The Consumer Financial Protection Bureau (CFPB) has officially finalized revisions to the highly anticipated Section 1071 small business lending data collection rule. The latest rule strips back several expansive requirements from the original 2023 version, resulting in significantly more streamlined requirements, and exempted the vast majority of community banks from reporting requirements.
A Brief History of Section 1071
The origins of Section 1071 trace back to the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. Section 1071 amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to collect and report data regarding credit applications for women-owned, minority-owned, and small businesses. Congress’s primary purposes for this mandate were to facilitate the enforcement of fair lending laws and to enable communities, creditors, and the government to identify business and community development needs. The implementation has been delayed for a decade due to legal challenges, agency procedural hurdles, and industry pushbacks.
What’s Changing? The New 1071 Rule Highlights
The revised rule scales back the 2023 requirements to reduce the regulatory burden on smaller institutions but still intends to capture the vast majority of small business lending data.
1. Focus on Core Lenders (The 1,000-Loan Threshold) As previously noted, the CFPB actively rejected an asset-size exemption, meaning a bank's total assets will not determine its coverage. Financial institutions are now only covered by the rule if they originated at least 1,000 covered credit transactions for small businesses in each of the two preceding calendar years—a massive decrease from the previous 100-loan threshold.
2. A Narrower "Small Business" Definition The gross annual revenue threshold used to define a small business has been reduced from $5 million to $1 million or less.
3. Exclusion of Non-Core Lending Products The rule narrows the definition of "covered credit transactions." While core products like term loans, lines of credit, and credit cards remain covered, the new rule explicitly excludes merchant cash advances (MCAs), agricultural lending, and small dollar loans of $1,000 or less.
4. Streamlined Data Collection (No Pricing Data) The CFPB has abandoned several discretionary data points that were included in the 2023 rule. Most notably, lenders are no longer required to report pricing information (such as interest rates or origination charges). Other eliminated data points include application method, application recipient, denial reasons, the number of workers, and LGBTQI+-owned business status.
Demographic reporting has also been simplified to align with recent executive directives. Lenders will no longer collect disaggregated race and ethnicity subcategories, and the "sex" field has been changed from a free-form text box to a binary male or female choice.
Furthermore, the rule mandates that lenders proactively inform applicants of their statutory right to refuse to provide demographic data.
5. A Single, Unified Compliance Date The 2023 rule featured a complex system of tiered compliance dates based on lending volume. The new rule scraps this staggered approach entirely, providing the industry with a single, unified compliance date of January 1, 2028, giving lenders ample time to adjust their software and processes.
Key Takeaways for Lenders
The final rule carries major implications. Most community banks likely won’t have to report, with estimates indicating that fewer than 200 commercial banks will cross the reporting threshold. Additionally, the exclusion of pricing information is notable—since much of the discretion in commercial bank pricing occurs in commercial lending, fair lending implications are greatly diminished. Together, these changes greatly reduce regulatory effect compared to the 2023 rules.
Still, future adjustments are possible. The Bureau has signaled that it may later broaden reporting obligations, much like how HMDA requirements have expanded over time. Shifts in the CFPB’s priorities under different administrations add further uncertainty. Lenders should stay attentive to all regulations and maintain strong risk management practices.
