NEWS: The CFPB has issued an interim final rule, amending its small business lending rule under the Equal Credit Opportunity Act (Reg. B) to extend the compliance dates until 2027-28.
The change should ease uncertainty about compliance with the rule. The rule is still on the books – it has not been repealed – and litigation has only resulted in court-ordered stays of the rule for the plaintiffs who filed those cases. The new rule extends the compliance deadlines for all covered lenders.
Background
As explained in The League’s ii Release No. B083, the CFPB’s small business lending rule requires certain credit unions (those doing a certain amount of lending to small businesses) to collect and report to federal authorities data about loans to small businesses – those with less than $5 million in gross revenue in their last fiscal year.
The data includes basic information about the business and the loan, similar to the HMDA reporting requirement but for small business lenders. It also requires covered lenders to ask if the business applying is minority-owned, women-owned, or LGBTQ+-owned, as well as the applicant’s principal owners’ ethnicity, race, and sex. The rule is intended to help authorities enforce fair lending laws.
As we reported in this May Compliance Courier, the CFPB announced in a press release that it “will not prioritize enforcement or supervision” of the rule.
New compliance deadlines
The original, revised, and new compliance dates are as follows:
- Lenders are in Tier 1 if they originated at least 2,500 covered loans in both 2022 and 2023.
- Lenders are in Tier 2 if they originated at least 500 covered loans in both 2022 and 2023 and were not in Tier 1.
- Lenders are in Tier 3 if they originated at least 100 covered loans in both 2024 and 2025 and were not in Tiers 1 or 2.
Financial institutions can choose to use their small business originations from 2022 and 2023 or from subsequent years to determine their compliance tier.
In the preamble to the new rule, the CFPB advised that “[c]overed financial institutions are permitted to begin collecting protected demographic data required under the 2023 final rule 12 months before their new compliance date, in order to test their procedures and systems.”
What’s next?
In an April court filing, the CFPB wrote that it plans to start a new rulemaking process to revise the small business lending rule “as expeditiously as reasonably possible.” This Compliance Courier covered that development.
When the CFPB starts that new rulemaking to consider changing the small business lending rule, The League will ask credit unions to share their thoughts with us so that we can submit a comment letter.