56356 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

1 15 U.S.C. 1691 et seq. 

2Public Law 111–203, tit. X, section 1071, 124 

Stat. 1376, 2056 (2010), codified at ECOA section 

704B, 15 U.S.C. 1691c–2. 

3The Bureau interpreted section 1071 to mean 

that obligations for financial institutions to collect, 

maintain, and submit data ‘‘do not arise until the 

Bureau issues implementing regulations and those 

regulations take effect.’’ See Letter from Leonard 

Kennedy, General Counsel, CFPB, to Chief 

Executive Officers of Financial Institutions under 

Section 1071 of the Dodd-Frank Act (Apr. 11, 2011), 

https://files.consumerfinance.gov/f/2011/04/GCletter-re-1071.pdf. 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Part 1002 

[Docket No. CFPB–2021–0015] 

RIN 3170–AA09 

Small Business Lending Data 

Collection Under the Equal Credit 

Opportunity Act (Regulation B) 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Proposed rule; request for 

public comment. 

SUMMARY: The Bureau of Consumer 

Financial Protection (Bureau) is 

publishing for public comment a 

proposed rule amending Regulation B to 

implement changes to the Equal Credit 

Opportunity Act (ECOA) made by 

section 1071 of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (Dodd-Frank Act). Consistent with 

section 1071, the Bureau is proposing to 

require covered financial institutions to 

collect and report to the Bureau data on 

applications for credit for small 

businesses, including those that are 

owned by women or minorities. The 

Bureau’s proposal also addresses its 

approach to privacy interests and the 

publication of section 1071 data; 

shielding certain demographic data from 

underwriters and other persons; 

recordkeeping requirements; 

enforcement provisions; and the 

proposed rule’s effective and 

compliance dates. 

DATES: Comments must be received on 

or before January 6, 2022. 

ADDRESSES: You may submit comments, 

identified by Docket No. CFPB–2021– 

0015 or RIN 3170–AA09, by any of the 

following methods: 

• Federal eRulemaking Portal: 

https://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Email: 2021-NPRM-1071@cfpb.gov. 

Include Docket No. CFPB–2021–0015 or 

RIN 3170–AA09 in the subject line of 

the message. 

• Mail/Hand Delivery/Courier: 

Comment Intake—Section 1071 Small 

Business Lending Data Collection, 

Bureau of Consumer Financial 

Protection, 1700 G Street NW, 

Washington, DC 20552. 

Instructions: The Bureau encourages 

the early submission of comments. All 

submissions should include the agency 

name and docket number or Regulatory 

Information Number (RIN) for this 

rulemaking. Because paper mail in the 

Washington, DC area and at the Bureau 

is subject to delay, and in light of 

difficulties associated with mail and 

hand deliveries during the COVID–19 

pandemic, commenters are encouraged 

to submit comments electronically. In 

general, all comments received will be 

posted without change to https://

www.regulations.gov. In addition, once 

the Bureau’s headquarters reopens, 

comments will be available for public 

inspection and copying at 1700 G Street 

NW, Washington, DC 20552, on official 

business days between the hours of 10 

a.m. and 5 p.m. Eastern Time. At that 

time, you can make an appointment to 

inspect the documents by telephoning 

202–435–7275. 

All comments, including attachments 

and other supporting materials, will 

become part of the public record and 

subject to public disclosure. Proprietary 

information or sensitive personal 

information, such as account numbers 

or Social Security numbers, or names of 

other individuals, should not be 

included. Comments will not be edited 

to remove any identifying or contact 

information. 

FOR FURTHER INFORMATION CONTACT: 

Camille Gray, Paralegal Specialist; Tola 

Adenuga, Regulatory Implementation 

and Guidance Specialist; Tarrian Ellis, 

Honors Attorney; Jaydee DiGiovanni, 

Counsel; Kristine M. Andreassen, 

Pavitra Bacon, Benjamin Cady, Joseph 

Devlin, Amy Durant, Gregory Evans, 

David Jacobs, Kathryn Lazarev, 

Lawrence Lee, Kristen Phinnessee, or 

Michael Scherzer, Senior Counsels, 

Office of Regulations, at 202-435-7700 

or https://reginquiries.consumerfinance.

gov/. If you require this document in an 

alternative electronic format, please 

contact CFPB_Accessibility@cfpb.gov. 

SUPPLEMENTARY INFORMATION: 

I. Summary of the Proposed Rule 

In 2010, Congress passed the DoddFrank Act. Section 1071 of that Act 

amended ECOA1 to require that 

financial institutions collect and report 

to the Bureau certain data regarding 

applications for credit for womenowned, minority-owned, and small 

businesses.2 Section 1071’s statutory 

purposes are to (1) facilitate 

enforcement of fair lending laws, and (2) 

enable communities, governmental 

entities, and creditors to identify 

business and community development 

needs and opportunities of womenowned, minority-owned, and small 

businesses. 

Section 1071 specifies a number of 

data points that financial institutions 

are required to collect and report, and 

also provides authority for the Bureau to 

require any additional data that the 

Bureau determines would aid in 

fulfilling section 1071’s statutory 

purposes. Section 1071 also contains a 

number of other requirements, 

including those that address restricting 

the access of underwriters and other 

persons to certain 1071 data; 

recordkeeping; publication of 1071 data; 

and modifications or deletions of data 

prior to publication in order to advance 

a privacy interest. 

Section 1071 directs the Bureau to 

prescribe such rules and issue such 

guidance as may be necessary to carry 

out, enforce, and compile data pursuant 

to section 1071, and permits the Bureau 

to adopt exceptions to any requirement 

or to exempt financial institutions from 

the requirements of section 1071 as the 

Bureau deems necessary or appropriate 

to carry out the purposes of section 

1071. The Bureau is proposing to add a 

new subpart B to Regulation B to 

implement the requirements of section 

1071.3 Key aspects of the Bureau’s 

proposal are summarized below. 

If finalized, the Bureau’s proposed 

rule would create the first 

comprehensive database of small 

business credit applications in the 

United States. This would include 

critical information about womenowned and minority-owned small 

businesses to help regulators and the 

public identify and address fair lending 

concerns. The database would also 

enable a range of stakeholders to better 

identify business and community 

development needs and opportunities 

for small businesses, including womenowned and minority-owned small 

businesses. Just as the Bureau works in 

other ways to help foster fairness and 

opportunity in consumer financial 

services markets for all consumers, the 

proposed 1071 rule is structured to 

realize these same goals for the small 

business market—for all small 

businesses within the scope of the rule, 

including those that are owned by 

women and minorities. Research 

indicates that minority-owned small 

businesses face particular obstacles, as 

do those that are women-owned, but the 

current lack of comprehensive, 

quantitative data has made it difficult to 

understand the extent of these obstacles 

and address them with responsive 


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Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56357 

4For purposes of this notice of proposed 

rulemaking, the Bureau is using the term depository 

institution to mean any bank or savings association 

defined by the Federal Deposit Insurance Act, 12 

U.S.C. 1813(c)(1), or credit union defined pursuant 

to the Federal Credit Union Act, 12 U.S.C. 1751 et 

seq., as implemented by 12 CFR 700.2. The Bureau 

notes that the Dodd-Frank Act defines a depository 

institution to mean any bank or savings association 

defined by the Federal Deposit Insurance Act, 12 

U.S.C. 1811 et seq.; there, that term does not 

encompass credit unions. 12 U.S.C. 5301(18)(A), 

1813(c)(1). To facilitate analysis and discussion, the 

Bureau is referring to banks and savings 

associations together with credit unions as 

depository institutions throughout this notice, 

unless otherwise specified. 

5The Bureau’s rules, including this proposed rule 

to implement section 1071, generally do not apply 

to motor vehicle dealers, as defined in section 

1029(f)(2) of the Dodd-Frank Act, that are 

predominantly engaged in the sale and servicing of 

motor vehicles, the leasing and servicing of motor 

vehicles, or both. 12 U.S.C. 5519. 

6 12 U.S.C. 2801 et seq. 

7 15 U.S.C. 631 et seq. 

8See 15 U.S.C. 632(a)(2)(C). 

policy. By shining a light on lending 

practices in this area, the Bureau 

believes that the 1071 data would not 

only foster a culture of compliance but 

bring particular attention to the 

underserved parts of the small business 

market that have traditionally faced the 

greatest obstacles to success. In this 

way, the proposed rule is intended to 

help small businesses drive inclusive 

and equitable growth. 

Scope. The Bureau is proposing to 

require financial institutions to collect 

and report 1071 data regarding 

applications for credit for small 

businesses, including those that are 

owned by women and minorities. The 

Bureau is not proposing to require that 

financial institutions collect and report 

data regarding applications for womenowned and minority-owned businesses 

that are not small. Because most existing 

businesses are small businesses, 

covering small businesses necessarily 

means nearly all women-owned and 

minority-owned businesses will also be 

covered. The Bureau believes that this 

scope is consistent with the statute and 

will allow the rule to carry out section 

1071’s purposes without requiring 

collection of data that would be of 

limited utility. 

Covered financial institutions. 

Consistent with language from section 

1071, the Bureau is proposing to define 

a ‘‘financial institution’’ to include any 

partnership, company, corporation, 

association (incorporated or 

unincorporated), trust, estate, 

cooperative organization, or other entity 

that engages in any financial activity. 

Under the proposed definition, the 

Bureau’s 1071 rule would apply to a 

variety of entities that engage in small 

business lending, including depository 

institutions (i.e., banks, savings 

associations, and credit unions),4 online 

lenders, platform lenders, community 

development financial institutions (both 

depository and nondepository 

institutions), lenders involved in 

equipment and vehicle financing 

(captive financing companies and 

independent financing companies), 

commercial finance companies, 

governmental lending entities, and 

nonprofit nondepository lenders.5

The Bureau’s proposal uses the term 

‘‘covered financial institution’’ to refer 

to those financial institutions that 

would be required to comply with 

section 1071’s data collection and 

reporting requirements. The Bureau is 

proposing that a covered financial 

institution would be a financial 

institution that originated at least 25 

covered credit transactions for small 

businesses in each of the two preceding 

calendar years. The Bureau is not 

proposing an asset-based exemption 

threshold for depository institutions, or 

any other general exemptions for 

particular categories of financial 

institutions. 

The Bureau is also proposing to 

permit creditors that are not covered 

financial institutions to voluntarily 

collect and report data under section 

1071 in certain circumstances. 

Covered credit transactions. The 

Bureau is proposing to require that 

covered financial institutions collect 

and report data regarding covered 

applications from small businesses for 

covered credit transactions. The Bureau 

is proposing to define a ‘‘covered credit 

transaction’’ as one that meets the 

definition of business credit under 

existing Regulation B, with certain 

exceptions. Loans, lines of credit, credit 

cards, and merchant cash advances 

(including such credit transactions for 

agricultural purposes and those that are 

also covered by the Home Mortgage 

Disclosure Act of 1975 (HMDA) 6) 

would all be covered credit transactions 

within the scope of this proposed rule. 

The Bureau is proposing to exclude 

trade credit, public utilities credit, 

securities credit, and incidental credit. 

Factoring, leases, consumer-designated 

credit used for business purposes, and 

credit secured by certain investment 

properties would also not be covered 

credit transactions. 

Covered applications. The Bureau is 

proposing to define a ‘‘covered 

application’’—which would trigger data 

collection and reporting and related 

requirements—as an oral or written 

request for a covered credit transaction 

that is made in accordance with 

procedures used by a financial 

institution for the type of credit 

requested. This proposed definition of 

covered application is largely consistent 

with the existing Regulation B 

definition of that term. However, the 

Bureau is also proposing that certain 

circumstances would not be covered 

applications, even if they are considered 

applications under existing Regulation 

B. Specifically, the Bureau is proposing 

that a covered application does not 

include (1) reevaluation, extension, or 

renewal requests on an existing business 

credit account, unless the request seeks 

additional credit amounts; or (2) 

inquiries and prequalification requests. 

Small business definition. The Bureau 

is proposing to define a ‘‘small 

business,’’ about whose applications for 

credit data must be collected and 

reported, by reference to the definitions 

of ‘‘business concern’’ and ‘‘small 

business concern’’ as set out in the 

Small Business Act 7 and Small 

Business Administration (SBA) 

regulations. However, in lieu of using 

the SBA’s size standards for defining a 

small business concern, the Bureau’s 

proposed definition would look to 

whether the business had $5 million or 

less in gross annual revenue for its 

preceding fiscal year. The Bureau is 

seeking SBA approval for its alternate 

small business size standard pursuant to 

the Small Business Act.8

Data to be collected and reported. The 

Bureau’s proposal addresses the data 

points that must be collected and 

reported by covered financial 

institutions for covered applications 

from small businesses. Many of the 

proposed data points are specifically 

enumerated in section 1071; for the 

others, the Bureau is proposing to use 

the authority granted by section 1071 to 

require financial institutions to collect 

and report any additional data that the 

Bureau determines would aid in 

fulfilling the purposes of section 1071. 

