Regulatory body, the Consumer Financial Protection Bureau (CFPB), expands the deadline for small businesses to comply with their lending data reporting rule

Regulatory body, the Consumer Financial Protection Bureau (CFPB), expands the deadline for small businesses to comply with their lending data reporting rule

The Consumer Financial Protection Bureau (CFPB) is taking steps to repropose rules for small-business lending data collection under Section 1071 of the Dodd-Frank Act. This decision comes after the agency agreed to revisit and repropose both the Section 1071 rule and the Section 1033 rule on consumer data sharing, following legal challenges in federal court.

The CFPB plans to issue a Notice of Proposed Rulemaking (NPRM) on Section 1071 by October 2025. This move aims to address judicial concerns and potentially adjust the implementation details of the rule. The Section 1033 rule, which concerns consumer-authorized data sharing with financial technology firms and other third parties, is also set for reproposal with an NPRM in December 2025.

The earlier CFPB rules faced lawsuits that resulted in the agency agreeing to repropose them to resolve the disputes. The reproposals are part of an ongoing effort to ensure regulatory compliance and operational efficiency.

The CFPB's operations have been affected by recent budget cuts and leadership changes, which have constrained enforcement and regulatory activities. However, the reproposals of the small business data collection regulations remain a high priority with deadlines set for late 2025.

In July 2023, a U.S. district court judge in Texas partially blocked the small-business data collection rule. The judge's exemption was extended to lenders nationwide. The CFPB, however, has extended the compliance deadlines associated with the rule by 290 days, mirroring the amount of time the rule was hung up in court.

Lenders that originate 2,500 or more small-business loans per year must begin collecting data by July 18, 2025. Those that originate at least 500 per year must collect data by Jan. 16, 2026, and lenders that originate at least 100 each year must comply by Oct. 18, 2026.

The rule includes lending decisions, borrowers' geographic and demographic information, and the price of credit. Under Tuesday's update, lenders can collect demographic data of borrowers up to a year before their compliance date for testing procedures and systems. The deadline for reporting the data to the bureau will be June 1 of the year after data collection begins.

The CFPB does not intend to assess penalties for reporting errors for the first year of collection as long as lenders engage in good-faith compliance efforts. The agency also intends to conduct examinations only to help lenders diagnose compliance weaknesses.

President Joe Biden vetoed the repeal of the rule in December, demonstrating his support for the transparency of lending details that the rule aims to achieve, as mandated under the Dodd-Frank Act. The CFPB is seeking public comments and revising the rules to address those legal and operational challenges.

The small-business data collection rule has encountered pushback since its issuance in March 2023. A Texas bank, the state's banking trade group, and the American Bankers Association sued the CFPB over the rule less than a month after its issuance. The Supreme Court, however, recently ruled the CFPB's funding structure is constitutional.

As the CFPB continues to work on the reproposals, it is clear that the small-business data collection rule is not currently finalized and effective. Instead, it is in a reproposal phase driven by previous court rulings and ongoing legislative pressures. The agency is seeking public comments and revising the rules to address those legal and operational challenges.

1. The CFPB's reproposal of the Section 1071 rule, which concerns small-business lending data collection, is part of the broader policy-and-legislation agenda in the finance sector, reflecting ongoing efforts to maintain regulatory compliance and operational efficiency in business.
2. The reproposal of the Section 1071 rule on small-business lending data collection is a hot topic in general-news, with various legal challenges, court rulings, and public comments shaping its development, demonstrating the intersection of politics and finance.

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