Here We Go — Again. New CFPB Section 1071 Proposal
By Rose Oswald Poels
Last Thursday, the Bureau of Consumer Financial Protection (CFPB) published a proposed rule to revise its Small Business Lending Rule under Regulation B (Section 1071). In its latest proposal, CFPB is reconsidering coverage of certain credit transactions and financial institutions; the small business definition; inclusion of certain data points and how others are collected; and the compliance date. While I continue to digest the proposed rule, the proposed changes are an improvement to the Section 1071 rule that members had been working to implement. The following is a summary of the proposed changes to the current Section 1071 rule:
Covered Credit Transactions: CFPB proposes to exclude merchant cash advances, agricultural lending, and small dollar loans from the definition of covered credit transactions.
Covered Financial Institutions: CFPB proposes two changes to the definition of covered financial institutions. The first change would exclude Farm Credit System (FCS) lenders from coverage of the rule, and the second change would raise the origination threshold from 100 to 1,000 covered credit transactions for each of the two consecutive years. CFPB also proposes conforming changes to the bona fide error portions of the enforcement provisions of the rule.
Small Business: CFPB proposes changing the gross annual revenue threshold in the rule’s definition of small business from $5 million or less to $1 million or less.
Data Points: CFPB proposes to remove the discretionary data points for application method, application recipient, denial reasons, pricing information, and number of workers. The CFPB also proposes changes to comply with an executive branch mandate, which would result in a modification of the collection of data concerning business ownership status of small business applicants and the format of demographic data collected concerning the principal owners of a small business.
Time and Manner of Data Collection: CFPB proposes changes to the time and manner of data collection, and to remove certain requirements that are not statutorily required and appear to anticipate or presume non-compliance with the rule.
Compliance Dates: CFPB proposes to extend the compliance date to January 1, 2028, for all financial institutions that remain covered by the rule.
Privacy Concerns: CFPB does not address privacy in the proposed rule other than to state it continues to review the concerns shared by the industry and has committed to continue to engage with stakeholders. CFPB also stated that it will address privacy and findings going forward in a timely fashion.
The CFPB believes the proposed changes would streamline the rule, reduce complexity for lenders, and improve data quality, advancing the purposes of section 1071 and complying with recent executive directives. Comments regarding the proposed rule are due December 15, 2025. Just as we have every step of the way in the Section 1071 rule implementation process, WBA will be filing comments regarding the proposed changes. If you wish to discuss the proposal or share your comments about the proposed rule, be sure to reach out to WBA Legal at wbalegal@wisbank.com or 608-441-1200.
Read the 1071 Proposed Rule here.
