Consumer Law Regulatory Insights: Third of CFPB Symposia Series Debates the Data Collection Rule of Section 1701 of the Dodd-Frank Act

November 15, 2019
Consumer Financial Services Alert

On November 6, 2019, the Consumer Financial Protection Bureau (Bureau) hosted the third installment of its symposia series, addressing Dodd-Frank Section 1701 which, when implemented, will require financial institutions to collect, report, and make public certain information concerning credit applications made by women-owned, minority-owned, and small businesses. At the event, two panels discussed this data collection rule, including experts from traditional and fintech lenders, academic and policy researchers, advocacy groups, and regulators.

The first panel provided perspectives on the current state of small business lending and the second panel provided thoughts on how the rule can be implemented most efficiently to meet its stated purpose: "to facilitate enforcement of fair lending laws and enable communities, governmental entities and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses."

While the benefits of data collection for learning and identifying gaps must be balanced with the costs and burdens on small business lenders and borrowers in terms of complexity, privacy, and expense, most of the panelists agreed that additional research, data and analysis is paramount to understand the needs and health of the small business sector and also to design better products and services to serve them.

Panel observations about the current state of small business lending included:

Panel suggestions on how the Bureau should implement the rule:

From tailoring the rule's definitions, to use of exemptive authority, to harmonizing definitions with analogous regulations, panelists suggested various approaches to how the Bureau might implement the rule to best meet the goals of measuring small business lending and collecting the data necessary for effective measurement. These included:

Hinshaw's Consumer Financial Services practice has issued advisories on the Bureau's first symposium on June 25, 2019, which explored Dodd-Frank's prohibition on abusive acts or practices, and the second symposium held September 19, 2019, which discussed how behavioral law and economics can inform regulatory action.