Joint ABA and State Bankers Associations Letter to the CFPB on the Notice of Proposed Rulemaking to Streamline the 1071 Final Rule

Dear Acting Director Vought,

The American Bankers Association and 52 state bankers associations (the Associations) appreciate the opportunity to comment on the CFPB's Notice of Proposed Rulemaking to streamline the 1071 final rule issued in 2023. Banks oppose discrimination in any form and support enforcement of fair lending laws. Our members also support community development by investing in the neighborhoods they serve, for the improvement of those communities, the businesses that operate there, and the families who live and work there. However, the Associations have repeatedly expressed concerns that the cost of the small business lending data collection rule will result in reduced access to credit for small businesses. And we have strong concerns that 1071 will achieve neither of its objectives.

Unfortunately, the CFPB ignored these concerns and took an expansive approach in its 2023 rule, extending the data collection regime to very small banks, defining “small business” to cover larger businesses, and increasing the statute’s 13 data points to 81 data fields. An American Bankers Association (ABA) survey conducted in February 2024 showed that the cost of the data collection was much larger than the Bureau’s 2023 estimates and fell particularly harshly on small banks. As the CFPB itself acknowledged in 2023, these costs would be passed on to small business customers, thereby decreasing, rather than increasing, access to credit.Increased costs, however, are just the beginning of the negative impacts of the 2023 rule. Those increased costs will reduce competition in the small business credit market. Over time, the 2023 rule will drive further consolidation, and the gradual loss of community banks. Reduced competition leads to fewer choices and higher prices for small businesses. Nonbanks will absorb some of the lending done today by banks but will not be able to offer the benefits of a banking relationship and the technical assistance banks provide to their small business customers.

While the CFPB underestimated the 2023 rule’s costs, it also overestimated the benefits of the data collected. The 2023 rule is premised on the erroneous assumption that small business data will be as useful for fair lending analysis as mortgage data is. However, small business data does not lend itself to the sort of analysis typically employed to evaluate mortgage lending for compliance with our fair lending laws. Mortgages are commodities with largely standardized underwriting and pricing. In contrast, small business lending lacks standardization, and loans are designed, priced and tailored to each small business’s unique situation and needs.

For these reasons, we agree with the Bureau that, given the cost, complexity, and questionable utility of the data collection, the 1071 rule should focus only on core lenders, products, and data points to avoid disruption to the small business credit market.

Download the joint comment letter to read the full text.