Chairman McHenry, Ranking Member Waters and Members of the Committee:
On behalf of National Taxpayers Union (NTU), America’s oldest taxpayer advocacy organization, I write to offer our comments on the final rule issued by the Consumer Financial Protection Bureau (CFPB) to implement Section 1071 of the Dodd-Frank Act. While the goals of the rule may be well-intentioned, we are concerned that the final rule will increase costs for lenders that will be passed down to small businesses and simultaneously would jeopardize the privacy of borrowers.
Nearly a decade after Dodd-Frank was passed, the California Reinvestment Coalition sued the CFPB for not following the requirements of Section 1071. This ended in a court order which forced the CFPB to resolve the rules by March 31, 2023. The result was nearly 900 pages of rulemaking and over 80 reporting requirements.
The finalized rules require banks and other lenders who make 100 small business loans or more in each of the two preceding calendar years to collect data on their lending practices. For businesses that make $5 million or less in gross annual revenue, lenders must collect data from 21 fields including the loan’s purpose; the race, gender, and ethnicity of the businesses’ owners; if the business is women-owned, minority-owned, and/or LGBT-owned; and in-depth loan pricing details.
While the rules allow for a period phasing-in collection requirements, some lenders will have as little as 18 months to prepare for collecting this data. The extent of the data collection outlined by the new rules and the low 100 loan threshold mean compliance will place a significant burden on the banking and loan industries, especially on smaller regional and community banks. Events in the last few months have shown how industry strains have an outsized effect on smaller banks.
The CFPB announced they would not go through a public rulemaking process on the publication of the data collected during this process. Members of Congress have a few options to change or improve CFPB’s final rule. The Small LENDER Act (H.R. 1806) introduced by Rep. French Hill (R-AR) and the Bank Loan Privacy Act (H.R. 1810) introduced by Rep. Blaine Luetkemeyer (R-MO) both seek to improve the final rule. The former would shrink the pool of lenders obligated to collect and report data on lending while the latter would direct the CFPB to allow public comment on how the data collected from borrowers will be used and published. We urge the Committee to pass these bills.
Even better, a joint resolution introduced by several representatives (H.J. Res. 50) would stop the final rule entirely, citing the impact on small businesses and lenders. Rep. Roger Williams (TX-25), Chairman of the House Small Business Committee and co-author of the resolution, stated that, “We cannot allow the CFPB to continue to add burdensome requirements without any consideration of their impact on small businesses and lenders. This resolution furthers my commitment to protect Main Street America from costly over-regulation by unelected bureaucrats.” NTU urges swift passage of this Congressional Review Act resolution.
Thank you for considering our comments on this important issue facing taxpayers, small businesses, and financial institutions.
Sincerely,
Brandon Arnold