The Consumer Financial Protection Bureau (CFPB) has issued its final rule revising Regulation B (subpart B), delivering a significantly scaled-back implementation of Dodd-Frank Section 1071. Rather than a full repeal, the rule preserves the statutory mandate to collect and report small business lending data while narrowing the scope of covered lenders, loan products, required data fields, and compliance timelines.
For bank executives, compliance officers, and commercial lending leaders, this update provides substantial operational relief but also highlights critical strategic considerations for ongoing risk management.
Key Highlights of the Phase One Rule
1. Higher Thresholds & Significantly Fewer Covered Lenders
- 1,000-Transaction Threshold: A financial institution is covered only if it originated at least 1,000 covered small-business credit transactions in each of the two preceding calendar years (up from 100 in the 2023 rule).
- Dramatically Narrowed Coverage: The CFPB estimates that only about 280 institutions will be covered down from roughly 2,500 under the 2023 rule allowing approximately 1,570 depository institutions to drop out of scope entirely.
- High Market Capture: Despite covering far fewer lenders, the rule still captures an estimated 92% to 93% of small-business loan volume at depository institutions.
- Exclusions & Origination Rules: Farm Credit System lenders are excluded entirely. Coverage is determined solely by originations; excluding applications, line increases, renewals, extensions, and post-origination loan purchases.
2. Lower Revenue Cap & Target Product Exclusions
- $1 Million Revenue Cap: A business qualifies as "small" if its gross annual revenue in the preceding fiscal year was $1 million or less (down from $5 million). This cap will be CPI-U adjusted every five years starting in 2030.
- Core Products Focus: Data collection applies primarily to core commercial credit—business loans, lines of credit, and credit cards.
- Newly Excluded Products: Merchant Cash Advances, agricultural credit, and small-dollar business loans of $1,000 or less are explicitly excluded.
3. Streamlined Data Fields
- Substantial Burden Reduction: Required reporting has been cut from 81 fields in the 2023 rule to roughly 13 fields.
- Eliminated Fields: Key fair lending data points including interest rates, origination fees, denial reasons, and application channels have been completely removed.
- Simplified Demographics: Race and ethnicity reporting is limited to aggregate OMB categories, principal-owner sex is binary, and LGBTQI+-owned business status has been removed.
- Firewall & Collection Flexibility: Prescriptive anti-discouragement monitoring regimes have been deleted in favor of a flexible "reasonably designed" standard. Smaller institutions where officers wear multiple hats can invoke the statutory firewall feasibility exception without hiring additional personnel.
Implementation Timeline & Key Compliance Dates
The complex tiered schedules of prior proposals have been replaced with a single, unified timeline:
- June 30, 2026: Effective date of the final rule.
- January 1, 2028: Mandatory data collection begins for all covered institutions.
- December 31, 2028: Conclusion of a one-year good-faith compliance grace period.
- June 1, 2029: First official Small Business Lending Application Register (SBLAR) submission due (covering calendar year 2028 data).
Determining Coverage: Banks will generally look at 2026 and 2027 originations to determine coverage for 2028, though a special transition rule allows using 2025 and 2026 origination data instead.
Strategic Takeaways for Commercial Lenders
- Verify Your Origination Counts: Most community banks and credit unions fall out of Section 1071 reporting. Conduct an immediate review of your 2025 and 2026 originations using the new $1 million revenue ceiling and product carve-outs to confirm your status.
- Fair Lending Compliance Remains Essential: Falling out of Section 1071 does not create a safe harbor for commercial lending. Commercial credit continues to be scrutinized under standard interagency fair lending examination procedures.
- Plan for Future Expansion: The CFPB rollout implies an incremental build-out modeled on HMDA's multi-decade evolution. Deferred items like pricing data and denial reasons remain potential candidates for future rulemaking phases.