Certain of these data points are or could 

be collected from the applicant (or 

otherwise determined based on 

information provided or authorized by 

the applicant); other data points are 

based on information solely within the 

financial institution’s control. The 

Bureau is proposing that covered 

financial institutions maintain 

procedures to collect applicantprovided data at a time and in a manner 

that is reasonably designed to obtain a 

response. The Bureau’s proposal also 

addresses what financial institutions 

should do if, despite having such 

procedures in place, they are unable to 

obtain certain data from an applicant. A 

financial institution would be permitted 

to rely on statements made by an 


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56358 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

9 140 S. Ct. 1731 (2020). 

10 86 FR 14363 (Mar. 16, 2021). 

applicant (whether in writing or orally) 

or information provided by an applicant 

when collecting and reporting 1071 

data, although for most data points if the 

financial institution verifies the 

information provided it must report the 

verified information. The Bureau’s 

proposal would also permit financial 

institutions to reuse certain previously 

collected data in certain circumstances. 

As noted above, the Bureau’s proposal 

includes certain data points that are, or 

could be, provided by the applicant. 

Some data points specifically relate to 

the credit being applied for: The credit 

type (which includes information on the 

credit product, types of guarantees, and 

loan term); The credit purpose; and the 

amount applied for. There are also data 

points that relate to the applicant’s 

business: A census tract based on an 

address or location provided by the 

applicant; gross annual revenue for the 

applicant’s preceding full fiscal year; 

the 6-digit North American Industry 

Classification System (NAICS) code 

appropriate for the applicant; the 

number of workers that the applicant 

has (i.e., non-owners working for the 

applicant); the applicant’s time in 

business; and the number of principal 

owners of the applicant. 

There are also data points that would 

be provided by the applicant addressing 

the demographics of the applicant’s 

ownership: Whether the applicant is a 

minority-owned business; whether the 

applicant is a women-owned business; 

and the ethnicity, race, and sex of the 

applicant’s principal owners. The 

Bureau refers to these data points 

collectively as an applicant’s ‘‘protected 

demographic information.’’ The Bureau 

is proposing that principal owners’ 

ethnicity and race be collected from 

applicants using aggregate categories as 

well as disaggregated subcategories. The 

Bureau is proposing to permit principal 

owners to self-describe their sex 

(instead of or in addition to choosing 

male and/or female), and is seeking 

comment on whether and, if so, how its 

collection of principal owners’ sex 

should incorporate sexual orientation 

and gender identity in light of the recent 

Supreme Court decision in Bostock v. 

Clayton County 9 and the Bureau’s 

subsequent ECOA interpretive rule.10 If 

an applicant does not provide any 

ethnicity, race, or sex information for 

any principal owners, the Bureau is 

proposing that the financial institution 

must collect at least one principal 

owner’s race and ethnicity (but not sex) 

via visual observation or surname, but 

only if the financial institution meets 

with any principal owners in person or 

via electronic media with an enabled 

video component. The Bureau is 

proposing detailed instructions to assist 

financial institutions in collecting and 

reporting applicants’ protected 

demographic information pursuant to 

section 1071. The Bureau is also 

proposing a sample data collection 

form, which would include a required 

notice to applicants that the financial 

institution cannot discriminate on the 

basis of an applicant’s minority- or 

women-owned business status or any 

principal owner’s ethnicity, race, or sex. 

In addition, the Bureau’s proposal 

includes data points that would be 

generated or supplied solely by the 

financial institution. These data points 

include, for all applications: A unique 

identifier for each application for or 

extension of credit; the application date; 

the application method (i.e., the means 

by which the applicant submitted its 

application); the application recipient 

(that is, whether the financial institution 

or its affiliate received the application 

directly, or whether it was received by 

the financial institution via a third 

party); the action taken by the financial 

institution on the application; and the 

action taken date. For denied 

applications, there is also a data point 

for denial reasons. For applications that 

are originated or approved but not 

accepted, there is a data point for the 

amount originated or approved, and a 

data point for pricing information 

(which would include, as applicable, 

interest rate, total origination charges, 

broker fees, initial annual charges, 

additional cost for merchant cash 

advances or other sales-based financing, 

and prepayment penalties). 

Firewall. The Bureau’s proposal 

includes a section to implement the 

requirement in section 1071 that certain 

data collected be shielded from 

underwriters and certain other persons; 

the Bureau refers to this as the 

‘‘firewall.’’ An employee or officer of a 

financial institution or a financial 

institution’s affiliate that is involved in 

making any determination concerning 

the application would be prohibited 

from accessing an applicant’s responses 

to inquiries that the financial institution 

makes pursuant to section 1071 

regarding whether the applicant is a 

minority-owned or women-owned 

business, and the ethnicity, race, and 

sex of the applicant’s principal owners. 

This prohibition would not apply to 

an employee or officer, however, if the 

financial institution determines that it is 

not feasible to limit that employee’s or 

officer’s access to an applicant’s 

responses to the financial institution’s 

inquiries regarding the applicant’s 

protected demographic information, and 

the financial institution provides a 

notice to the applicant regarding that 

access. It would not be feasible to limit 

access if the financial institution 

determines that an employee or officer 

involved in making any determination 

concerning a covered application 

should have access to one or more 

applicants’ responses to inquiries 

regarding protected demographic 

information. The notice must be 

provided to each applicant whose 

information will be accessed or, 

alternatively, the financial institution 

could provide the notice to all 

applicants whose information could be 

accessed. The Bureau is proposing 

sample language that a financial 

institution could use in providing this 

notice. 

Reporting data to the Bureau; 

publication of data by the Bureau; and 

privacy considerations. The Bureau is 

proposing to require that 1071 data be 

collected on a calendar year basis and 

reported to the Bureau on or before June 

1 of the following year. Financial 

institutions reporting data to the Bureau 

would be required to provide certain 

identifying information about 

themselves as part of their submission. 

The Bureau is proposing to provide 

technical instructions for the 

submission of 1071 data in a Filing 

Instructions Guide and related 

materials. 

The Bureau is proposing to make 

available to the public, on an annual 

basis and on the Bureau’s website, the 

data submitted to it by financial 

institutions, subject to modifications or 

deletions made by the Bureau, at its 

discretion, to protect privacy interests. 

To determine whether and how the 

Bureau might use its discretion to 

modify or delete data prior to 

publication, the Bureau is proposing a 

‘‘balancing test’’ that would assess the 

risks and benefits of public disclosure. 

After the Bureau receives at least one 

full year of 1071 data following the 

compliance date of the final rule, the 

Bureau plans to issue a policy statement 

in which it would set forth its intended 

modifications and deletions. The 

Bureau is also proposing that the 

Bureau’s publication of the data would 

satisfy financial institutions’ statutory 

obligation to make data available to the 

public upon request. 

Recordkeeping, enforcement, 

severability, and effective and 

compliance dates. The Bureau’s 

proposal addresses issues related to 

recordkeeping and to severability of the 

rule. It also addresses enforcement of 

violations of the rule, along with 

provisions regarding bona fide errors 


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Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56359 

11 12 U.S.C. 2901 et seq. 

12The Riegle Community Development Banking 

and Financial Institutions Act of 1994, 12 U.S.C. 

4701 et seq., authorized the Community 

Development Financial Institution Fund (CDFI 

Fund). The CDFI Fund is discussed in more detail 

in part II.F.2.ii below. 

13Off. of Advocacy, Small Bus. Admin., 2020 

Small Business Profile (May 2020), https://

cdn.advocacy.sba.gov/content/uploads/2020/06/ 

04144214/2020-Small-Business-Economic-ProfileStates-Territories.pdf (estimating 31.7 million small 

businesses in the United States). 

14Off. of Advocacy, Small Bus. Admin., 

Frequently Asked Questions About Small Business, 

at 1 (Oct. 2020), https://cdn.advocacy.sba.gov/wpcontent/uploads/2020/11/05122043/SmallBusiness-FAQ–2020.pdf (SBA OA 2020 FAQs) 

(small businesses accounted for 65.1 percent of new 

jobs since 2000). See generally Congressional 

Research Serv., Small Business Administration and 

Job Creation (updated June 23, 2021), https://

fas.org/sgp/crs/misc/R41523.pdf (discussing small 

business job creation); Jon Haltiwanger et al., Who 

Creates Jobs? Small Versus Large Versus Young, 95 

Rev. Econ. Stat. 347, 347–48 (May 2013), https://

direct.mit.edu/rest/article/95/2/347/58100/WhoCreates-Jobs-Small-versus-Large-versus-Young 

(finding that young firms, which are generally 

small, contribute disproportionately to both gross 

and net job creation). 

15 Jason Dietrich et al., Bureau of Consumer Fin. 

Prot., Data Point: Small Business Lending and the 

Great Recession, at 9 (Jan. 23, 2020), https://files.

consumerfinance.gov/f/documents/cfpb_datapoint_small-business-lending-great-recession.pdf 

(finding that small business lending fell sharply 

during the Great Recession and recovered slowly, 

still not reaching pre-Recession levels by 2017). 

16Ays ̧egu ̈l S ̧ahin et al., Fed. Reserve Bank of N.Y., 

Current Issues in Economics & Finance, Why Small 

Businesses Were Hit Harder by the Recent 

Recession, at 1 (Vol. 17, No. 4, 2011), https://

www.newyorkfed.org////_issues/ci17-4.pdf. 

17Rebel A. Cole, Off. of Advocacy, Small Bus. 

Admin, How Did the Financial Crisis Affect Small 

Business Lending in the United States?, at 2 (Nov. 

2012), https://www.microbiz.org/content/ploads//

04/SmallBizLending-and-FiscalCrisis.pdf. 

18Alexander W. Bartik et al., The Impact of 

COVID–19 on Small Business Outcomes and 

Expectations, 117 Proc. Nat’l Acad. Sci. 17656, 

17656 (July 2020), https://www.pnas.org/content/ 

pnas/117/30/17656.full.pdf. 

19Leland D. Crane et al., Bd. of Governors of the 

Fed. Reserve Sys., Finance and Economics 

Discussion Series, 2020–089, Business Exit During 

the COVID–19 Pandemic: Non-Traditional 

Measures in Historical Context, at 4 (2020), https:// 

www.federalreserve.gov/econres/feds/files/ 

2020089r1pap.pdf (estimating excess establishment 

exits and analyzing other estimates of small 

business exits during the pandemic). The paper 

defines ‘‘exit’’ as permanent shutdown and 

calculates ‘‘excess’’ exits by comparing the number 

of exits during the 12-month period from March 

2020 to February 2021 with previous years. Id. at 

2–4. 

20ADP Research Inst., ADP National Employment 

Report (May 2021), https://

adpemploymentreport.com////May-2021.aspx (nonfarm private sector jobs as of June 2021 as compared 

to Feb. 2020); Biz2Credit, Biz2Credit Small 

Business Lending Index Finds April 2021 Non-PPP 

Loan Approval Rates Move Little for All Types of 

Lenders (Apr. 2021), https://www.biz2credit.com/ 

business-lending-index/april-2021 (approvals as of 

May 2021). 

21Congressional Research Serv., Small Business 

Credit Markets and Selected Policy Issues, at 6 

(Aug. 20, 2019), https://fas.org/sgp//misc/ 

R45878.pdf (decline since 1986); Bruce C. Mitchell 

et al., Nat’l Cmty. Reinvestment Coal., 

Relationships Matter: Small Business and Bank 

Branch Locations, https://ncrc.org/relationshipsmatter-small-business-and-bank-branch-locations/ 

(last visited Aug. 24, 2021) (branch closures). 

22PYMNTS, How Long Can MCAs Avoid the 

‘Loan’ Label? (Jan. 20, 2016), https://

www.pymnts.com/in-depth/2016/how-long-canmcas-avoid-the-loan-label/. 

under the rule as well as several safe 

harbors. 

Finally, the Bureau is proposing that 

its final rule to implement section 1071 

would become effective 90 days after 

publication in the Federal Register, 

though compliance with the rule would 

not be required until approximately 18 

months after publication in the Federal 

Register. The Bureau is also proposing 

several related transitional provisions 

that would permit covered financial 

institutions to begin collecting 

applicants’ protected demographic 

information prior to the compliance 

date and would permit financial 

institutions to use a different time 

period to determine whether they will 

be covered by the rule as of the 

compliance date. 

