The ABA (American Bankers Association) backs the CFPB’s (Consumer Financial Protection Bureau) proposal to revise its small-business lending data rule. In a recent letter, the association also proposed key modifications to ease the compliance burden on banks.
The ABA’s suggestions aim to simplify the rule without compromising its effectiveness. The primary goal is to ease the collection of small-business lending data, reducing the burden on banks’ resources. In doing so, the ABA seeks to support the CFPB’s objective of promoting transparency and fairness in the small-business lending market.
The association posits that the proposed changes may enhance lending practices. As a result, small businesses, which heavily rely on loans for operations and growth, could benefit. The ABA’s proactive proposals highlight its commitment to helping both banks and small businesses navigate lending data rules.
ABA’s Suggestions to CFPB
The ABA primarily recommends excluding certain business loans from the rule. Specifically, it suggests excluding loans to non-profits, government entities, and businesses with revenues exceeding $1 million. The ABA believes this would simplify data collection, thereby easing banks’ compliance burden.
Moreover, the ABA proposes that the CFPB clarify the definitions of terms like ‘small business’, ‘women-owned’, and ‘minority-owned’. The association asserts that clear definitions are vital to prevent ambiguity that could cause inconsistent data collection.
The ABA further suggests that the CFPB consider offering a safe harbor provision to banks. This would shield them from potential non-compliance penalties, given they have made a good faith effort to follow the rule. This suggestion reflects the ABA’s recognition of the complexities of such regulations and its desire for a balanced approach that doesn’t unfairly penalize banks.
Lastly, the ABA advises the CFPB to provide comprehensive training and guidance to banks. This would ensure effective rule implementation, facilitate a smoother transition, and enable banks to comply more efficiently.
