On 3/30/23, the CFPB released the long anticipated rule that implements section 1071 of the Dodd-Frank Act. This rule will require certain lenders to report information about the small business credit applications they receive, including geographic and demographic data, lending decisions, and the price of credit. As this rule was just released, we will be analyzing this rule and providing further guidance in the near future.
In their release, the CFPB provided the following key elements of the new final rule:
Coverage: The rule covers lenders making over 100 covered small business loans per year, which accounts for more than 95 percent of small business loans by banks and credit unions. Like with mortgages, lenders will submit data points required by Congress, as well as additional data points that are typically already included in lender files.
Use straightforward definitions and streamlined forms: To make it easy for lenders to know on which applications to collect data, the rule defines a small business as one with gross revenue under $5 million in its last fiscal year. The rule also includes a streamlined sample form for lenders to use, if they so choose, to collect demographic data from small business credit applicants.
Required Compliance Dates: The CFPB found that there were key differences in how large financial institutions would implement the rule, compared to relationship-based local lenders. The final rule requires the largest lenders, which account for most of the small business lending market, to collect and report data earlier than smaller lenders. Specifically, lenders that originate at least 2,500 small business loans annually must collect data starting October 1, 2024. Lenders that originate at least 500 loans annually must collect data starting April 1, 2025. Lenders that originate at least 100 loans annually must collect data starting January 1, 2026.
Assistance for Compliance Professionals
To support our members in understanding this new rule, we will be offering a number of resources (some free and some for sale). At this point, we plan to provide the following assistance:
Email updates. We will be sending occasional email updates to our basic (free) members to keep them informed of 1071 information as we feel it should be shared.
Introduction to the 1071 Final Rule Class. By mid April, we plan to release a new class: Introduction to the 1071 Final Rule. This program will provide an overview of the new rule by helping attendees understand who must comply with the new rule, when reporting must begin, what data must be reported (general overview), and what steps need to be taken to start implementing the new rule.
1071 School. Over the next month or two, we will be working to create a comprehensive 1071 school that will help institutions subject to the new rule learn the ins and outs of what they need to do in their shops to comply.
Join our Wait List
If you would like to receive information on the resources that we create relating to the 1071 final rule, click the following link to join our 1071 wait list.
