New rules should be tailored because small-business lending cannot be commoditized
Washington, D.C. (Jan. 6, 2022) — The Independent Community Bankers of America (ICBA) today called on the Consumer Financial Protection Bureau to exempt more community banks and small businesses from its proposal to implement new small-business loan data collection and reporting requirements.
In a comment letter, ICBA said the CFPB’s proposal to implement Dodd-Frank Section 1071 reporting mandates should exclude community banks with assets of $1.3 billion or less and define small businesses as those with $1 million or less in gross annual revenue. By ensuring more than 90% of small-business loans are captured, these updates will allow the CFPB to meet Dodd-Frank Act objectives while limiting the rule’s negative impact on small-business access to credit.
“Community bank small-business lending is complex—it should not be commoditized and subjected to simplified, rigid analysis that would have a chilling effect on small-business lending,” ICBA President and CEO Rebeca Romero Rainey said today. “While ICBA supports the proposal’s goal of expanding access to credit for minority-owned, women-owned, and small businesses, we are concerned that its overly broad coverage will disadvantage community bank business customers. The CFPB should tailor its Dodd-Frank Section 1071 rule to mitigate unintended consequences for small-business customers.”
Among its other recommendations, ICBA’s comment letter also calls on the CFPB to:
- Require the collection and reporting of congressionally mandated data points, instead of nearly doubling the number and increasing the compliance burden.
- Publish a full privacy test open for public comment before determining which data to make public, to avoid privacy risks for small-business applicants.
- Provide at least three years for financial institutions to comply or stagger implementation dates based on asset size to allow for good-faith compliance.
- Provide a 12-month grace period after the compliance date because the rule will impose an entirely new environment for many community banks.
- Update firewall requirements to avoid disproportionately burdening community banks due to their smaller staff size.
- Allow banks to report annually or as loan applications are received to support recordkeeping.
- Not require financial institutions to separately verify applicant-provided information.
For more information, visit icba.org.
The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. ICBA is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education, and high-quality products and services.
With nearly 50,000 locations nationwide, community banks constitute roughly 99 percent of all banks, employ nearly 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding nearly $5.9 trillion in assets, over $4.9 trillion in deposits, and more than $3.5 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.