Helping regulators and the public better understand the business lending market is the aim of a new rule unveiled last week by the federal consumer financial protection agency, according to its acting director.
The proposed rule, issued Sept. 1, would require lenders to disclose information about their lending to small businesses. According to the Consumer Financial Protection Bureau (CFPB), lenders would be required to report the amount and type of small business credit applied for and extended, demographic information about small business credit applicants, and key elements of the price of the credit offered.
That information would allow it to learn, the agency said, how small enterprises fare when trying to access financing and what barriers are holding them back from further prosperity.
The CFPB noted the rule was mandated by the legislation which created the bureau, the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).
In comments to the press Sept. 1, CFPB Acting Director Dave Uejio said the bureau and the public don’t know enough about whether small businesses have fair access to the capital they need to generate new jobs and grow the economy. “As we saw all too recently in the original design and implementation of the Paycheck Protection Program (PPP, established to help businesses keep paying their workers during the coronavirus crisis), we need to know much more about the credit needs of small businesses if we are to support them adequately in times of crisis and day-to-day,” Uejio said. “Our rule, if finalized, will shed much-needed light on the credit needs of small businesses, and it will help unleash the true potential of our nation’s entrepreneurs.”
Under the proposal – issued with a 90-day comment period, with no extension anticipated – lenders would be required to collect and report data about credit applications from small businesses, including women-owned and minority-owned small businesses. The bureau said the proposed reporting requirements would apply to a wide range of credit products, including term loans, lines of credit, credit cards, and merchant cash advances.
The agency said it would publish “application-level” data collected under the rule but would modify or withhold data from public disclosure “based on an assessment of the risks to privacy interests and the benefits of publication.”