II. Background 

As discussed above, in 2010, Congress 

enacted the Dodd-Frank Act. Section 

1071 of the Dodd-Frank Act, which 

amended ECOA, requires financial 

institutions to collect and report to the 

Bureau data regarding applications for 

credit for women-owned, minorityowned, and small businesses. Section 

1071 was adopted for the dual purposes 

of facilitating fair lending enforcement 

and enabling communities, 

governmental entities, and creditors to 

identify business and community 

development needs and opportunities of 

such businesses. Section 1071 

complements other Federal efforts to 

ensure fair lending and to promote 

community development for small 

businesses, including through ECOA, 

the Community Reinvestment Act of 

1977 (CRA),11 and the Community 

Development Financial Institutions 

(CDFI) Fund.12

The collection and subsequent 

publication of more robust and granular 

data regarding credit applications for 

small businesses, including those that 

are women- and minority-owned, will 

provide much-needed transparency to 

the small business lending market. The 

current COVID–19 pandemic has shown 

that transparency is essential, 

particularly at a time of crisis, when 

small businesses, especially those 

owned by women and minorities, may 

be in urgent need of credit in order to 

recover from economic shocks. 

Furthermore, in the years and decades 

to come, the collection and publication 

of these data will be helpful in 

identifying potential fair lending 

violations and in facilitating the 

enforcement of anti-discrimination 

laws. It will also help governments, 

community groups, financial 

institutions, and other stakeholders to 

identify opportunities and gaps in the 

market, thereby enhancing business and 

community development and boosting 

broad-based economic activity and 

growth. 

Overview 

Small businesses are a cornerstone of 

the U.S. economy. There were over 30 

million small businesses in the U.S. in 

2017, employing almost half of all 

private sector employees.13 Small 

businesses, particularly start-ups, also 

generated 65 percent of new jobs since 

2000.14 Small businesses were hit hard 

by two major shocks in the last two 

decades. First, the Great Recession, 

which began in 2007, disproportionately 

affected small businesses.15 Between 

2007 and 2009, employment at 

businesses with under 50 employees fell 

by 10.4 percent, compared with 7.5 

percent at larger firms,16 while between 

2008 and 2011 lending to small firms 

fell by 18 percent, compared with 9 

percent at larger firms.17 Small 

businesses suffered again because of the 

COVID–19 pandemic. Around 40 

percent of small businesses were 

temporarily closed in late March and 

early April 2020, due primarily to 

demand shocks and employee health 

concerns.18 Across the first year of the 

pandemic, ‘‘excess’’ business 

establishment exits from the market, in 

comparison to exits over the same 

period from prior years, numbered up to 

200,000.19 As of mid-2021, loan 

approvals (other than for government 

emergency programs) still remained 

low, and some 845,000 non-farm private 

sector jobs had not yet been recovered.20

During the last two decades, the small 

business lending landscape has also 

transformed. Traditional providers— 

namely banks—consolidated, leading to 

branch closures. The number of banks 

in the U.S. has declined from over 

18,000 in 1986 to under 5,200 today and 

the number of branches declined by 14 

percent from 2009 to 2020.21

Meanwhile, new providers and 

products, such as fintechs and merchant 

cash advances (MCAs), have become 

increasingly prevalent in the small 

business lending market. Financing by 

MCA providers is estimated to have 

increased from $8.6 billion in volume 

during 2014 to $15.3 billion in 2017.22

From 2017 to 2019, the volume may 


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56360 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

23Paul Sweeney, Gold Rush: Merchant Cash 

Advances are Still Hot, deBanked (Aug. 18, 2019), 

https://debanked.com/2019/08/gold-rushmerchant-cash-advances-are-still-hot/. Although 

the article does not specify one way or the other, 

estimates by the underlying source, Bryant Park 

Capital, appear to reference origination volumes 

rather than outstanding balances. See Nimayi Dixit, 

S&P Global Market Intelligence, Payment Fintechs 

Leave Their Mark On Small Business Lending (Aug. 

28, 2018), https://www.spglobal.com/ 

marketintelligence/en/news-insights/research/ 

payment-fintechs-leave-their-mark-on-smallbusiness-lending. Depending on credit multiplier 

effects, the value of annual origination volumes 

could be smaller or greater than outstanding 

balances. Without information on outstanding 

balances and for the purposes of calculating a 

market size for small business financing in 2019, 

the Bureau assumes in this paper a 1:1 ratio 

between annual origination volumes and 

outstanding balances for MCA products. See part 

II.D below for discussion of credit multiplier effects 

and for market size calculations for MCA and other 

small business financing products in 2019. 

24Fintechs are defined as ‘‘technology companies 

providing alternatives to traditional banking 

services, most often exclusively in an online 

environment,’’ and may overlap in part with other 

categories of financial institution, such as 

commercial finance companies and/or providers of 

specialized products, including factoring and 

MCAs. Brett Barkley & Mark Schweitzer, The Rise 

of Fintech Lending to Small Businesses: Businesses’ 

Perspectives on Borrowing, 17 Int’l J. Cent. Banking 

35, 35–36 (Mar. 2021), https://www.ijcb.org/journal/ 

ijcb21q1a2.pdf. 

25 Id. (citing Katie Darden et al., S&P Global 

Market Intelligence, 2018 US Fintech Market 

Report, at 5, https://www.spglobal.com/ 

marketintelligence/en/documents/2018-us-fintechmarket-report.pdf (2018 US Fintech Market 

Report)). This figure annualizes $121 million in 

estimated 2013 quarterly originations to $484 

million in annual originations and scales up to 

estimated outstanding balances using the ratio 

between the FFIEC Call Report and the CRA data 

discussed in part II.D below. 

26 2018 US Fintech Market Report at 6. This figure 

scales up $9.3 billion in estimated 2019 credit 

originations for small to medium sized enterprise 

(SME) borrowers to outstanding balances using the 

ratio methodology discussed in part II.D below. 

27See part II.E below. 

28 Id. 

29 86 FR 16837, 16839 (Mar. 31, 2021). 

30 Id. See also Patrice Ficklin et al., Bureau of 

Consumer Fin. Prot., Innovation Spotlight: 

Providing Adverse Action Notices When Using AI/ 

ML Models (July 7, 2020), https://www.consumer

finance.gov/about-us/blog/innovation-spotlightproviding-adverse-action-notices-when-using-ai-mlmodels/ (discussing potential benefits and risks 

from financial institutions using AI in credit 

underwriting and other areas). 

31 Geng Li, Bd. of Governors of the Fed. Reserve 

Sys., FEDS Notes: Gender-Related Differences in 

Credit Use and Credit Scores (June 22, 2018), 

https://www.federalreserve.gov/econres/notes/fedsnotes/gender-related-differences-in-credit-use-andcredit-scores-20180622.htm (finding that single 

women on average have lower credit scores than 

single men); Alicia Robb, Off. of Advocacy, Small 

Bus. Admin., Minority-Owned Employer Businesses 

and their Credit Market Experiences in 2017, at 4 

(July 22, 2020), https://cdn.advocacy.sba.gov/wpcontent/uploads/2020/07/22172533/MinorityOwned-Employer-Businesses-and-their-CreditMarket-Experiences-in-2017.pdf (finding that Black 

and Hispanic small business borrowers are 

disproportionately denied credit or discouraged 

from applying for credit on the basis of their credit 

score). 

32See Jessica Battisto et al., Who Benefited from 

PPP Loans by Fintech Lenders?, Liberty Street 

Economics (May 27, 2021), https://libertystreet

economics.newyorkfed.org/2021/05/who-receivedppp-loans-by-fintech-lenders.html (showing that 

fintech lenders were an important source of credit 

for Black owners during the COVID–19 pandemic). 

33The Bureau estimates that nondepository 

private business financing totaled approximately 

$550 billion out of around $1.2 trillion in total 

private outstanding balances in 2019 (47 percent). 

This $550 billion figure includes estimated 

financing by fintechs (around $25 billion), 

commercial finance companies (around $160 

billion), nondepository CDFIs (around $1.5 billion), 

MCA providers (around $19 billion), factors 

(around $100 billion), equipment leasing providers 

(around $160 billion), nondepository mortgage 

lenders originating loans for 5+ unit residential 

developments (around $30 billion), and nonfinancial trade creditors (around $50 billion). There 

may additionally be lending by equipment and 

vehicle dealers originating loans in their own name 

that is not captured here. Public lenders include the 

Small Business Association (SBA), the Federal 

Housing Association (FHA), Fannie Mac and 

Freddie Mac, and the Farm Credit System (FCS), 

with public lending totaling around $210 billion in 

traditional lending programs plus $1 trillion in 

emergency COVID–19 SBA lending programs. See 

part II.D below for methodology and sources 

regarding market size estimates for each lending 

category. 

34See part II.B below. 

have increased further to $19 billion.23

Meanwhile, financing by fintechs 24 is 

estimated to have increased from $1.4 

billion 25 in outstanding balances in 

2013 to approximately $25 billion 26 in 

2019. 

Both recent economic shocks and 

changes in patterns of small business 

financing have had fair lending and 

community development implications. 

In terms of the effect of economic 

shocks, data suggest that women-owned 

and minority-owned small businesses 

were impacted disproportionately by 

the economic crises of the last two 

decades.27 Data further suggest that 

women-owned and minority-owned 

small businesses, compared to other 

small businesses, had fewer cash 

reserves and faced steeper hurdles in 

accessing credit that would have 

allowed them to better weather these 

crises.28

Regarding trends in the small 

business financing landscape, the shift 

away from traditional providers of small 

business credit toward newer types of 

providers gives rise to both potential 

harm and opportunity. In terms of 

potential harms, bank closures may 

have made it more difficult for small 

businesses, particularly women-owned 

and minority-owned small businesses, 

to access credit and remain open— 

particularly in low- and moderateincome areas and rural communities. 

Newer providers, often offering newer 

products, have less experience 

complying with both Federal and State 

lending laws and regulations. 

Additionally, they may use algorithms 

and artificial intelligence (AI), which 

may create or heighten ‘‘risks of 

unlawful discrimination, unfair, 

deceptive, or abusive acts or practices 

. . . or privacy concerns.’’ 29 In 

addition, opaque product terms and 

high interest rates could trap business 

owners in cycles of debt. 

In terms of opportunity, innovative 

products and lending models, including 

the use of AI, may yield benefits of more 

accurate, lower-cost, and faster 

underwriting, as well as expanded 

credit access for small businesses that 

may not have obtained credit under 

traditional credit underwriting 

approaches.30 Specifically, newer 

providers and approaches may permit 

those with low or nonexistent personal 

or business credit scores—including 

women and minorities who own or seek 

to start small businesses but on average 

have relatively lower personal credit 

scores than male and white business 

owners 31—to more easily access 

credit.32 Non-traditional credit 

providers may help offset decreases in 

lending associated with the closure of 

bank branches. For instance, fintechs 

may help provide financing to small 

businesses in rural communities that 

lack bank branches. 

The precise impacts of these broader 

trends are not well understood at 

present because there are no 

comprehensive, comparable, and 

application-level data across the 

fragmented and complex small business 

lending market. Some small business 

lending data exist, provided mostly by 

Federal regulators, but available data are 

incomplete in certain ways. Some do 

not include lending by certain 

categories of institutions, such as 

smaller depository institutions. And 

none include lending by nondepository 

institutions, which comprises almost 

half of all small business financing.33

The datasets that do exist both overand underestimate small business 

lending in certain respects by including 

small dollar loans to non-small 

businesses and by excluding larger 

loans to small businesses.34 Further, 

these datasets all concern originated 

loans; they do not include information 

on applications that do not result in 

originated loans. Nor do they generally 

include borrower demographics. Other 

public, private, and nonprofit datasets 

offer only partial snapshots of particular 

areas of the market. Finally, much of the 

publicly available data are aggregated, 

which does not permit more granular, 

loan- or application-level analysis that 


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35See Small Bus. Admin., Table of Small 

Business Size Standards Matched to North 

American Industry Classification System Codes 

(effective Aug. 19, 2019), https://www.sba.gov/sites/ 

default/files/2019-08/SBA%20%20%20Size%

20Standards_Effective%20Aug%2019%2C%202

019_Rev.pdf. 

36See id. 

37A small number of industries use a size 

standard based on a metric other than average 

annual receipts or average number of employees. 

For example, the commercial banking industry 

(NAICS 522110) is subject to an asset-based size 

standard. See id. 

38See SBA OA 2020 FAQs at 1. 

39See id. 

40See id. 

41See id.; see also Haltiwanger et al., 95 Rev. 

Econ. Stat. at 347–48 (finding that young firms, 

which are generally small, contribute 

disproportionately to both gross and net job 

creation). 

