Big changes are on the horizon for commercial lending compliance. The Consumer Financial Protection Bureau (CFPB) finalized the small business lending rule on March 30, 2023. The rule implements section 1071 of the Dodd-Frank Act, which amends the Equal Credit Opportunity Act (ECOA/Regulation B), and requires financial institutions to collect and report specific data points about their small business lending activity.

Collection and reporting requirements will be familiar to those of us who also report Home Mortgage Disclosure Act (HMDA) data, with a web-based platform specifically designed for the Small Business Lending Application Register (SBLAR). Despite your level of familiarity, it’s important to not become complacent in your efforts to prepare for filing the SBLAR. Policies, procedures, and processes will require updates to ensure compliance with the small business lending rule. Now is the time to begin evaluating your forms and documents to ensure required data may be collected effectively and accurately. Additionally, monitoring for compliance, prompt investigations, and remedial actions are required under this rule.

Following the Supreme Court’s decision in CFPB vs. CFSA, the bureau extended the compliance dates for the rule as follows:

While many organizations won’t be required to report data until 2027, it is time to think about the SBLAR and ensure the accuracy for 23 data points (81 fields of data). The 2024 Filing Instructions Guide discusses the technical requirements for the following 23 data points:

1. Unique identifier
2. Application date
3. Application method
4. Application recipient
5. Credit type
6. Credit purpose
7. Amount applied for
8. Amount approved or originated
9. Action taken
10. Action taken date
11. Denial reasons
12. Pricing information
13. Census tract
14. Gross annual revenue
15. North American Industry Classification System (NAICS) code
16. Number of workers
17. Time in business
18. Minority-owned, women-owned, and LGBTQI+-owned business statuses
19. Number of principal owners
20. Demographic information of principal owner 1
21. Demographic information of principal owner 2
22. Demographic information of principal owner 3
23. Demographic information of principal owner 4

Many data points are new, unique to this rule and highly nuanced. For instance, the credit type data points has six associated data fields. The pricing information data point has 14. The demographic information points account for data points 46 through 81.

It cannot be underscored enough that this collection and reporting effort will require significant changes to a financial institution’s operations. At a minimum, your institution should be reviewing the bureau’s Small Entity Compliance Guide and other publicly available resources to prepare for the small business lending rule.

If your financial institution needs help implementing this rule or testing compliance with the data requirements, RKL’s team of Assurance professionals can help.

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Juliya Kofman Greenfield is a Principal in RKL’s Financial Services Industry Group. She draws upon deep bank examining, auditing, and consulting experience to help financial institutions meet their consumer compliance obligations through risk assessments, training, and compliance review performance.