Regulatory Headache: Reporting of Small Business Loan Data

Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act is going to increase the regulatory burden on financial institutions, as it will require them to gather and disclose information on their lending to small businesses.

This section of the bill defines a financial institution as “any partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity that engages in any financial activity.” This definition captures banks, credit unions, and other financial entities.

The new Bureau of Consumer Financial Protection, when it becomes operational, will require banks and credit unions to collect and disclose the following small business loan data:

(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 women-owned, minority-owned, or small business loan applicant;
(F) the gross annual revenue of the business in the last fiscal year of the women-owned, minority-owned, or small business loan applicant preceding the date of the application;
(G) the race, sex, and ethnicity of the principal owners of the business; and
(H) any additional data that the Bureau determines would aid in fulfilling the purposes of this section.

There are two purposes for this data collection in the legislation – (1) the enforcement of fair lending laws and (2) the identification of business and community development needs and opportunities of women-owned, minority-owned, and small businesses.

These new reporting requirements are just another compliance headache for banks and credit unions.