42See Press Release, U.S. Census Bureau, Annual 

Business Survey Release Provides Data on MinorityOwned, Veteran-Owned and Women-Owned 

Businesses (Jan. 28, 2021), https://www.census.gov/ 

newsroom/press-releases//business-survey.html. 

43Minority Bus. Dev. Agency, U.S. Dep’t of Com., 

The Number of Minority Nonemployer Firms Grew 

by Nearly 17% between 2014 and 2017 (Dec. 18, 

2020), https://www.mbda.gov/news/press-releases/ 

2020/12/the-number-of-minority-nonemployer 

(stating that the nearly 8.2 million minority nonemployer firms in the U.S. generated $279.3 billion 

in revenues in 2017, and grew in number at four 

times the rate of non-minority non-employer firms 

between 2014 and 2017). See also SBA OA 2020 

FAQs at 3 (showing over 7.6 million minorityowned non-employer firms as of 2016). 

44See Press Release, U.S. Census Bureau, Annual 

Business Survey Release Provides Data on MinorityOwned, Veteran-Owned and Women-Owned 

Businesses (Jan. 28, 2021), https://www.census.gov/ 

newsroom/press-releases//business-survey.html. 

45See Press Release, Nat’l Women’s Bus. Council, 

NWBC Shares 2017 Nonemployer Statistics by 

Demographics Estimates for Women-Owned 

Businesses (Dec. 17, 2020), https://www.nwbc.gov/ 

2020/12/17/nwbc-shares-2017-nonemployerstatistics-by-demographics-estimates-for-womenowned-businesses/ (also stating that these 10.6 

million non-employer firms generate $286.1 billion 

in revenue, and that nearly half of all womenowned non-employer firms generate less than 

$10,000 in annual receipts, while only 0.05 percent 

generate $1 million or more in revenue). 

46See SBA OA 2020 FAQs at 3. 

47 Id. at 4. 

48 Id. 

49 Id. 

50See Off. of Advocacy, Small Bus. Admin., 2019 

Small Business Profile (Apr. 2019), https://

cdn.advocacy.sba.gov/wp-content/uploads/2019/ 

04/23142719/2019-Small-Business-Profiles-US.pdf 

(2019 Small Business Profile). 

would facilitate fair lending or business 

and community development analysis 

by stakeholders other than those that 

collected the data. See part II.B below 

for a detailed discussion on existing 

data on small business financing. 

The remainder of this part II focuses 

on several broad topics that explain, in 

more detail, the need for the small 

business lending data that the proposed 

rule to implement section 1071 would 

provide: (A) The role of small 

businesses in the U.S. economy; (B) 

existing data on small business 

financing; (C) the landscape of small 

business financing; (D) estimating the 

size of the small business financing 

market despite limited data; (E) the 

particular challenges faced by womenowned and minority-owned small 

businesses; and (F) the purposes and 

impact of section 1071. 

A. Small Businesses in the United States 

Small businesses are an important, 

dynamic, and widely diverse part of the 

U.S. economy. They are critical to 

employment, innovation, and economic 

growth and stability, both overall and 

specifically for minority and women 

entrepreneurs. 

The Small Business Act, as 

implemented by the SBA, defines a 

small business using size standards that 

generally hinge on the average number 

of employees or average annual receipts 

of the business concern and are 

customized industry by industry across 

1,057 6-digit North American Industry 

Classification System (NAICS) codes.35

Size standards based on average number 

of employees are used in all industries 

in the manufacturing and wholesale 

trade sectors, as well as in certain 

industries across a variety of other 

sectors as well. Employee-based size 

standards range from 100 (used almost 

entirely in certain industries within the 

wholesale trade sector) to 1,000 (used in 

industries across a variety of sectors 

including, for example, petroleum 

refineries, automobile manufacturing, 

and greeting card publishers).36 Size 

standards based on average annual 

receipts are used in nearly all other 

industries, and range from $1 million 

(used in most industries in the crop 

production and animal production and 

aquaculture subsectors) to $41.5 million 

(used in industries across a variety of 

sectors including, for example, 

passenger car leasing, television 

broadcasting, and general medical and 

surgical hospitals).37

Simpler definitions of what 

constitutes a small business are used in 

certain contexts. For example, in certain 

annual research releases the SBA’s 

Office of Advocacy defines a small 

business as one that has fewer than 500 

employees.38 According to the Office of 

Advocacy, and based on this definition 

of a small business, there are 31.7 

million such businesses in the U.S. that 

represent 99.9 percent of all U.S. firms 

and employ over 60 million 

Americans.39 Six million of these small 

businesses have paid employees, while 

25.7 million are non-employer 

businesses (i.e., the owner(s) are the 

only people involved in the business).40

From 2000 to 2019, small businesses, 

particularly young businesses and startups, created 10.5 million net new jobs 

in the U.S., while large businesses 

created 5.6 million.41

Nearly one third of all businesses are 

minority-owned and more than one 

third are women-owned, though 

minorities and women own a smaller 

share of employer firms. As of 2018, 

minorities owned over one million 

employer firms in the U.S. (amounting 

to 18.3 percent of all employer firms) 42

and, as of 2017, approximately 8.2 

million non-employer firms.43 Likewise, 

as of 2018, women owned about 1.1 

million employer firms (19.9 percent of 

all employer firms) 44 and, as of 2017, 

approximately 10.6 million nonemployer firms.45

Businesses are legally structured in 

several ways. In 2017, 87 percent of 

non-employer businesses were sole 

proprietorships, which means that the 

business is not distinguishable from the 

owner for tax and legal purposes; the 

owner receives profits directly but is 

also legally responsible for the 

business’s obligations.46 Seven percent 

of non-employer businesses were 

partnerships, which can be structured to 

limit the personal liability of some or all 

owners; limited partners may exchange 

control for limited liability, while 

general partners that run the business 

may remain personally liable.47 Six 

percent of non-employer businesses 

were structured as corporations—4.6 

percent are S-corporations and 1.5 

percent are C-corporations—which are 

independent legal entities owned by 

shareholders who are not personally 

liable for the corporation’s obligations.48

In 2017, most small employer 

businesses were corporations, with 50.5 

percent choosing to be S-corporations 

and 16.8 percent preferring Ccorporation status, although sole 

proprietorship and partnership 

structures remained relatively popular 

at 12.9 percent and 11.8 percent 

respectively. By contrast, 74.2 percent of 

large employer businesses chose to be Ccorporations, with 9.3 percent preferring 

a partnership structure and 8.1 percent 

S-corporation status.49

Small businesses are particularly 

important in specific sectors of the 

economy. In 2016, in the services sector, 

small businesses supplied 45 percent of 

19.7 million healthcare and social 

services jobs, over 60 percent of 13.7 

million accommodation and food 

services jobs, and over 80 percent of 6.3 

million construction jobs.50 In the same 

year, in manufacturing, small businesses 

made up 44 percent out of 11.6 million 


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56362 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

51 Id. at 3. 

52Nat’l Inst. of Food & Agric., U.S. Dep’t of Agric., 

Family Farms, https://nifa.usda.gov/family-farms 

(last visited July 26, 2021) (classifying family farms 

as any farm organized as a sole proprietorship, 

partnership, or family corporation. Family farms 

exclude farms organized as non-family corporations 

or cooperatives, as well as farms with hired 

managers.). 

53 2019 Small Business Profile at 3. 

54 Daniel Wilmoth, Off. of Advocacy, Small Bus. 

Admin., The Effects of the COVID–19 Pandemic on 

Small Businesses (Issue Brief No. 16) (Mar. 2021), 

https://cdn.advocacy.sba.gov/wp-content/uploads/ 

2021/03/02112318/COVID-19-Impact-On-SmallBusiness.pdf. 

55 Id. By August 2021, many of these jobs had 

since returned as mandatory closure orders ended 

and the economy began to recover. 

56Bureau of Consumer Fin. Prot., Key dimensions 

of the small business lending landscape, at 39–40 

(May 2017), https://files.consumerfinance.gov/f/ 

documents/201705_cfpb_Key-Dimensions-SmallBusiness-Lending-Landscape.pdf (White Paper). 

57While Call Report and CRA data provide some 

indication of the level of supply of small business 

credit, the lack of data on small business credit 

applications makes demand for credit by small 

businesses more difficult to assess, including with 

respect to local markets or protected classes. 58Rebel A. Cole, Off. of Advocacy, Small Bus. 

Admin., How Did Bank Lending to Small Business 

in the United States Fare After the Financial Crisis?, 

at 26 (Jan. 2018), https://cdn.advocacy.sba.gov/wpcontent/uploads/2019/05/09134658/439-How-DidBank-Lending-to-Small-Business-Fare.pdf (showing 

a decline in bank loans to small businesses from 

2008 to 2015 from $710 billion to $600 billion). The 

level of bank lending to small businesses has 

recovered somewhat since a trough in 2012–13 that 

represented the lowest amount of lending since 

2005. Fed. Deposit Ins. Corp., https://www.fdic.gov/ 

analysis/quarterly-banking-profile/qbp/timeseries/ 

small-business-farm-loans.xlsx (last visited July 22, 

2021). 

59White Paper at 40. 60See Fed. Fin. Insts. Examination Council, 

Reporting Forms 31, 41, and 51 (last modified Mar. 

16, 2021), https://www.ffiec.gov/ffiec_report_

forms.htm (FFIEC Call Report). 

61See Fed. Fin. Insts. Examination Council, A 

Guide to CRA Data Collection and Reporting, at 11, 

13 (2015), https://www.ffiec.gov/cra/pdf/2015_

CRA_Guide.pdf (2015 FFIEC CRA Guide). Small 

business loans are defined for CRA purposes as 

loans whose original amounts are $1 million or less 

and that were reported on the institution’s Call 

Report or Thrift Financial Report as either ‘‘Loans 

secured by nonfarm or nonresidential real estate’’ 

or ‘‘Commercial and industrial loans.’’ Small farm 

loans are defined for CRA purposes as loans whose 

original amounts are $500,000 or less and were 

reported as either ‘‘Loans to finance agricultural 

production and other loans to farmers’’ or ‘‘Loans 

secured by farmland.’’ Id. at 11. Beginning in 2023, 

national banks supervised by the OCC with assets 

greater than $2.5 billion will be required to report 

loans of $1.6 million or less and indicate whether 

the borrower’s gross annual review is $1.6 million 

or less. See 85 FR 34734 (June 5, 2020). 

62See Nat’l Credit Union Admin., Call Report 

Form 5300 (June 2020), https://www.ncua.gov/files/ 

publications/regulations/form-5300-june-2020.pdf. 

63Fed. Fin. Insts. Examination Council, 

Community Reinvestment Act 2021 Reporting 

Criteria, https://www.ffiec.gov/cra/reporter21.htm 

(last visited Aug. 5, 2021). 

64Nondepository lending is estimated to total 

approximately $550 billion out of $1.4 trillion in 

total lending, excluding $1 trillion in COVID–19 

emergency program lending. See part II.D below 

jobs.51 Finally, in 2016, small family 

farms totaled 96 percent out of 2.2 

million farms,52 and small businesses 

provided over 80 percent of agriculture, 

forestry, and fishing and hunting jobs 

out of 161,000.53 As such, the financial 

health of small businesses is essential to 

the U.S. economy, especially to the 

supply of critical and basic goods and 

services—from producing food to 

serving it at restaurants, and from home 

building to healthcare. 

