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NAFCU writes to CFPB on section 1071 proposed rule
NAFCU Regulatory Affairs Counsel Dale Baker wrote to the CFPB Thursday regarding the agency’s section 1071 proposed rule. The proposed rule would require credit unions and 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.
“NAFCU unequivocally opposes the Bureau’s adoption of any regulation or examination practice that operates to require that any individual make any visual observation concerning any protected demographic information or similarly sensitive data of a small business applicant’s owners,” wrote Baker. “Routinely inaccurate visual observations of this sensitive data would not only threaten the integrity of other valuable section 1071 data but would add unnecessary friction to small business relationships and give rise to avoidable, unreasonable fair lending risks.”
NAFCU also provides several suggestions for the agency regarding the rule, including:
- establishing a 500 loan-volume threshold for covered financial institutions;
- adopting a small business definition based on a $1 million prior-year gross annual revenue threshold;
- establishing a de minimis threshold applicable to all covered credit transactions that tracks the NCUA Call Report threshold, currently $50,000;
- excluding small business credit cards and commercial real estate loans from the definition of a covered credit transaction;
- extending the proposed mandatory compliance schedule from 18 months to no less than three years;
- coordinating with other FFIEC agencies, including the NCUA, to develop model examination procedures in advance of the Bureau adopting a section 1071 final rulemaking; and more.
In addition, the association sent a joint comment letter with the Credit Union National Association (CUNA) on the proposed rule, highlighting similar shared concerns.
NAFCU’s Regulatory Alert on the Proposed Rule may be found here. NAFCU remains engaged with the CFPB and will continue to ask for the bureau to offer clarity on this rulemaking.
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