CUNA provides section 1071 rule revisions to House subcommittee

Credit unions support the goals of section 1071 of the Dodd-Frank Act but are concerned about increased costs, CUNA wrote to the House Small Business Subcommittee on Economic Growth, Tax, and Capital Access Monday. The subcommittee will conduct a hearing on the CFPB’s 1071 rule Tuesday.

“We are concerned about potential unintended consequences and substantial costs in complying with the creation of a broad data collection where one does not currently exist,” the letter reads. “In addition, as entities bound to serve a specific field of membership, credit union data would likely be incomparable to other lenders.”

CUNA urged the CFPB to consider several revisions to the proposed rule, including:

• Increasing the covered financial institution threshold to at least 500 covered credit transactions in each of the two preceding calendar years coupled with a size-based exemption for entities of $600 million assets or less.
• Reducing the gross annual revenue threshold used to determine which businesses are “small businesses” for purposes of the rule to no more than $1 million in gross annual revenue in the preceding fiscal year.
• Exempting several types of credit transactions from the definition of covered credit transactions, including agriculture-purpose credit, HMDA-reportable transactions, consumer-designated credit, loans under $50,000, and government guaranteed loans.
• Excluding credit line increases from the definition of covered application for purposes of the rule.
• Considering the firewalling requirement’s potential for negative impacts on smaller lenders serving business borrowers.
• Reduce the section 1071 data set to only data points that are statutorily required and avoid unnecessary discretionary data points.
• Rescinding the requirement for covered financial institutions to conduct a visual observation and surname analysis on applicants declining to provide responses to demographic questions.
• Considering the privacy and reidentification concerns in finalizing the rule and conduct a notice and comment period on the bureau’s “balancing test” for publication of 1071 data.
• Adopting a phased mandatory compliance schedule that begins no sooner than three years following the issuance of a final rule.

CUNA supports legislation to establish an appropriate compliance timeline for the section 1071 rule as well.