VIDEO: Executive Summary on CFPB Proposal for Small Business Data Collection
In this Compliance Clip (video), Adam provides a quick executive summary of the CFPB’s recent proposal to amend Regulation B, which will require small business data collection and reporting - much like HMDA - for many financial institutions. As this rule will have a significant impact on financial institutions, it is important to understand the direction this proposal is headed in regards to who might be required to report and what this rule is going to require. This executive summary video is a MUST WATCH for all compliance officer, senior lenders, and those who may be required to implement this new rule.
For those wanting to take a deep dive into the CFPB’s proposal to amend Regulation B with the small business data collection and reporting requirements, be sure to check our our Fall 2021 Quarterly Compliance Update where we spend 45 minutes discussing this proposed rule:
Video Transcript
The following is a transcript of this video:
This Compliance Clip is going to talk about the CFPB proposal on small business data collection and reporting. This was actually released on September 1st, 2020 when the CFPB issued a notice of proposed rulemaking to implement the provisions of the Dodd-Frank Act on small business lending data collection and reporting requirements.
This proposal actually goes back a decade to the Dodd-Frank Act so we've known this has been coming for some time. If you've seen many of my programs, you know that I've been talking about this for some time. This is actually going to be a very significant change for lenders, specifically commercial lenders, because we're now going to have this rule that is very much HMDA-like. What it does is it is proposing to amend Regulation B, because that's what the Dodd-Frank Act requires, to have this new Subpart B in Regulation B that talks about small business lending data collection and reporting. It really is similar to HMDA. In fact, the HMDA framework that they developed over the last decade, which was also a requirement of the Dodd-Frank Act, has really become this backbone, this backdrop, is what they call it, a HMDA backdrop. It's a foundation that they're building this small business lending data collection reporting on top of. It is substantially similar to HMDA. It's different, it’s completely different, but it is substantially similar. If you have experience in HMDA, you're going to understand a lot of what's going on in this small business lending data collection and reporting.
Now it is different and, in fact, it's so different that some lenders who are exempt from HMDA and don't report HMDA are going to have to report this new requirement under regulation B under Subpart B. This is a proposal. It's not a final rule and I'm not going to spend a lot of time on this Compliance Clip. In fact, we took a pretty deep dive into the proposal in our Fall 2021 Quarterly Compliance Update. So if you want to learn everything about this topic and learn more details, we spent a full 45 minutes talking about this in our Fall 2021 Quarterly Compliance Update.
I did want to bring this up because the comment period is still open for 90 days after publication in the Federal Register, which really works out to January 6th of 2022. So there's plenty of time for you to submit comments on this, especially if you're one of those financial institutions who may be subject to reporting based on the number of small business loans that you do.
Let's talk briefly about what's included in this proposal and what I've done is I've broken this down into a few main topics. This is how I approached it in our Fall 2021 Quarterly Compliance Update. There's main parts to the proposal. They give a background explaining everything but then they go into a number of things.
They talk about covered financial institutions, which lenders are subject to this rule. Now, of course, we're talking about commercial lenders so if you don't do any commercial loans, then you're not going to be subject to this data collection or reporting rule. However, if you do commercial loans, this could apply to you. Originally when they talked about issuing this a year ago, back in the fall of 2020, they talked about potential thresholds of anywhere from a hundred small business loans or maybe 50, or maybe 25. I'm telling you you're not going to like what they're proposing so it's definitely worth taking a deep dive into the rules to see what they're proposing and taking a look at essentially submitting a comment because there could be changes. They talked about how comments received really do drive what they're doing and they haven't received a lot of comments that are unfavorable. There's been a lot of support for this rule so it's very important that you consider commenting.
Moving on, they also talked about what is a covered application, what's a covered transaction. So who are we going to know, who we're going to have to report on if we are a reporter, and what transactions do we actually report. Much like HMDA, you're going to have your originated loans, but you also have some other originated loans like approved, not accepted, withdrawn or denied. Those types of things. Also, there are proposed requirements to collect and report data. They've got some specifics on how to do that. They've actually got the data fields that are, again, somewhat similar to HMDA where they use the HMDA backdrop. So a lot of the same fields HMDA reporters are used to are now going to be in this Reg B reporting under Subpart B of Regulation B.
There's also provisions regarding availability and publication of data. Much like HMDA, you have to make this data available to the public and the CFPB is proposing an easy way to do that.
There's a firewall requirement where you have to keep this data separate from certain individuals in your organizations, so there’s some challenges there.
Then of course, there's record keeping and compliance and effective dates. Now, when they talk about effective dates, we're looking out a little bit into the future. So you're not going to be subject to report this in 2022, obviously, but it is going to be coming up at some point.
There's a lot in this rule. If you're not familiar with this, take a look at this. This is going to affect a lot of financial institutions. In fact, a lot of community banks and even credit unions who lend to small businesses are going to be affected by this HMDA-like rule. So it's very important that you pay attention now and start to understand how this might affect your organization. Consider submitting a comment because this really could have an effect on the final rule in whether or not this does apply to your organization.
Again, if you want to take a deep dive into this, we have a 45-minute video as part two of our Fall 2021 Quarterly Compliance Update. The full program runs over 2 hours long, but we spent 45 minutes just talking about this proposal and what they're proposing to do, a lot of the logistics, who this would apply to and how this would look. So if you want to deep dive, that's available to you. We want to give this overview because this is going to be a big change in a lot of organizations.
That's all I have for this Compliance Clip.