Delay Small-Business Lending Data Rule

Summary#

The bill delays enforcement of the Consumer Financial Protection Bureau’s (Bureau) small business lending data rule and narrows which lenders and which small businesses are covered. It gives lenders a fixed multi-year compliance window and adds new size tests for both lenders and businesses.

• Main change: The Bureau must provide a 3-year period from the date the Bureau issued its small-business lending rule to comply, followed by a 2-year safe harbor during which lenders must comply but cannot be penalized for noncompliance.
• Defines “covered rule” as the Bureau’s final rule titled “Small Business Lending Under the Equal Credit Opportunity Act (Regulation B)” published May 31, 2023.
• Defines “financial institution” to mean an entity that does financial activity and that in each of the previous two calendar years originated at least 500 credit transactions for small businesses.
• Defines “small business” to mean an entity with gross annual revenues of $1,000,000 or less in its most recent fiscal year.
• Broad goal: The bill appears intended to reduce reporting pressure on smaller lenders and give firms more time to meet new data-collection requirements.

What it means for you#

• Small lenders and community banks

  • If your lender originated fewer than 500 small-business credit transactions in each of the prior two years, this bill would mean it is excluded from the statute’s definition of “financial institution,” and so would not be subject to the rule as amended here.
  • If your lender does meet the 500-per-year test, the lender would have a 3-year compliance period starting May 31, 2023, and then a 2-year period when it must comply but cannot be fined for failing to comply.

• Small businesses

  • The rule would count as “small businesses” only those with gross revenues of $1,000,000 or less in the last fiscal year. This changes which borrowers are treated as small businesses for data collection purposes under the amended law.

• Researchers, fair-lending advocates, and regulators

  • This bill could reduce the number of lenders required to report data and narrow the set of businesses included in reported data. That could affect the size and detail of the data available for oversight and research.

• Consumers and businesses seeking credit

  • Practical effects depend on which lenders remain subject to the rule. The bill itself does not directly change loan terms, disclosure, or credit decisions.

Expenses#

No publicly available information.

• The bill does not include a fiscal note or cost estimate in the provided material.
• This could reduce compliance costs for lenders that fall below the new 500-transaction threshold or for those who gain more time before enforcement.
• The Bureau’s enforcement workload or timing of enforcement actions could shift because of the delayed penalty period; the bill does not quantify any staffing or administrative costs or savings.

Proponents' View#

• The bill appears intended to give lenders more time to implement new data systems and to avoid penalizing lenders still building compliance programs.
• It appears intended to limit the rule’s reach to larger or more active small-business lenders by setting a 500-originations-per-year test.
• Narrowing the borrower definition to firms with $1,000,000 or less in revenues focuses data collection on smaller businesses, according to the bill’s definition choices.
• The multi-year approach (3 years to comply, then 2 years of safe harbor) could be seen as a gradual implementation that reduces immediate reporting burdens.

Opponents' View#

• One concern is that delaying penalties and narrowing coverage could reduce the amount of data collected on small-business lending. That could make it harder to detect patterns of discrimination or gaps in credit access.
• The 500-originations test requires the number to be met in each of the previous two calendar years; this may exclude lenders with uneven activity and could be administratively tricky to prove.
• Defining “small business” as revenues of $1,000,000 or less changes which firms are covered; this may exclude businesses that other programs or studies consider small, reducing comparability of datasets.
• The bill does not explain how “credit transactions for small businesses” are counted or verified, leaving implementation details unclear.