Small businesses have been especially 

hard-hit by the COVID–19 pandemic. At 

a low point in the pandemic in April 

2020, 20 percent of self-employed 

workers had temporarily exited the 

labor market.54 Industries in which 

small businesses played a large role 

have been particularly impacted. For 

example, comparing April 2020 with 

April 2019, employment declined by 

almost 50 percent in the leisure and 

hospitality industries (also declining by 

50 percent among food services and 

drinking establishments within the 

leisure and hospitality industry), in 

which small businesses employ 60 

percent of workers.55

B. Existing Data on Small Business 

Lending 

While small businesses are a critical 

part of the U.S. economy and require 

financial support, it is still true, as it 

was in 2017 when the Bureau published 

its White Paper on small business 

lending, that it is not possible with 

current data to confidently answer basic 

questions regarding the state of small 

business lending. This limitation is 

especially the case with regard to the 

race, sex, and ethnicity of small 

business owners, applications as 

opposed to originations, and for small 

business financing products that are not 

currently reported in Call Report data.56

Data on small business lending are 

fragmented, incomplete, and not 

standardized, making it difficult to 

conduct meaningful comparisons across 

products and over time. This hinders 

attempts by policymakers and other 

stakeholders to understand the size, 

shape, and dynamics of the small 

business lending marketplace, including 

the interaction of supply and demand, 

as well as potentially problematic 

lending practices, gaps in the market, or 

trends in funding that may be holding 

back some communities.57 For example, 

absent better data, it is hard to 

determine if relatively lower levels of 

bank loans to small businesses in the 

decade before the pandemic began were 

reflective of a net relative decline in 

lending to small businesses as compared 

to large businesses or rather a shift 

within small business lending from 

banks to alternative lenders.58 To the 

extent there may have been a relative 

decline, it is difficult to assess if that 

decline affected certain types of small 

businesses more than others, including 

women-owned and minority-owned 

small businesses.59

The primary sources of information 

on lending by depository institutions 

are the Federal Financial Institutions 

Examination Council (FFIEC) and 

National Credit Union Administration 

(NCUA) Consolidated Reports of 

Condition and Income (Call Reports), as 

well as reporting under the CRA. Under 

the FFIEC and CRA reporting regimes, 

small loans to businesses of any size are 

used in whole or in part as a proxy for 

loans to small businesses. The FFIEC 

Call Report captures banks’ outstanding 

number and amount of small loans to 

businesses (that is, loans originated 

under $1 million to businesses of any 

size; small loans to farms are those 

originated under $500,000).60 The CRA 

requires banks and savings associations 

with assets over a specified threshold to 

report loans in original amounts of $1 

million or less to businesses; reporters 

are asked to indicate whether the 

borrower’s gross annual revenue is $1 

million or less, if they have that 

information.61 The NCUA Call Report 

captures data on all loans over $50,000 

to members for commercial purposes, 

regardless of any indicator about the 

business’s size.62 There are no similar 

sources of information about lending to 

small businesses by nondepository 

institutions. The SBA also releases data 

concerning its loan programs, but these 

typically do not include demographic 

information, and this covers only a 

small portion of the overall small 

business financing market. 

These public data sources provide 

some of the most extensive information 

currently available on small business 

lending. However, they suffer from four 

material limitations, namely that the 

data capture only parts of the market, 

are published at a high level of 

aggregation, do not permit detailed 

analysis across the markets, and lack 

standardization across different 

agencies. 

First, these datasets exclude entire 

categories of lenders. For example, 

banks under $1.322 billion in assets do 

not have to report under the CRA.63 The 

FFIEC and NCUA Call Reports and CRA 

data do not include lending by 

nondepository financial institutions, 

which the Bureau estimates to represent 

40 percent of the small business 

financing market and is rapidly 

growing.64


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(providing a detailed breakdown and methodology 

of estimates across lending products). 

65Fed. Fin. Insts. Examination Council, Schedule 

RC–C, Part II Loans to Small Businesses and Farms, 

at 1, https://www.fdic.gov/regulations/resources/ 

call/crinst-031-041/2017/2017-03-rc-c2.pdf 

(detailing the Call Report loan size threshold of $1 

million at origination for loans to small businesses); 

2015 FFIEC CRA Guide at 11 (detailing the CRA 

size thresholds of $1 million both for loan amount 

at origination and for revenue of small business 

borrowers). 

66Nat’l Credit Union Admin., Call Report Form 

5300 Instructions, at 26 (effective Mar. 31, 2021), 

https://www.ncua.gov/files/publications/ 

regulations/call-report-instructions-march2021.pdf. 

67Zachary Warmbrodt, Tracking the Money: Bid 

to Make Business Rescue More Inclusive Undercut 

by Lack of Data, Politico (Mar. 2, 2021), https://

www.politico.com/news/2021/03/02/businessesinclusive-coronavirus-relief-money-data-472539 

(reporting that 75 percent of PPP recipients did not 

report their ethnicity and 58 percent did not reveal 

their gender). 

68Nat’l Fed’n of Indep. Bus., Small Business 

Optimism Index (June 2021), https://www.nfib.com/ 

surveys/small-business-economic-trends/. 

69ADP, Employment Reports, https://

adpemploymentreport.com/ (last visited July 22, 

2021). 

70Biz2Credit, Biz2Credit Small Business Lending 

Index, https://www.biz2credit.com/small-businesslending-index (last visited July 27, 2021). 

71PayNet, Small Business Lending Index, https:// 

sbinsights.paynetonline.com/lending-activity/ (last 

visited July 27, 2021). 

72Opportunity Insights Economic Tracker, 

https://tracktherecovery.org/ (last visited July 27, 

2021). The Opportunity Insights Economic Tracker 

and similar data sources may materially 

overestimate the number of business closures by not 

controlling for attrition in the small business client 

base of data providers. See Leland D. Crane et al., 

Bd. of Governors of the Fed. Reserve Sys., Finance 

and Economics Discussion Series, 2020–089, 

Business Exit During the COVID–19 Pandemic: 

Non-Traditional Measures in Historical Context, at 

21–22 (2020), https://www.federalreserve.gov/

econrest/feds/files2020089r1pap.pdf. 

73See, e.g., Dun & Bradstreet, https://

www.dnb.com/ (data provider and credit reporter); 

Data Axle, https://www.data-axle.com/ (data 

provider); Equifax, https://www.equifax.com/ 

business/business-credit-reports/ (credit reporter); 

Experian, https://www.experian.com/smallbusiness/business-credit-reports (credit reporter). 

74Nat’l Small Bus. Ass’n, 2016 Year-End 

Economic Report (July 2017), https://www.nsba.biz/ 

wp-content/uploads/2017/02/Year-End-EconomicReport-2016.pdf. 

75 Id. 

Second, Federal agencies publish 

summary data at a high level in a 

manner that does not facilitate 

independent analysis by other agencies 

or stakeholders. The FFIEC and NCUA 

Call Reports and the CRA data are all 

available at a higher level of aggregation 

than loan-level, limiting fair lending 

and detailed geographic analyses since 

race, sex, and ethnicity as well as 

business location data are rarely 

disclosed. 

Third, the detailed data collected by 

these Federal sources have significant 

limitations as well, preventing any 

analysis into certain issues or types of 

borrowers, even by the regulators 

possessing these data. Neither Call 

Report nor CRA data include 

applications, which limits insights into 

any potential discrimination or 

discouragement in application processes 

as well as into the interaction between 

credit supply and demand. The Call 

Report and CRA data separately identify 

loans of under $1 million in value, and 

CRA data also identify loans to 

businesses with annual revenues of $1 

million or less.65 However, the Call 

Report definition of small business 

loans as those with a loan size of $1 

million or less at origination is both 

overinclusive, as it counts small loans to 

businesses of all sizes, and 

underinclusive, as it excludes loans 

over $1 million made to small 

businesses. Credit unions report any 

loans under $50,000 as consumer loans 

and not as commercial loans,66

potentially excluding from 

measurement an important source of 

funding for many small businesses, 

particularly the smallest and often most 

underserved. 

Finally, the Federal sources of small 

business lending data are not 

standardized across agencies and cannot 

be easily compared. For example, the 

FFIEC Call Report collects small loans 

to businesses as a proxy for small 

business lending, whereas the NCUA 

Call Report collects loans to members 

for commercial purposes above $50,000 

but with no upper limit. The loan-level 

data for the Paycheck Protection 

Program (PPP) offer an unprecedented 

level of insight into small business 

lending, but this dataset is a one-off 

snapshot into the market for a specific 

lending program at an acute moment of 

crisis and is also limited in utility by 

relatively low response levels to 

demographic questions concerning 

borrowers.67

The Federal government also 

conducts and releases a variety of 

statistics, surveys, and research reports 

on small business lending through the 

member banks for the Federal Reserve 

System, the FDIC, CDFI Fund, and the 

U.S. Census Bureau. These data sources 

offer insights into broad trends and 

specific small business lending issues 

but are less useful for detailed fair 

lending analyses or identification of 

specific areas, industries, or 

demographic groups being underserved. 

Periodic changes in survey methodology 

and questions can also limit 

comparability and the ability to track 

developments over time. 

There are also a variety of nongovernmental data sources, issued by 

both private and nonprofit entities, that 

cover small businesses and/or the small 

business financing market. These 

include datasets and surveys published 

by commercial data and analytics firms, 

credit reporting agencies, trade 

associations, community groups, and 

academic institutions. Certain of these 

data sources are publicly available and 

track specific topics, such as small 

business optimism,68 small business 

employment,69 rates of small business 

credit application approvals,70 small 

business lending and delinquency 

levels,71 and rates of small business 

closure.72 Other databases have more 

granularity and provide detailed 

information on individual businesses, 

including revenue, credit utilization, 

industry, and location.73

While these non-public sources of 

data on small businesses may provide a 

useful supplement to existing Federal 

sources of small business lending data, 

these private and nonprofit sources 

often do not have lending information, 

may rely in places on unverified 

research based on public internet 

sources, and/or narrowly limit use cases 

for parties accessing data. Further, 

commercial datasets are generally not 

free to public users and can be costly, 

raising equity issues for stakeholders 

who cannot afford access. 

C. The Landscape of Small Business 

Finance 

Notwithstanding the lack of data on 

the market, it is clear that financing 

plays an important role in enabling 

small businesses to grow and contribute 

to the economy. When it is available, 

financing not only provides resources 

for small businesses to smooth cash 

flows for current operations, but also 

affords business owners the opportunity 

to invest in business growth. An 

analysis by the National Small Business 

Association, which examined data from 

1993 through 2016, found a correlation 

between small business owners’ ability 

to access credit and their ability to 

hire.74 This same study found that, 

while not the sole cause, the inability to 

secure financing may have led 16 

percent of small businesses to reduce 

their number of employees and 

approximately 10 percent of small 

businesses to reduce employee benefits. 

Lack of access to financing also 

contributed to a further 10 percent of 

small businesses being unable to 

increase store inventory in order to meet 

existing demand.75

To support their growth or to make it 

through harder times, small businesses 

look to a variety of funding sources. 

Especially when starting out, 

entrepreneurs often rely on their own 


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76Emily Moss et al., The Black-White Wealth Gap 

Left Black Households More Vulnerable, Brookings 

Inst. (Dec. 8, 2020), https://www.brookings.edu/ 

blog/up-front/2020/12/08/the-black-white-wealthgap-left-black-households-more-vulnerable/ 

(detailing wealth gaps in 2019 by race and sex that 

show white male households with more wealth 

than white female or Black male or female 

households at all age brackets). See also Erin Ruel 

& Robert Hauser, Explaining the Gender Wealth 

Gap, 50 Demography 1155, 1165 (Dec. 2012), 

https://read.dukeupress.edu/demography/article/ 

50/4/1155/169553/Explaining-the-Gender-WealthGap (finding a gender wealth gap of over $100,000 

in a longitudinal study over 50 years of a single age 

cohort in Wisconsin); Neil Bhutta et al., Bd. of 

Governors of the Fed. Reserve Sys., Disparities in 

Wealth by Race and Ethnicity in the 2019 Survey 

of Consumer Finances (Sept. 28, 2020), https://

www.federalreserve.gov/econres/notes/feds-notes/ 

disparities-in-wealth-by-race-and-ethnicity-in-the2019-survey-of-consumer-finances-20200928.htm 

(finding median white family wealth in 2019 of 

$188,200 compared with $24,100 for Black families 

and $36,100 for Hispanic families). 

77 Jim Woodruff, The Advantages and 

Disadvantages of Debt and Equity Financing, 

CHRON (updated Mar. 4, 2019), https://

smallbusiness.chron.com/advantagesdisadvantages-debt-equity-financing-55504.html. 

78For purposes of this notice of proposed 

rulemaking, the Bureau is using the term depository 

institution to mean any bank or savings association 

defined by section 3(c)(1) of the Federal Deposit 

Insurance Act, 12 U.S.C. 1813(c)(1), or credit union 

defined pursuant to the Federal Credit Union Act, 

as implemented by 12 CFR 700.2. The Bureau notes 

that the Dodd-Frank Act defines a depository 

institution to mean any bank or savings association 

defined by the Federal Deposit Insurance Act; there, 

that term does not encompass credit unions. 12 

U.S.C. 5301(18)(A), 1813(c)(1). The Bureau is 

referring to banks and savings associations together 

with credit unions as depository institutions 

throughout this notice, unless otherwise specified, 

to facilitate analysis and discussion. 

79Rebel A. Cole, Off. of Advocacy, Small Bus. 

Admin., How Did Bank Lending to Small Business 

in the United States Fare After the Financial Crisis?, 

at 26 (Jan. 2018), https://cdn.advocacy.sba.gov/wpcontent/uploads/2019/05/09134658/439-How-DidBank-Lending-to-Small-Business-Fare.pdf (showing 

a decline in bank loans to small businesses from 

2008 to 2015 from $710 billion to $600 billion). The 

level of bank lending to small businesses has 

recovered somewhat since a trough in 2012–13 that 

represented the lowest amount of lending since 

2005. Fed. Deposit Ins. Corp., https://www.fdic.gov/ 

analysis/quarterly-banking-profile/qbp/timeseries/ 

small-business-farm-loans.xlsx (last visited July 22, 

2021). 

