CUNA backs Section 1071 reform legislation

February 23, 2022

CUNA wrote in support of legislation Tuesday that would reform Section 1071 of the Dodd-Frank Act. Section 1071 of the Dodd-Frank Act requires financial institutions collect and report certain data regarding applications for credit for women-owned, minority-owned, and small businesses to the Consumer Financial Protection Bureau (CFPB).

CUNA supports the goals of Section 1071 but is concerned about unintended consequences of broad data collection.

“There is widespread concern that Section 1071’s complexity and significant costs will weigh disproportionately on credit unions in ways that ultimately lead to fewer and less favorable outcomes for all small business borrowers,” the letter reads. “The overly broad scope of the CFPB’s proposed rule will substantially raise the cost of small business borrowing and require covered financial institutions to collect data on businesses that are not “small businesses” by any traditional metric. Section 1071 should be appropriately tailored to ensure the health and financial needs of truly small businesses can continue to be met.”

CUNA also supports efforts to establish an appropriate compliance timeline for Section 1071 instead of the mandatory 18-month compliance scheduled proposed by the CFPB.

The bills are:

  • The Small Lenders Exempt from New Data and Excessive Reporting Act, introduced by Rep. French Hill (R-Ark.) would codify “financial institution” as one that originates at least 500 covered transactions in each of the last two years. The CFPB has proposed a 25-transaction threshold.
  • The Business Loan Privacy Act, introduced by Rep. Blaine Luetkemeyer (R-Mo.), which would require the CFPB issue an advance notice and comment period before any data collection modification.
  • The Preventing Racial Profiling in Lending Act, introduced by Rep. Roger Williams (R-Texas), which would block the CFPB from mandating loan officers having to guess the ethnicity of a loan applicant based on their appearance and last name, should this information not be voluntarily provided.