Small LENDER Act
Click any stage to learn more about the legislative process.
The bill would exempt smaller banks and credit unions from a Consumer Financial Protection Bureau rule requiring lenders to report data on small business credit applications, limiting the requirement to institutions with at least $10 billion in assets or 2,500 or more such loans a year.
It would also delay the rule's compliance deadline until June 1, 2031, followed by a two-year safe-harbor period without penalties, and narrow the data lenders must collect and the definition of a qualifying small business.
What this bill would do
What it would do
The bill would amend the Equal Credit Opportunity Act's small business lending data provisions. It would exempt financial institutions from the reporting requirement if they originated fewer than 2,500 small business credit transactions in each of the prior two years, or if they hold less than $10 billion in assets. It would push back the date by which the Consumer Financial Protection Bureau can require compliance to June 1, 2031, and add a two-year safe harbor afterward during which the Bureau could not enforce the rule.
The bill would also narrow the definition of "small business" to entities with $1,000,000 or less in gross annual revenue, eliminate several categories of data institutions must collect, bar the use of applicant response rates as a compliance measure, and prohibit institutions from compiling demographic data through visual observation rather than applicant self-reporting. It would require the Bureau to create a plain-English model disclosure form.
Key provisions
- 1Would exempt financial institutions from small business lending data reporting if they originated fewer than 2,500 covered transactions in each of the prior two years or hold under $10 billion in assets
- 2Would delay the Bureau's authority to require compliance with the rule until June 1, 2031, followed by a two-year non-enforcement safe harbor
- 3Would redefine "small business" for purposes of the rule as an entity with $1,000,000 or less in gross annual revenue
- 4Would eliminate several data categories financial institutions must collect and report on small business applicants
- 5Would bar financial institutions from compiling applicant data through visual observation or other means not provided directly by the applicant
- 6Would require the Bureau to create a plain-English, single-page model disclosure form for applicants
- 7Would prohibit using applicant response rates as a factor in assessing an institution's compliance
Who would be affected
Banks, credit unions, and other lenders that make small business loans, particularly community and mid-size institutions that would newly qualify for exemption; small businesses applying for credit, whose data collection burden and disclosures would change; and the Consumer Financial Protection Bureau, which administers the rule.
Why it matters
Smaller and mid-size lenders would avoid a costly data-collection and reporting regime for years longer than under current rules, while regulators and researchers would have less small-business lending data, particularly on very small businesses and smaller-volume lenders. Businesses seeking loans could see changes in what information they are asked to provide and how it is used.
What would change
Changes to existing law
Amends Equal Credit Opportunity Act (Section 704B, 15 U.S.C. 1691c-2) (Sec. 2)
Narrows reporting scope and small-business definition, delays compliance until June 1, 2031, adds a two-year safe harbor, and restricts data collection methods.
Agencies directed to act
Effective dates
- Earliest date the Bureau may require compliance with the small business lending data rule
- Safe-harbor period during which the Bureau may not enforce compliance
How implementation would work
The Consumer Financial Protection Bureau would be barred from requiring compliance with the reporting rule until June 1, 2031, and from enforcing it for two years after that, giving affected institutions a extended runway. The Bureau would also have to design and issue a one-page, plain-English model form for informing loan applicants about the reporting requirement. Institutions would self-determine exemption eligibility based on transaction counts and asset size, and would be barred from using non-self-reported (e.g., visually observed) data or applicant response rates in compliance determinations.
Legislative status & sources
Latest action
Placed on the Union Calendar, Calendar No. 610.
Official CRS summary
Show the CRS summaryHide the CRS summary
This bill modifies the requirements for financial institutions to report certain information about small business credit applications to the Consumer Financial Protection Bureau (CFPB) and extends the timeline for compliance with the CFPB rule with respect to such reporting (i.e., Section 1071 final rule). (For background about the CFPB rule and subsequent litigation see CRS Report R47788.)
Under the bill, the reporting requirements apply only to financial institutions that originate at least 500 credit transactions to small businesses in each of the preceding two years. The bill further defines small businesses as those with gross annual revenue of $1 million or less.
The rule currently establishes a phase-in period that ultimately requires institutions that originate over 100 credit transactions to small businesses to comply with the reporting requirements. The rule also defines small businesses as those with gross annual revenue of $5 million or less.
Further, beginning on the date the final CFPB rule was issued (May 31, 2023), the bill provides three years for applicable financial institutions to comply with the rule followed by a two-year safe harbor period during which such institutions are not subject to any penalties for failure to comply with the rule.
Legislative subjects
Banking and financial institutions regulation; Business records; Commerce; Data collection, sharing, protection; Financial services and investments; Small business
Committee report
H. Rept. 119-702