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NAFCU Vice President of Legislative Affairs Brad Thaler on Wednesday wrote to the House Financial Services Subcommittee on Consumer Protections and Financial Institutions ahead of its hearing to ensure small and minority-owned businesses' needs are met, urging support for legislation to provide member business cap lending relief for credit unions and expressing concerns around the CFPB’s proposed rule under section 1071.  Thaler also shared NAFCU’s concerns on new legislative proposals before the Subcommittee, pointing out the impact they could have on credit unions trying to help small business members.

“These bills could end up removing flexibility for credit unions and increase their regulatory compliance burdens, making it harder to help small businesses,” wrote Thaler. Instead, the association suggests focusing legislation on increasing access to funding for small businesses and granting temporary relief from the arbitrary cap on credit union member business lending (MBL), such as the Access to Credit for Small Businesses Impacted by the COVID-19 Crisis Act.

Thaler also urged the committee to support the Member Business Loan Expansion Act as well as the Expanding Access for Underserved Communities Act, both of which would substantially help small businesses.

NAFCU also shared concerns around section 1071 which would require credit unions and credit union service organizations (CUSOs) that originated at least 25 covered small business credit transactions in each of the two preceding calendar years to collect and report small business credit application data, including data related to the ethnicity, race, and sex of small business applicants’ principal owners.

Of note, Thaler urges the CFPB to establish a clear threshold for exempting smaller community leaders under section 1071, stating that “the proposed 25 loan threshold is far too low and would unjustifiably impact many smaller lenders.”

Thaler also notes the following concerns:

• the proposed rule’s definition of small businesses, which defines any businesses with prior-year gross annual revenue of five million or less, is far too broad and would raise the cost of small business borrowing, NAFCU suggests lowering the revenue threshold to one million under this definition;
• while the CFPB does define covered credit transactions under the proposed rule, it does not exempt loans under the de minimus definition of MBL found in the Federal Credit Union Act (FCU Act); since the NCUA does not require credit unions to report these loans as MBLs, subjecting non-MBL loans to section 1071 coverage could affect the availability of these loans due to increased compliance costs; and
• the proposed rule’s 18-month mandatory compliance deadline is aggressive even for the largest financial institutions, especially for credit unions, NAFCU instead urges the CFPB to extend the compliance deadline to more than 36 months after the final rule is issued.

Last month, Sen. Tim Scott, R-S.C., and Rep. William Timmons, R-S.C., sent a letter to CFPB Director Rohit Chopra opposing the bureau's section 1071 proposed rule. NAFCU also wrote to the CFPB directly, to oppose section 1071 and to share several suggestions regarding the rule.

Read the full letter. NAFCU will continue to monitor movement on the bureau's proposal and will advocate ensuring lawmakers hear the credit union perspective on this issue.