The Consumer Financial Protection Bureau (CFPB) has issued a long-awaited rule that will implement the small business lending data collection requirements detailed in Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The rule requires covered financial institutions to collect and report data on small business loan applications, including geographic and demographic data, lending decisions, and the cost of credit.
The African American Alliance of CDFI CEOs commends the diligence of the CFPB throughout the 1071 rulemaking process. The final rule is the latest in a series of efforts to promote transparency and accountability in a small business lending system that has historically engaged in discriminatory lending practices, particularly as it relates to Black-owned and women-owned small businesses. Through the creation of the first comprehensive database of small business credit applications in the U.S., the final rule will allow regulators to identify where lending inequities are most pronounced and hold those institutions responsible for fostering such inequity to account. Though considerable work remains to combat the pervasive discrimination in the small business lending market that has persisted for generations, the implementation of Section 1071 of the Dodd-Frank Act marks a crucial milestone in the ongoing fight to ensure all borrowers – irrespective of race, gender, or other defining characteristics – have equal access to credit opportunities and other resources necessary to grow their businesses.