Last week, the CFPB announced that it will hold a symposium on Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) on November 6, 2019. This will be the third in a series of symposia held by the CFPB. Section 1071 of the Dodd-Frank Act amended the Equal Credit Opportunity Act (“ECOA”) to require financial institutions to collect, report, and make public information about credit applications made by women- and minority-owned businesses and small businesses. The CFPB is responsible for drafting rules to implement Section 1071, but, other than issuing a Request for Information in 2017, has not yet taken significant steps to meet this statutory requirement. The stated purpose of the symposium is to hear various perspectives on the small business lending marketplace and CFPB’s implementation of Section 1071. The CFPB had moved the Section 1071 rulemaking to long-term status, but indicated in its Spring 2019 rulemaking agenda that it expected to resume pre-rulemaking activities. With this symposium, the CFPB appears to be (re)starting those activities.
Once Section 1071 is implemented, institutions will be required to collect information regarding the race, sex, and ethnicity of the principal owners of small businesses and women- and minority-owned businesses. Applicants have the right to refuse to provide required information. Financial institutions must retain required demographic information and submit it to the CFPB. Collection of this information is designed to “facilitate enforcement of fair lending laws,” among other things. Where feasible, Section 1071 mandates that a financial institution’s underwriters, officers, employees, or affiliates involved in making credit determinations not have access to this demographic information, and applicants must receive notice if those individuals do receive access.
ECOA’s Regulation B currently limits institutions’ ability to collect demographic information unless used to conduct an allowable self-test or to designate an individual’s title (i.e., Mrs. Mr., etc.). Regulation B also permits the collection of demographic information in certain other limited circumstances, such as in connection with loans made to a Minority Enterprise Small Business Investment Corporation, for which a creditor must consider the applicant’s minority status. The CFPB may need to amend Regulation B to create additional carve-outs for small business loans in order to implement Section 1071.
The symposium will start at 9:30 am and will feature remarks by Bureau Director Kathleen Kraninger and two panels of experts. One panel will cover the current state of the small business lending marketplace and the other will discuss the implementation of Section 1071. Planned speakers include regulators, representatives from various think tanks and trade associations, business school professors, and representatives from an array of lenders. The views expressed by panel participants could inform the CFPB’s Section 1071 proposed rule. For those who are unable to attend, we will report here on the symposium’s key takeaways.