Acting CFPB Director Uejio Reiterates Commitment to Issuing Regulations Enacting Dodd-Frank 1071On February 4, 2021, acting CFPB Director Dave Uejio published a blog post sharing statements recently made to the staff of the CFPB’s Division of Research, Markets, and Regulations (RMR). In his post, Uejio stressed two policy priorities for the CFPB: “(1) relief for consumers facing hardship due to COVID-19 and the related economic crisis and (2) racial equity.” Although the acting director outlined several policies related to COVID-19 forbearances, as well as the QM and debt collection rules, a substantial portion of the comments related to the CFPB’s use of “data, market intelligence, and analysis.” In particular, Uejio identified Dodd-Frank 1071 as an area of focus for the bureau.

As we have discussed previously, Section 1071 of the Dodd-Frank Act amends the Equal Credit Opportunity Act to mandate certain reporting requirements for lenders making business loans. Specifically, the provision requires that lenders identify women-owned, minority-owned, and small businesses and collect data related to the race, sex, and ethnicity of the business owners, the purpose of the loan, the action taken with regards to the loan, the business’s gross annual revenue, and “any additional data that the [CFPB] determines would aid in fulfilling the purposes of this section.”

Although Section 1071 is part of the 2010 Dodd-Frank Act, the CFPB has yet to issue enacting regulations. However, due in part to a May 2019 lawsuit and a resulting settlement, the CFPB has been working to issue a rule. For instance, in August 2020, the CFPB issued an online survey designed to collect information from “institutions engaged in small business financing” regarding one-time costs of compliance with Dodd-Frank 1071. More recently, in September 2020, the bureau released an outline of proposals in preparation for a small business review panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA). Among other things, the outline (1) suggests that data reporting requirements will be limited to loans made to “small businesses,” (2) contains various potential exemption options, and (3) specifies that various alternative credit products such as factoring agreements and merchant cash advance could be exempt. However, the recent change in administration means that the bureau may elect to issue a broader rule.

While rulemaking regarding Dodd-Frank 1071 has been delayed, Uejio’s comments suggest that we will see a notice of proposed rulemaking (NPRM) sooner rather than later. Specifically, the acting director expressly asks the RMR to “resume data collections paused at the beginning of the pandemic, including . . . the previously completed 1071 data collection.” More directly, Uejio “pledged [to the RMR] the support it needs to implement section 1071 of the Dodd-Frank Act without delay.”

Takeaways

Dodd-Frank 1071 is coming, and it is coming soon. The regulation will require substantial data collection and reporting by banks, non-bank lenders, and possibly alternative finance companies that make loans to businesses. Moreover, because the acting director has made it a priority to “enforce[] critical laws that protect small business owners, including from harmful discrimination, in their access to and use of credit[,]” it is conceivable that the proposed rule might be much broader in scope than what was suggested by the SBREFA outline. In other words, compliance with Dodd-Frank 1071 will likely require a substantial amount of time, effort, and resources. Stakeholders should start paying close attention to developments at the bureau in order to understand the potential compliance challenges posed by Dodd-Frank 1071. We will continue to monitor for developments.

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Photo of Christopher K. Friedman Christopher K. Friedman

Chris Friedman is a regulatory compliance attorney and litigator who focuses on helping consumer finance companies and small business lenders, as well as banks, fintech companies, and other participants in the financial services industry, address the challenges of operating in a highly regulated…

Chris Friedman is a regulatory compliance attorney and litigator who focuses on helping consumer finance companies and small business lenders, as well as banks, fintech companies, and other participants in the financial services industry, address the challenges of operating in a highly regulated sector. Chris focuses on both small business lenders and alternative business finance products and has helped non-bank small business lenders, banks who make small business loans, commercial credit counselors, lead generators, and others in the industry. He helps clients launch new products, conduct due diligence, engage in compliance reviews, evaluate litigation risk, and solve some of the unique legal problems faced by companies who work with small businesses. In that vein, Chris has written extensively about the upcoming rulemaking related to Dodd-Frank 1071, which will require data collection and reporting by companies making loans to certain small businesses.

Photo of Brian R. Epling Brian R. Epling

Brian Epling assists financial services clients, including small dollar lenders, auto finance companies, and mortgage servicers, with navigating regulatory compliance and litigation issues.

On the regulatory compliance side, Brian has assisted financial services clients with policies and procedures to comply with state and…

Brian Epling assists financial services clients, including small dollar lenders, auto finance companies, and mortgage servicers, with navigating regulatory compliance and litigation issues.

On the regulatory compliance side, Brian has assisted financial services clients with policies and procedures to comply with state and federal law and investor requirements. With respect to litigation, practicing in both Tennessee and Kentucky, Brian has successfully argued dispositive motions and appeals involving alleged violations of the Truth in Lending Act, Real Estate Procedures Act, and Fair Debt Collection Practices Act. Additionally, he has represented auto finance companies in administrative matters against the state. View articles by Brian.

Photo of Judea S. Davis Judea S. Davis

Judea Davis is an associate in Bradley’s Litigation Practice Group. Prior to joining the firm, Judea clerked for the Hon. Michelle Childs of the U.S. District Court for the District of South Carolina and the Hon. Garrison Hill of the South Carolina Court…

Judea Davis is an associate in Bradley’s Litigation Practice Group. Prior to joining the firm, Judea clerked for the Hon. Michelle Childs of the U.S. District Court for the District of South Carolina and the Hon. Garrison Hill of the South Carolina Court of Appeals.

She also served as a law fellow and law clerk for the Equal Justice Initiative, where she researched constitutional and criminal law issues and represented clients before the Alabama Board of Pardons and Paroles.

Photo of Shelby D. Lomax Shelby D. Lomax

Shelby Lomax is an associate in Bradley’s Banking and Financial Services Practice Group.

Shelby received her J.D. from Belmont University College of Law, where she served as associate editor for the Belmont Law Review, treasurer of the Student Bar Association, and president…

Shelby Lomax is an associate in Bradley’s Banking and Financial Services Practice Group.

Shelby received her J.D. from Belmont University College of Law, where she served as associate editor for the Belmont Law Review, treasurer of the Student Bar Association, and president of the Women’s Law Organization. Shelby earned a B.S. in Sport Management from Florida State University.