80Congressional Research Serv., Small Business 

Credit Markets and Selected Policy Issues, at 6 

(Aug. 20, 2019), https://fas.org/sgp/crs/misc/ 

R45878.pdf. 

81Bruce C. Mitchell et al., Nat’l Cmty. 

Reinvestment Coal., Relationships Matter: Small 

Business and Bank Branch Locations, at 6 (2020), 

https://ncrc.org/relationships-matter-smallbusiness-and-bank-branch-locations/ (stating that 

in 2009 there were 95,596 brick and mortar fullservice branches or retail locations but, as of June 

30, 2020, that number had fallen to 82,086). 

82Bd. of Governors of the Fed. Reserve Sys., 

Perspectives from Main Street: Bank Branch Access 

in Rural Communities, at 1, 3–4, 19 (Nov. 2019), 

https://www.federalreserve.gov/publications/files/ 

bank-branch-access-in-rural-communities.pdf. 

83 Id. 

84 Id. 

85Congressional Research Serv., Small Business 

Credit Markets and Selected Policy Issues, at 6 

(Aug. 20, 2019), https://fas.org/sgp/crs/misc/ 

R45878.pdf. 

86Fed. Deposit Ins. Corp., Bank Data and 

Statistics, https://www.fdic.gov/bank/statistical/ 

(last visited Aug. 22, 2021). 

87Speech by Board Governor Lael Brainard: 

Community Banks, Small Business Credit, and 

Online Lending (Sept. 30, 2015), https://

www.federalreserve.gov/newsevents/speech/ 

brainard20150930a.htm. Banks with under $10 

billion in assets are often referred to as ‘‘community 

banks.’’ Congressional Research Serv., Over the 

Line: Asset Thresholds in Bank Regulation, at 2–3 

(May 3, 2021), https://fas.org/sgp/crs/misc/ 

R46779.pdf (noting that the Board of Governors of 

the Federal Reserve System (Board) and the Office 

of the Comptroller of the Currency (OCC) define 

community banks as having under $10 billion in 

assets, although there may be other criteria, with 

the FDIC considering also geographic footprint and 

a relative emphasis on making loans and taking 

deposits as opposed to engaging in securities and 

derivatives trading). Community banks are also 

more likely to engage in relationship-based lending. 

See id. at 3. 

88Biz2Credit, Biz2Credit Small Business Lending 

Index, https://www.biz2credit.com/small-businesslending-index (last visited July 22, 2021). These 

historical approval rates are reflected in prepandemic Small Business Lending Index releases 

by Biz2Credit. See, e.g., Biz2Credit, Small Business 

Loan Approval Rates at Big Banks Remain at 

Record High in February 2020: Biz2Credit Small 

Business Lending Index, https://

www.biz2credit.com/small-business-lending-index/ 

february-2020 (last visited July 29, 2021) (showing 

large bank approvals of 28.3 percent in February 

2020 and of 27.2 percent in February 2019 and 

smaller bank approvals of 50.3 percent in February 

2020 and of 48.6 percent in February 2019). 

89See part II.B above. 

savings and help from family and 

friends. If a business generates a profit, 

its owners may decide to reinvest 

retained earnings to fund further 

growth. However, for many aspiring 

business owners—and their personal 

networks—savings and retained 

earnings may not be sufficient to fund 

a new venture or grow it, leading 

owners to seek other sources of funding. 

This is particularly true for minorityand women-led households, which on 

average have less wealth than their 

white- and men-led counterparts.76

One such source of funding comes 

from others besides family and friends, 

whether high net worth individuals or 

‘‘angel investors,’’ venture capital funds, 

or, in a more recent development 

usually facilitated by online platforms, 

via crowdsourcing from retail investors. 

Often, these early investments take the 

form of equity funding, which business 

owners are not obligated to repay to 

investors. However, equity funding 

requires giving up some ownership and 

control to investors, which certain 

entrepreneurs may not wish to do. For 

small businesses, equity funding also 

tends to be somewhat more expensive 

than debt financing in the longer run. 

This is for a number of reasons, 

including that loan interest payments, 

unlike capital gains, are taxdeductible.77 Finally, equity 

investments from others besides family 

and friends are available to only a 

minority of small businesses. 

Many small businesses instead seek 

debt financing from a wide range of 

providers. These providers include 

depository institutions, such as banks, 

savings associations, and credit 

unions,78 as well as fintechs and 

commercial finance companies, 

specialized providers of specific 

financing products, and a range of 

government and government-sponsored 

enterprises, among others. 

In the past, small businesses 

principally sought credit from banks; 

however, as banks have merged and 

consolidated, particularly in the wake of 

the Great Recession, they have provided 

less financing to small businesses.79 As 

noted earlier, the number of banks has 

declined significantly since a post-Great 

Depression peak in 1986 of over 18,000 

institutions to around 5,200 institutions 

today,80 while 13,500 branches closed 

from 2009 to mid-2020, representing a 

14 percent decrease.81 Although nearly 

half of counties either gained bank 

branches or retained the same number 

between 2012 and 2017, the majority 

lost branches over this period.82 Out of 

44 counties that were deeply affected by 

branch closures, defined as having 10 or 

fewer branches in 2012 and seeing five 

or more of those close by 2017, 39 were 

rural counties.83 Of rural counties, just 

over 40 percent lost bank branches in 

that period; the rural counties that 

experienced substantial declines in 

bank branches tend to be lower-income 

and with a higher proportion of AfricanAmerican residents relative to other 

rural counties,84 raising concerns about 

equal access to credit. 

As banks and branches have merged 

and/or closed, the share of banking 

assets has also become increasingly 

concentrated in the largest institutions, 

with banks of over $10 billion in assets 

representing 84 percent of all industry 

assets in 2018,85 totaling $15.1 out of 

$17.9 trillion.86 Nevertheless, banks of 

under $10 billion in assets continue to 

hold approximately half of all small 

business loans (using the FFIEC Call 

Report definition of loans of under $1 

million), highlighting the importance of 

smaller banks to the small business 

lending market.87 Since smaller bank 

credit approvals have traditionally been 

close to 50 percent, while large banks 

approve only 25–30 percent of 

applications, bank consolidation may 

have implications for small business 

credit access.88 Since institutions under 

$1.322 billion in assets are not required 

to report on lending under the CRA,89

it is difficult to precisely assess the 


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90Bruce C. Mitchell et al., Nat’l Cmty. 

Reinvestment Coal., Relationships Matter: Small 

Business and Bank Branch Locations, https://

ncrc.org/relationships-matter-small-business-andbank-branch-locations/ (last visited July 27, 2021). 

91Rebel A. Cole, Off. of Advocacy, Small Bus. 

Admin., How Did Bank Lending to Small Business 

in the United States Fare After the Financial Crisis?, 

at 26 (Jan. 2018), https://cdn.advocacy.sba.gov/wpcontent/uploads/2019/05/09134658/439-How-DidBank-Lending-to-Small-Business-Fare.pdf. 

92Fed. Reserve Banks, Small Business Credit 

Survey, 2021 Report On Employer Firms (2021), 

https://www.fedsmallbusiness.org/medialibrary/ 

FedSmallBusiness/files/2021/2021-sbcs-employerfirms-report. 

93According to the FDIC, FDIC-insured MDIs and 

CDFI banks are banks, savings banks, and savings 

associations (collectively, banks) that serve 

minority, low- or moderate-income (LMI), and rural 

communities at higher rates than mainstream banks. 

MDIs serve minority communities including 

African American, Asian American, Hispanic 

American, and Native American. CDFI banks are 

certified through the U.S. Department of the 

Treasury by demonstrating they serve LMI 

communities. See, e.g., Fed. Deposit Ins. Corp. 

Minority Depository Institutions Program website, 

https://www.fdic.gov/regulations/resources/ 

minority/mission-driven/index.html (last visited 

July 11, 2021). 

94Cmty. Dev. Fin. Inst., CDFI Certification, 

https://www.cdfifund.gov/programs-training/ 

certification/cdfi (last visited July 21, 2021); Fed. 

Deposit Ins. Corp., Minority Depository Institutions 

Program (last updated June 9, 2021), https://

www.fdic.gov/regulations/resources/minority/ 

mdi.html. 

95See Rebel A. Cole, Off. of Advocacy, Small Bus. 

Admin., How Did Bank Lending to Small Business 

in the United States Fare After the Financial Crisis?, 

at 26 (Jan. 2018), https://cdn.advocacy.sba.gov/wpcontent/uploads/2019/05/09134658/439-How-DidBank-Lending-to-Small-Business-Fare.pdf (showing 

a decline in bank loans to small businesses from 

2008–15 from $710 billion to $600 billion). The 

level of bank lending to small businesses has 

recovered somewhat since a trough in 2012–13 that 

represented the lowest amount of lending since 

2005. See also Fed. Deposit Ins. Corp., https://

www.fdic.gov/analysis/quarterly-banking-profile/ 

qbp/timeseries/small-business-farm-loans.xlsx (last 

visited July 21, 2021) (tabulating outstanding 

balances for credit extended to small- and nonsmall business lending by banks and thrifts over 

time). 

96See part II.B above. 

97See part II.D below. 

98Congressional Research Serv., Small Business 

Administration 7(a) Loan Guaranty Program 

(updated June 21, 2021), https://fas.org/sgp/crs/ 

misc/R41146.pdf (discussing the SBA’s flagship 7(a) 

loan guarantee program); U.S. Dep’t of Hous. & 

Urban Dev., Descriptions Of Multifamily Programs, 

https://www.hud.gov/program_offices/housing/ 

mfh/progdesc (last visited July 27, 2021) (listing 

FHA mortgage insurance programs for 5+ unit 

residential developments); Farm Serv. Agency, U.S. 

Dep’t of Agric., Guaranteed Loan Program Fact 

Sheet (Mar. 2020), https://www.fsa.usda.gov/Assets/ 

USDA-FSA-Public/usdafiles/FactSheets/ 

guaranteed_loan_program-factsheet.pdf (discussing 

the USDA’s Farm Service Agency guaranteed loan 

program). 

99See part II.D below for definitions of the 

different product categories. 

100Press Release, Fed. Trade Comm’n, Cash 

Advance Firm to Pay $9.8M to Settle FTC 

Complaint It Overcharged Small Businesses (Apr. 

22, 2021), https://www.ftc.gov/news-events/pressreleases/2021/04/cash-advance-firm-pay-98msettle-ftc-complaint-it-overcharged (settling a 

lawsuit between the Federal Trade Commission 

(FTC) and an MCA provider for $9.8 million where 

the complaint alleged that the provider ‘‘deceived’’ 

and ‘‘misle[d]’’ business borrowers about the 

amount and terms of financing); Bd. of Governors 

of the Fed. Reserve Sys., Record of Meeting: 

Community Advisory Council and the Board of 

Governors, at 7 (Oct. 5, 2018), https://www.federal

reserve.gov/aboutthefed/files/cac-20181005.pdf 

(noting a growing trend of small business owners 

facing difficulty with expensive loan products such 

as MCAs where the pricing and structure of the 

loans is often deliberately obscured). 

101Fed. Trade Comm’n, ‘Strictly Business’ Forum, 

Staff Perspective, at 5 (Feb. 2020), https://

www.ftc.gov/system/files/documents/reports/staffperspective-paper-ftcs-strictly-business-forum/ 

strictly_business_forum_staff_perspective.pdf 

(discussing the difficulty in comparing across 

financing products with widely differing methods 

for calculating and describing key features). 

impact of bank consolidation and 

shuttered branches on small business 

lending and access to credit in local 

areas.90 By contrast, credit unions 

increased their small business lending 

from $30 billion in 2008 to at least $55 

billion in 2019.91 Like banks, credit 

unions typically receive high 

satisfaction scores among small business 

borrowers, reflecting more high-contact, 

relationship-based lending models.92

Certain banks and credit unions 

choose to be mission-based lenders, as 

CDFIs or Minority Depository 

Institutions (MDIs).93 Mission-based 

lenders focus on providing credit to 

traditionally underserved and lowincome communities and individuals to 

promote community development and 

expand economic opportunity, making 

them a relatively smaller by dollar value 

but essential part of the small business 

lending market. There were over 1,200 

CDFIs (around half of which are 

depository institutions) as of May 2021 

and over 140 MDIs as of March 2021.94

During a period in which that 

depository institutions have been 

providing relatively less funding to 

small businesses,95 small businesses 

have increasingly relied on other 

nondepository institutions for financing. 

