Last week — roughly 8 1/2 years after the CFPB published a letter to financial institutions promising to develop rules “expeditiously” — the CFPB held an information-gathering symposium on Section 1071 of the Dodd-Frank Act. Section 1071 amended the Equal Credit Opportunity Act to require that financial institutions collect and report information concerning credit applications made by women- or minority-owned businesses and by small businesses.
As we previously noted, 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. Collection of this information is designed to “facilitate enforcement of fair lending laws,” among other things. Applicants can refuse to provide required information, but the financial institution must retain the required demographic information that it collects and submit it to the CFPB. Section 1071 mandates that, where feasible, a financial institution’s underwriters, officers, employees, or affiliates involved in making credit determinations should not have access to this demographic information, and applicants must receive notice if those individuals do receive access to demographic information.
While the CFPB is responsible for drafting rules to implement Section 1071, it had not previously taken significant steps to meet that obligation other than reporting on some preliminary research it conducted in 2017. The CFPB had moved the Section 1071 rulemaking to “long-term” status. However, in its Spring 2019 rulemaking agenda, the CFPB indicated that it expected to resume pre-rulemaking activities related to Section 1071.