts: 974
USA
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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.
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#2286324 - 07/06/23 05:44 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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New Poster
Joined: Jun 2023
Posts: 2
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Thanks for the responses. That was what I thought as well.
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#2289918 - 10/19/23 06:15 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Platinum Poster
Joined: Nov 2010
Posts: 974
USA
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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?
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#2289919 - 10/19/23 06:33 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Power Poster
Joined: Oct 2009
Posts: 9,288
OK
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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.
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#2289921 - 10/19/23 06:35 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Power Poster
Joined: Nov 2004
Posts: 2,545
Anywhere I want to be
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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.
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#2289937 - 10/19/23 08:07 PM
Re: CFPB releases 1071 final rule
InFairness, CRCM
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Junior Member
Joined: Jun 2023
Posts: 35
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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.
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