The Consumer Financial Protection Bureau’s Final Section 1071 Rule on Small Business Data Collection: What You Need to Know, Part I
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At the end of March 2023, the CFPB issued its long-awaited final rule to implement Section 1071 of the Dodd-Frank Act. Section 1071 amended the Equal Credit Opportunity Act to require financial institutions to collect and report certain data in connection with credit applications made by small businesses, including women- or minority-owned small businesses. Although the final rule will be effective on August 29, 2023, it contains a tiered compliance date schedule, with an earliest compliance date of October 1, 2024 for financial institutions that originate the most covered credit transactions and later compliance dates for institutions with lower transaction volumes.
In Part I of this two-part episode, we first take a close look at the final rule’s key definitions, specifically those for “covered application,” “covered financial institution,” “covered credit transaction,” and “small business.” We then discuss the data points that must be collected about the credit applied for, the borrower, and the borrower’s principal owners and consider how the data points are similar to or different from the data points required to be collected pursuant to the Home Mortgage Disclosure Act. We conclude with a discussion of the rule’s provisions regarding procedures for the collection of data, such as the restrictions on employee and officer access to data.
Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, leads the conversation, joined by John Culhane and Richard Andreano, Partners in the Group.
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