Fair Lending: CFPB Agrees to Restart Women- and Minority-Owned Business Data Collection

Financial Services Law

In a settlement with a consumer advocacy group on a significant fair lending issue, the Consumer Financial Protection Bureau (CFPB) has agreed to restart long-stalled efforts to gather statutorily mandated data on lending to women- and minority-owned businesses.

What happened

To facilitate the enforcement of federal fair lending laws, Section 1071 of the Dodd-Frank Act amends the federal Equal Credit Opportunity Act to require the CFPB to collect and publish data from financial institutions on their lending to women-owned, minority-owned and small businesses. The act likewise requires, “as may be necessary,” that the CFPB promulgate regulations in this regard, and the Obama-era CFPB leadership took steps to implement such regulations as well as to empanel a Consumer Advisory Board to assist, per Section 1014 of Dodd-Frank. In 2018, however, then-Acting Director Mick Mulvaney suspended rulemaking on this topic and disbanded the Consumer Advisory Board. Although the board was later revived, the status quo on data gathering otherwise remained the same under current director Kathy Kraninger.

In May 2019, the California Reinvestment Coalition and the National Association for Latino Community Asset Builders, represented by consumer group Democracy Forward, sued the CFPB in federal court in Northern California for (in its words) defying the Dodd-Frank Act regarding data collection and rulemaking. As we reported in late 2019, the CFPB did hold a symposium on the topic, but the gathering did not resolve the issue of data collection, with lenders and advocates in disagreement over the scope of future rulemaking. As Director Kraninger said then, the “bureau fully recognizes the sensitivities here, and we know that the rule needs to be done with great care and consideration.”

And now those “sensitivities” will be put to the test. In a settlement agreement filed with the court on February 26, the CFPB agreed to outline a proposed rule for data collection and create a small-business advocates panel to assist the process. The settlement agreement must still be approved by the court.

Why It Matters

This settlement resolves a fair lending battle, but the war over implementation has not yet begun. In choosing to settle, the CFPB faced the express language of the Dodd-Frank Act, leaving the bureau unable to fight a battle it was likely to lose if fought through trial. But what this means for future litigants is uncertain. The CFPB has broad discretion in enforcing a number of significant regulations and may not so quickly settle when the issues are not so black and white.

On the specific issue of rulemaking, expect a significant battle between lenders and consumer groups over the breadth of the reporting requirements. The settlement agreement does not resolve the question of how the CFPB will treat these statutory requirements. Further, expect financial institutions to lobby for a narrow approach because of the increased costs of compliance.

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