The Center for Responsible Lending (CRL), the National Association of Latino Community Asset Builders (NALCAB), and the National Coalition for Asian Pacific American Community Development (National CAPCACD), along with eleven undersigned public interest groups submitted comments to the Consumer Financial Protection Bureau in regards to its proposed rule to implement Section 1071 of the Dodd-Frank Wall Street Reform and Protection Act. The proposed rule will expand the data collection and reporting requirements in the Small Business Lending Market to include women-owned, minority-owned and small businesses.

In these comments we first highlight racial disparities in wealth building opportunities and present evidence of the unique challenges posed by business owners of color seeking credit to start or grow their businesses. We then analyze current research and academic literature highlighting barriers business owners of color when seeking financing for their business, and discuss how as the Bureau states “it is not possible with current data to confidently answer basic questions regarding the state of small business lending” and this “limitation is especially the case with regard to the race, sex, and ethnicity of small business owners.”

In order to strengthen the Bureau’s proposal we have made the following recommendations:

  • We support the Bureau’s proposal to include Merchant Cash Advances as a covered transaction within the scope of the rule. To strengthen this proposal, we urge the Bureau to collect data to capture the full costs of MCAs by requiring lenders to report the term of the loan in addition to the difference between the amount advanced and the amount to be repaid.
  • We support the Bureau’s proposal that financial institutions request principal owners’ ethnicity and race using both aggregate categories as well as disaggregated subcategories, including the disaggregated subcategories with respect to Latino and Asian Americans, Native Hawaiian, and Pacific Islander populations as are used in Regulation C.
  • Under Proposed Comment 109(a)(3)-1,2, and 3 we urge the Bureau to with respect to applications as to which more than one covered financial institution is a creditor under ECOA, to assign reporting responsibility to the FI which has the predominant economic interest in and bears the predominant risk of a loan or that would have had such an interest had the loan been consummated.
  • We urge the Bureau in enumerating the “type of purchaser” field, to avoid the term “fintech” and use the phrase “online lender” instead and to define that phrase to mean entities that have little or no physical, retail presence and that secure applications predominantly through the Internet.
  • We disagree with the Bureau’s decision to omit requiring lenders to report credit and urge the Bureau to require lenders to report personal credit scores of business owners where used in deciding either on whether to make a loan or on the terms of the loan (including size, duration, and pricing).
  • We wholeheartedly supported the Bureau’s decision to require lenders to collect and report data not only with respect to their credit decisions but also with respect to the price of the loans that are offered.
  • To strengthen the Bureau’s proposal and capture pricing on all offers, including counteroffers, we urge the Bureau to modify the specifications for the actions taken field to include counteroffer accepted and counteroffer rejected as discrete options and then require reporting of pricing information with respect to either of these actions taken. In any instance where a lender offers terms to an applicant, we urge the Bureau to require that those terms be reported.
  • To capture ongoing costs in subsequent years after the initial reporting year, we urge the Bureau to require reporting not only of scheduled first-year, but also require reporting of any recurring scheduled cost, or costs scheduled for a year other than the first year, even if the cost is not charged during the first year or not charged every year.
  • We recommend that the Bureau provide for disaggregated reporting of third-party charges that are pure pass-through charges.
  • We urge the Bureau to provide for robust public disclosure of 1071 data