Prepare for More Regulatory Reporting Burdens

The Senate is preparing to vote next week on legislation (S. 3217, the Restoring American Financial Stability Act of 2010) that will expand the regulatory burdens on banks and credit unions.

I would like to focus just on two new data collection regulatory burdens. S. 3217 will authorize the proposed Consumer Financial Protection Bureau (CFPB) to impose new costly reporting requirements regarding deposits and small business loans. A similar reporting requirement has already passed the House of Representatives.

First, Section 1071(b) of the bill would mandate new disclosures regarding deposit accounts. Every bank and credit union is to maintain records of the number and dollar amount of the deposit accounts of its customers, for all branches, ATMs, and other deposit-gathering facilities. Customer addresses are to be geo-coded and identified as a residential or commercial customer. Every bank and credit union also is to make annual disclosures, for each branch, ATM, or other facility, regarding the type of deposit account (including whether it is a checking or savings account) and data on the number and dollar amount of all accounts, by census tract of the customer.

Second, Section 1072 of the bill imposes new reporting burdens on small business loans. Every bank and credit union, when it receives a loan application from a small business, must ask the applicant whether it is women- or minority-owned. The financial institution is to maintain this information separately from the application file and the loan underwriter. If the bank or credit union determines that the underwriter should have access to the information, the bank or credit union is to tell the customer that the underwriter has access to it. Banks and credit unions are to itemize each loan according to the following criteria plus anything else the CFPB thinks is appropriate.

(A) the number of the application and the date on which the application was received;

(B) the type and purpose of the loan or other credit being applied for;

(C) the amount of the credit or credit limit applied for, and the amount of the credit transaction or the credit limit approved for such applicant;

(D) the type of action taken with respect to such application, and the date of such action;

(E) the census tract in which is located the principal place of business of the small business loan applicant;

(F) the gross annual revenue of the business in the last fiscal year of the small business loan applicant preceding the date of the application; and

(G) the race and ethnicity of the principal owners of the business.

Once again, this info is to be publicly available.

What do these new reporting burdens have to do with the financial crisis? Nothing.