Thursday, May 30, 2024

Kennedy introduces resolution to reverse burdensome Biden CFPB rule

by BIZ Magazine

WASHINGTON – Sen. John Kennedy (R-La.) today introduced a Congressional Review Act (CRA) resolution of disapproval to the Consumer Financial Protection Bureau’s (CFPB) rule to implement Dodd Frank Section 1071, which amends the Equal Credit Opportunity Act (ECOA).

Rep. Roger Williams (R-Texas) has introduced the resolution in the House of Representatives.

“By collecting and publishing personal demographic and other information, the CFPB is putting small business owners at risk of having their private financial affairs exposed to a watching world. Reporting these personal details is an invasion of privacy and a waste of resources aimed at furthering the woke agenda. The practical impact of this rule could hamstring lending to Main Street,” Kennedy said.

“The Consumer Financial Protection Bureau’s (CFPB) new rule is a continued attack on Main Street America. Each day, small businesses struggle with rising costs, increasing interest rates, and ongoing labor shortages, and this new rule only builds on those issues. We cannot allow the CFPB to continue to add burdensome requirements without any consideration of their impact on small businesses and lenders. I am proud to stand by my commitment to protect Main Street America from costly over-regulation by unelected bureaucrats,” said Williams.

Kennedy’s CRA would ensure that the CFPB’s final rule on Dodd-Frank Section 1071 does not go into effect. 

Background: 

On March 30, the CFPB promulgated the final rule implementing Section 1071 of the Dodd-Frank Act, which amends the ECOA. The rule was published in the Federal Register on May 31, 2023.

Section 1071 requires covered financial institutions to collect and report certain personal information on small business loan applicants and report that to the CFPB. The CFPB may then make certain parts of that information public, including data that could publicly identify the small business credit applicant.

In order to comply with the Biden CFPB rule, financial institutions would have to collect information about applicants, including the applicant’s census tract, North American Industry Classification System and years in business, among other information. Further, banks are required to report the owner’s race, ethnicity and sex; and whether the business is minority-owned, women-owned or LGBT-owned.

  • The rule applies to financial institutions that originated at least 100 small business loans in each of the two preceding calendar years. 
  • Based on the number of credit transactions for small businesses, covered financial institutions must comply with the final rule beginning October 1, 2024; April 1, 2025; or January 1, 2026.
  • A small business is defined as a company with $5 million or less in revenue from the previous fiscal year.

Among the many concerns about the CFPB’s collecting and storing such personal information is that the agency recently experienced a data breach including the personally identifiable information of 256,000 consumers and failed to properly inform them for two months. 

The implementation of this rule may reduce the availability and accessibility of small business credit by increasing compliance costs of lenders.

Text of the resolution is here.

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