Since nondepositories typically do not 

report their small business financing 

activities to regulators, however, there 

are no authoritative sources for either 

the number of such entities or the dollar 

value of financing they provide to small 

businesses.96 However, what data are 

available make clear that fintech firms 

are rapidly increasing their share of the 

small business financing market.97

Whether depository or nondepository, 

each provider of small business 

financing assesses a variety of different 

criteria to determine whether and on 

what terms to grant an extension of 

credit or other financing product, 

including business and financial 

performance, the credit history of the 

business and its owner(s), the time in 

business, and the industry, among other 

factors. Protections such as guarantees, 

collateral, and insurance can mitigate 

perceived risks, potentially enabling a 

lender to offer better terms or facilitating 

an extension of credit that would 

otherwise not meet lending limit or 

underwriting criteria. Often, 

government agencies, including the 

SBA, FHA, and USDA, guarantee or 

insure loans themselves to encourage 

lenders to provide credit to borrowers 

that may not otherwise be able to obtain 

credit, either on affordable terms and 

conditions or at all.98 Different lenders 

also employ diverse methods for 

assessing risk, with smaller banks 

generally relying more on traditional 

underwriting methods and typically 

managing multi-product relationships. 

Fintechs increasingly use algorithms, 

automation, and even AI and machine 

learning to assess risk and make 

underwriting decisions, with 

originations typically being less 

relationship-based in nature. 

As well as diversity in underwriting 

methodology and criteria, there are also 

considerable differences across small 

business financing products and 

providers with respect to pricing 

methods and repayment structures. As a 

result, it can be challenging to compare 

the competitiveness of product pricing 

and terms. The Bureau understands that 

term loans, lines of credit, and credit 

cards typically disclose annualized 

interest rates; leases often take into 

account depreciation; factoring products 

discount an invoice’s value and add a 

fee; and MCAs apply a multiple to the 

value of the up-front payment.99

Moreover, providers may add additional 

fees that are not standardized within 

industries, much less across them. The 

Bureau believes that this complexity 

may confuse business owners and 

render them unable to secure more 

favorable rates due to opacity in offers 

presented—which in some cases may 

even be deliberate 100—and a 

corresponding inability to effectively 

compare across different financing 

options.101 This may impair applicants’ 

ability to make informed choices. 

D. Estimating the Size and Scope of the 

Small Business Financing Market 

In light of the lack of data and the 

heterogeneity of products and providers 

within the small business financing 

market, it can be difficult to get a clear 

sense of the size and scope of the 

market. In this section, the Bureau 

describes its estimates of the total 

outstanding balances of credit in the 

market, the number of institutions that 

are active in the small business 


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102FFIEC Call Report data records outstanding 

balances on loans with origination amounts less 

than $1 million across Commercial & Industrial, 

Nonfarm Nonresidential, Agricultural, and Secured 

by Farmland lending categories. See FDIC Quarterly 

Banking Profile Time Series, https://www.fdic.gov/ 

analysis/quarterly-banking-profile/qbp/timeseries/ 

small-business-farm-loans.xlsx (last visited August 

29, 2021). 

103FFIEC Call Report data and CRA data on small 

business credit products also include business 

credit card products, but loans and lines of credit 

made up $713 billion out of $775 billion in 

outstanding balances on bank, savings association, 

and credit union loans to small businesses in 2019. 

One important caveat to this assumption is that 

products with materially shorter average term 

lengths, for example credit cards, factoring 

products, and MCAs, may have an inverse ratio of 

originations to outstanding balances. For example, 

top issuers of general purpose credit cards recorded 

purchase volumes of two to seven times their 

outstanding balances in 2020. Nilson Report, Issue 

1192, at 6 (Feb. 2021), https://nilsonreport.com/ 

publication_newsletter_archive_

issue.php?issue=1192. If business-purpose credit 

cards, factoring products, and MCAs behaved 

similarly with respect to the ratio of originations to 

outstanding balances, then for every $1 originated 

in the market in a given year, there could be a 

corresponding $0.14–0.50 in outstanding balances 

for such products ($1 divided by two to seven). 

104Calculated from FFIEC Call Report data 

accessed on June 8, 2021. The Bureau notes that, 

as discussed in part II.B above, these estimates rely 

on small loans to businesses as a proxy for loans 

to small businesses. As such, the Bureau 

acknowledges that the true outstanding value of 

credit extended to small businesses by such 

institutions may be different than what is presented 

here. For example, the small loans to businesses 

proxy would overestimate the value of outstanding 

credit if a significant number of small loans to 

businesses and farms are to businesses or farms that 

are actually large. Alternatively, the proxy would 

underestimate the value of outstanding credit to 

small businesses if a significant number of 

businesses and farms that are small under the 

proposed rule take out loans that are larger than $1 

million or $500,000, for businesses and farms, 

respectively. 

105Nat’l Credit Union Admin., 2019 Call Report 

Quarterly Data, https://www.ncua.gov/analysis/ 

credit-union-corporate-call-report-data/quarterlydata (last visited Aug. 24, 2021) (2019 NCUA Call 

Report). The Bureau notes that, as discussed in part 

II.B above, credit unions only report credit 

transactions made to members for commercial 

purposes with values over $50,000. The Bureau 

uses this value as a proxy for small business credit. 

The Bureau acknowledges that the true value of 

small business credit extended by credit unions 

may be different than what is presented here. For 

example, this proxy may overestimate the value of 

outstanding small business credit because some 

members are taking out loans for large businesses. 

Alternatively, this proxy may underestimate the 

value of outstanding small business credit if credit 

unions originate a substantial number of small 

business loans with origination values of under 

$50,000. For this analysis, the Bureau includes all 

types of commercial loans to members except 

construction and development loans and 

multifamily residential property. This includes 

loans secured by farmland; loans secured by owneroccupied, non-farm, non-residential property; loans 

secured by non-owner occupied, non-farm, nonresidential property; loans to finance agricultural 

production and other loans to farmers; commercial 

and industrial loans; unsecured commercial loans; 

and unsecured revolving lines of credit for 

commercial purposes. The Bureau does include 

multifamily in part VII below. 

106There may additionally be lending by 

equipment and vehicle dealers originating loans in 

their own name that is not captured here. 

107Bd. of Governors of the Fed. Reserve Sys., 

Finance Companies—G.20 (updated July 15, 2021), 

https://www.federalreserve.gov/releases/g20/hist/ 

fc_hist_b_levels.html. The Bureau does not include 

leases, since they are already counted within the 

product category of equipment and vehicle leasing, 

or wholesale loans, which it assumes are typically 

made to non-small businesses. 

108This methodology is consistent with the 

approach taken by Gopal and Schnabl (2020). 

109Barkley & Schweitzer, 17 Int’l J. Cent. Banking 

at 35–36. 

financing market, and how the Bureau 

arrived at these estimates. Where 

possible, the Bureau tries to estimate the 

state of the small business financing 

market at the end of 2019 in order to 

estimate the state of the market during 

a year unaffected by the COVID–19 

pandemic. 

One challenge is that some of the data 

report the dollar value of originations 

and some report outstanding balances. 

For the purposes of this exercise and for 

most, but not all, products, the Bureau 

assumes that for every $1 originated in 

the market in a given year, there is 

approximately a corresponding $3 of 

outstanding balances. This assumption 

is based on the ratio of the 2019 FFIEC 

Call Report data, which totaled $721 

billion in outstanding balances on bank 

loans to small businesses and small 

farms, and the 2019 CRA data, which 

recorded $264 billion in bank loan 

originations to small businesses and 

small farms.102 This assumption is 

limited by the extent to which other 

small business financing products differ 

from loans and lines of credit, which 

make up the majority of financing 

products captured by the FFIEC Call 

Report data and the CRA data.103

As detailed in this section, the Bureau 

estimates that the market for small 

business financing products totaled $1.4 

trillion in outstanding balances in 2019. 

The Bureau estimates that small 

business financing by depository 

institutions makes up just over half of 

small business financing by private 

institutions. In 2020 and 2021, COVID– 

19 emergency lending programs added a 

further $1 trillion to this value, bringing 

the overall size of the small business 

financing market up to $2.4 trillion. 

Below, the Bureau estimates the market 

share for different small business 

financing products. 

Since the available data regarding 

depository institutions’ small loans to 

businesses address term loans, lines of 

credit, and credit cards together, the 

respective share of different products in 

the overall small business financing 

market is difficult to assess. As detailed 

in this section, the Bureau estimates that 

together, private term loans and lines of 

credit constitute the largest small 

business credit product by value, 

totaling approximately $770 billion in 

outstanding balances in 2019, although 

PPP and EIDL Program loans have since 

added $1 trillion to this figure. 

Lending by banks, saving 

associations, and credit unions 

comprises the largest part of this total 

amount for private term loans and lines 

of credit. Using FFIEC Call Report data 

for December 2019, the Bureau 

estimates that banks and savings 

associations account for a total of about 

$721 billion in outstanding credit to 

small businesses and small farms as of 

December 2019.104 Using NCUA Call 

Report data for December 2019, the 

Bureau estimates that credit unions 

account for a total of about $55 billion 

in outstanding credit to members for 

commercial purposes.105 From this 

value, the Bureau subtracts $62 billion 

in credit card lending to arrive at $713 

billion in outstanding balances for term 

loans and lines of credit. From this 

value, the Bureau further subtracts $134 

billion in SBA guaranteed loans to 

arrive at $580 billion in outstanding 

balances for private term loans and lines 

of credit extended by depository 

institutions (i.e., banks, savings 

associations, and credit unions) as of 

December 2019. 

The remaining $190 billion in 

outstanding balances for private term 

loans and lines of credit was extended 

by various nondepository institutions, 

namely commercial finance companies, 

fintechs, and nondepository CDFIs.106

Commercial finance companies 

specialize in financing equipment and 

vehicle purchases. The Bureau estimates 

that the value of outstanding balances 

on credit extended by commercial 

finance companies totaled 

approximately $160 billion. Using data 

from the Federal Reserve Board’s 

Finance Company Business Receivables 

data on owned assets as of December 

2019, the Bureau estimates commercial 

finance companies outstanding credit 

for commercial purposes as the value of 

retail motor vehicle loans plus 

equipment loans and other business 

receivables, which totaled about $215 

billion.107 The Bureau further assumes 

that about 75 percent of this value, or 

$162 billion, can be attributed to loans 

to small businesses.108

Typical fintech providers are 

characterized primarily by providing 

banking services exclusively in an 

online environment.109 The Bureau 

estimates that total outstanding loan 

balances for fintech providers reached 

around $25 billion in 2019. In a 2018 

report, S&P Global projected that online 


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110 2018 US Fintech Market Report at 6. 

111The Bureau notes that this figure may 

underestimate the total value of fintech lending 

because it focuses on platform lenders and may 

overestimate the value of lending to small 

businesses because it also includes credit to 

medium businesses. Additionally, the Bureau notes 

that fintechs often offer products besides loans and 

lines of credit, and that there is no clear 

demarcation between fintech, commercial finance 

company, and MCA provider, limiting the precision 

of market size estimates. Finally, fintechs often sell 

loans once originated to other entities, securitize 

their originations, or purchase loans that banks 

have originated, which may further present 

challenges to the precision of market size estimates 

for this market segment. 

112 Jessica Battisto et al., Who Benefited from PPP 

Loans by Fintech Lenders?, Liberty Street 

Economics (May 27, 2021), https://libertystreet

economics.newyorkfed.org/2021/05/who-receivedppp-loans-by-fintech-lenders.html; Small Bus. 

Admin., Paycheck Protection Program (PPP) Report 

(approvals through 12 p.m. EST Apr. 16, 2020), 

https://www.sba.gov/sites/default/files/2020-06/ 

PPP%20Deck%20copy-508.pdf; Small Bus. Admin., 

Paycheck Protection Program (PPP) Report 

(approvals through Aug. 8, 2020), https://

www.sba.gov/sites/default/files/2020-08/PPP_

Report%20-%202020-08-10-508.pdf. 

113Per the program’s intent, many PPP loans have 

been forgiven since the program began, which may 

mean that outstanding balances on PPP loans 

extended by fintech providers have since declined. 

114Barkley & Schweitzer, 17 Int’l J. Cent. Banking 

at 35–36 (citing 2018 US Fintech Market Report at 

5). This figure annualizes $121 million in estimated 

2013 quarterly originations to $484 million in 

annual originations and scales up to estimated 

outstanding balances using the ratio between the 

FFIEC Call Report and the CRA data discussed 

above. 

115CDFI Fund, CDFI Annual Certification and 

Data Collection Report (ACR): A Snapshot for Fiscal 

Year 2019, at 17, 22 (Oct. 2020), https://

www.cdfifund.gov/sites/cdfi/files/2021-01/ACRPublic-Report-Final-10292020-508Compliant.pdf. 

