Senate Democrats Strongly Endorse CFPB Data Collection Rule
Learn why Senate Democrats are endorsing a CFPB rule requiring credit unions and banks to report lending to women- and minority-owned small businesses.
Rule would require credit unions and banks to report lending activity to women- and minority-owned small businesses.
Five Senate Democrats have delivered a strong endorsement of the CFPB’s small business data collection rule, which currently is being challenged in a Texas federal court.
“This rule will bring transparency to small business lending, fight against unlawful discrimination, increase access to fair capital, and finally shine a light on the barriers that women, minority, and other entrepreneurs face in accessing capital,” Senate Banking Committee Chairman Sen. Sherrod Brown of Ohio, Sen. Ben Cardin of Maryland, Sen. Ron Wyden of Oregon, Sen. Cory Booker of New Jersey and Sen. Dick Durbin of Illinois wrote in a letter to CFPB Director Rohit Chopra.
What Does the Rule Entail?
Mandated by the Dodd-Frank Act, the final rule will require credit unions and banks to report their lending activity to women- and minority-owned small businesses. Totaling more than 800 pages, the rule goes into effect in August, but financial institutions will not have to comply until next year at the earliest as there are various compliance dates depending on the size of the financial institution.
Inside the Letter
In their letter, the five senators said that between 2018 and 2022, the Federal Reserve Board found that when women-owned businesses applied for a line of credit, they were more likely to receive no funding rather than a partial or full loan. The report also found that white-owned companies were more than twice as likely to receive all the financing they sought compared with Black, Hispanic and Asian firms.
The senators wrote further that the information gathered as a result of the rule will ensure financial institutions are accountable for serving their communities. They said it also will give Congress the tools to level the playing field and create new opportunities for women-owned and minority-owned small businesses.
Where CU Groups Stand on the Rule
Financial services trade groups, including CUNA and NAFCU, have said that the data collection will create a huge regulatory burden for credit unions and banks. Some Republicans have advocated repealing the rule.
What Comes Next?
The American Bankers Association, its Texas affiliate and a Texas Bank have filed suit in federal court challenging the rule, contending, among other things, that it was promulgated by an agency whose funding mechanism is unconstitutional.
The Supreme Court is scheduled to hear a challenge to the CFPB’s funding mechanism this fall. The Fifth Circuit Court of Appeals has ruled that the funding is unconstitutional because the agency is not funded through the annual appropriations process. The Second Circuit Court of Appeals has ruled just the opposite.