To the extent that CDFI loan funds and venture 

capital funds extend credit to business customers at 

different rates than CDFI banks and credit unions, 

this calculation may over- or underestimate the 

value of lending to small businesses by 

nondepository CDFIs. This figure also assumes that 

all CDFI lending is for small businesses. 

116 Depository institutions, discussed above, 

extend a sizeable proportion of loans for 5+ unit 

residential dwellings; both nondepository and 

depository institutions are included in the total for 

5+ unit outstanding balances. 

117See Mortg. Bankers Ass’n, Annual Report on 

Multi-Family Lending—2019, at 5 (2020), https://

www.mba.org/store/products/research/general/ 

report/2019-annual-report-on-multifamily-lending. 

This includes both private loans, estimated at 

around $18 billion, and loans extended by Fannie 

Mae, Freddie Mac, and the FHA, estimated at 

around $13 billion. The share of 5+ unit residential 

dwelling loans of all sizes extended by 

governmental or government-sponsored entities was 

41 percent. The Bureau assumes for the purposes 

of this exercise that the same share is reflected in 

loans of under $1 million in value at origination, 

although arguably this share would be higher if 

government and government-sponsored entities are 

extended disproportionately smaller dollar value 

loans on average. 

118The grand total for lending by government and 

government-sponsored entities would be 

approximately $210 billion, including 5+ unit 

residential dwelling loans extended by Fannie Mae, 

Freddie Mac, and the FHA, which are separately 

recorded within the 5+ unit residential dwelling 

loan product category. 

119Small Bus. Admin., Small Business 

Administration Loan Program Performance 

(effective Mar. 31, 2021), https://www.sba.gov/ 

document/report-small-business-administrationloan-program-performance. SBA guaranteed loans 

comprised $134 billion out of this total, which 

amount has been deducted from the totals for 

depository institutions to avoid double counting. 

120Small Bus. Admin., Paycheck Protection 

Program (PPP) Report (approvals through May 31, 

2021), https://www.sba.gov/sites/default/files/2021- 

06/PPP_Report_Public_210531-508.pdf; Small Bus. 

Admin., Disaster Assistance Update—Nationwide 

COVID EIDL, Targeted EIDL Advances, 

Supplemental Targeted Advances (June 3, 2021), 

https://www.sba.gov/sites/default/files/2021-06/ 

COVID-19%20EIDL%20TA%20STA_6.3.2021_

Public-508.pdf; Small Bus. Admin., Disaster 

Assistance Update—Nationwide EIDL Loans (Nov. 

23, 2020), https://www.sba.gov/sites/default/files/ 

2021-02/EIDL%20COVID-19%20Loan%2011.23.20- 

508_0.pdf. 

121Fed. Farm Credit Banks Funding Corp., Farm 

Credit 2019 Annual Information Statement of the 

Farm Credit System, at 54, https://www.farmcredit

funding.com/ffcb_live/investorResources/ 

informationStatements.html (last visited Aug. 13, 

2021). 

122See Bd. of Governors of the Fed. Reserve Sys., 

Report Forms FR Y–14M, https://www.federal

reserve.gov/apps/reportforms/reportdetail.

aspx?sOoYJ+5BzDYnbIw+U9pka3sMtCMopzoV 

(last visited July 12, 2021). The Board’s data are 

received from bank holding companies over $50 

billion in assets, which represent 70 percent of 

outstanding balances for consumer credit cards; the 

corresponding percent of balances captured for 

small business cards is not known, so the total 

small business-purpose credit card market could be 

substantially higher or lower. See Bureau of 

Consumer Fin. Prot., The Consumer Credit Card 

Market, at 18 (Aug. 2019), https://files.consumer

finance.gov/f/documents/cfpb_consumer-creditcard-market-report_2019.pdf. 

platform lenders would originate about 

$9.3 billion in credit to small and 

medium enterprises in 2019.110 Using 

this estimate, the Bureau scales up the 

value of originations to $25 billion in 

estimated outstanding balances, under 

the assumptions discussed above.111 At 

the beginning of the COVID–19 

pandemic and financial crisis, fintechs 

originated around $22 billion in PPP 

loans to small businesses from March to 

August 2020 112 and likely continued to 

originate billions more during the third 

wave of PPP loans in 2021, which 

represents an almost 90 percent increase 

or more in outstanding balances since 

2019.113 This follows already rapid 

growth from $1.4 billion in estimated 

outstanding balances in 2013.114

The Bureau estimates the value of 

outstanding balances on credit extended 

by nondepository CDFIs to small 

business borrowers to be around $1.5 

billion. Using reporting by the CDFI 

Fund for 2019, the Bureau scales down 

the outstanding balances for loan funds 

of $13.8 billion and for venture capital 

funds of $0.3 billion by the proportion 

of all CDFI lending attributable to 

business borrowers, which totaled $15.4 

billion out of $141.2 billion.115

Categorized here separately so as to 

distinguish residential from nonresidential loans, the Bureau estimates 

outstanding balances for loans on 5+ 

unit residential dwellings to total over 

$30 billion.116 Using data from the 

Mortgage Bankers Association, the 

Bureau scales up $11 billion in 2019 

annual originations on loans of under $1 

million in value at origination for 5+ 

unit residential dwellings to $30 billion 

in estimated outstanding balances, using 

the ratio between the FFIEC Call Report 

and the CRA data discussed above.117

Also categorized separately from 

depository institution totals so as to 

distinguish private from government 

and government-sponsored loans, the 

Bureau estimates that outstanding 

balances for loans extended by the 

Small Business Administration and the 

Farm Credit System totaled around $200 

billion in 2019.118

The SBA, through its traditional 7(a), 

504, and microloan programs as well as 

the Economic Impact Disaster Loan 

(EIDL) program and funding for Small 

Business Investment Companies 

(SBICs), is the largest governmental 

lender by value, with $143.5 billion in 

outstanding balances at the end of fiscal 

2019.119 However, since the outbreak of 

the COVID–19 pandemic, SBA lending 

has increased in size by over $1 trillion 

due to the PPP, which totaled $800 

billion, and the EIDL Program, which 

totaled $210 billion.120

The Farm Credit System is another 

important government-related part of 

the small business credit landscape. The 

Bureau estimates that Farm Credit 

System members had around $55 billion 

in outstanding balances of credit 

extended to small farms in 2019. Using 

the same small loan to farms proxy as 

is used in the FFIEC Call Report, the 

Bureau estimates credit to farms with an 

origination value of less than $500,000. 

Based on the Farm Credit System’s 2019 

Annual Information Statement of the 

Farm Credit System, the Bureau 

estimates that outstanding balances of 

such small credit to farms totaled $55 

billion at the end of 2019.121 The 

Bureau notes that, as with the FFIEC 

Call Report proxy, this number may 

include credit to non-small farms and 

may exclude larger credit transactions 

extended to small farms. 

Mostly extended by depository 

institutions, the Bureau estimates that 

the market for small business credit 

cards totaled over $60 billion in 

outstanding balances for 2020.122 Using 

data from Y–14 Form submissions to the 

Federal Reserve Board, the Bureau 

estimates the value of outstanding 

balances for small business credit card 

accounts where the loan is underwritten 


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123Off. of Mgmt. & Budget, Instructions for the 

Capital Assessments and Stress Testing Information 

Collection (Reporting Form FR–Y14M), OMB No. 

7100–0341, at 148 (Mar. 2020), https://omb.report/ 

icr/202101-7100-006/doc/108187801. 

124See Equip. Leasing & Fin. Found., Horizon 

Report, https://www.leasefoundation.org/industryresources/horizon-report/ (last updated Apr. 22, 

2021). 

125See Karen Mills, Harvard Bus. Sch., State of 

Small Business Lending, at 29 (July 2014), https:// 

www.hbs.edu/ris/Supplemental%20Files/15- 

004%20HBS%20Working%20Paper%

20Chart%20Deck_47695.pdf (estimating equipment 

leasing outstanding balances for small business 

borrowers at approximately $160 billion at Dec. 31, 

2013); Monitor Daily, SEFI Report Finds Strong 

Performance Despite Challenges, https://

www.monitordaily.com/news-posts/sefi-report-finds

-strong-performance-despite-challenges/ (last 

visited July 27, 2021) ($903 billion market in 2014, 

commensurate with an 18 percent market share for 

small business borrowers at the time of the Karen 

Mills report). 

126See Secured Fin. Found., 2019 Secured 

Finance: Market Sizing & Impact Study Extract 

Report, at 7 (June 2019), https://www.sfnet.com/ 

docs/default-source/data-files-and-researchdocuments/sfnet_market_sizing___impact_study_

extract_f.pdf?sfvrsn=72eb7333_2. This study 

estimated the total volume of the U.S. factoring 

market to be $101 billion. To the extent that 

factoring volumes differ from outstanding balances, 

the value of outstanding balances may be higher or 

lower than this estimate. Also, this estimate 

captures factoring for business borrowers of all 

sizes, not just small business borrowers. The Bureau 

assumes that most factoring is provided to small 

business customers. 

127Paul Sweeney, Gold Rush: Merchant Cash 

Advances are Still Hot, deBanked (Aug. 18, 2019), 

https://debanked.com/2019/08/gold-rush-merchant

-cash-advances-are-still-hot/. BPC estimates appear 

to reference origination volumes rather than 

outstanding balances. See Nimayi Dixit, S&P Global 

Market Intelligence, Payment Fintechs Leave Their 

Mark On Small Business Lending (Aug. 28, 2018), 

https://www.spglobal.com/marketintelligence/en/ 

news-insights/research/payment-fintechs-leavetheir-mark-on-small-business-lending. Depending 

on credit multiplier effects, the value of annual 

origination volumes could be smaller or greater 

than outstanding balances. Without information on 

outstanding balances and for the purposes of 

calculating a market size for small business 

financing in 2019, the Bureau assumes in this paper 

a 1:1 ratio between annual origination volumes and 

outstanding balances for MCA products. See above 

for discussion of credit multiplier effects. 

128Cf. Barbara Lipman & Ann Marie Wiersch, Bd. 

of Governors of the Fed. Reserve Sys., Uncertain 

Terms: What Small Business Borrowers Find When 

Browsing Online Lender websites, at 3 (Dec. 2019), 

https://www.federalreserve.gov/publications/files/ 

what-small-business-borrowers-find-when-browsing

-online-lender-websites.pdf (observing that online 

lenders, including providers of MCA products, 

position themselves as offering financing to 

borrowers underserved by traditional lenders). 

129See id. (stating that MCAs are generally repaid 

in three to 18 months). 

130 Id. (stating that annual percentage rates on 

MCA products can exceed 80 percent or rise to 

triple digits). See also Fed. Trade Comm’n, ‘Strictly 

Business’ Forum, Staff Perspective, at 5 (Feb. 2020), 

https://www.ftc.gov/system/files/documents/report/ 

staff-perspective-paper-ftcs-strictly-business-forum/ 

strickly_business__forum_staff_perspective.pdf 

(observing stakeholder concern about the high-cost 

of MCAs that can reach triple digit annual 

percentage rates). 

131 15 U.S.C. 1601 et seq. 

132New York State law will require, as of January 

1, 2022, that providers of ‘‘sales-based financing’’ 

provide disclosures to borrowers which would 

include calculations of an estimated annual 

percentage rate in accordance with the Bureau’s 

Regulation Z, 12 CFR part 1026. See New York 

S.898, section 803(c) (signed Jan. 6, 2021) 

(amending S.5470–B), https://legislation.

nysenate.gov/pdf/bills/2021/s898. Similarly, 

California’s Department of Financial Protection and 

Innovation is in the process of issuing a rule to 

implement a California law requiring disclosures by 

commercial financing companies, including those 

providing sales-based financing. See 10 Cal. Code 

Reg. 2057(a)(22) (defining sales-based financing as 

‘‘a commercial financing transaction that is repaid 

by a recipient to the financer as a percentage of 

sales or income, in which the payment amount 

increases and decreases according to the volume of 

sales made or income received by the recipient’’ 

and including ‘‘a true-up mechanism’’); 10 Cal. 

Code Reg. 2065(a)(3) and 3001 (requiring salesbased financing providers disclosure estimated 

annual percentage rate according to Regulation Z, 

12 CFR part 1026). Under these laws, providers of 

commercial financing generally will be required to 

disclose: (1) The total amount financed, and the 

amount disbursed if it is different from the total 

amount financed; (2) the finance charge; (3) the 

APR (or the estimated APR for sales-based financing 

and factoring transactions), calculated in 

accordance with TILA and Regulation Z; (4) the 

total repayment amount; (5) the term (or the 

estimated term for sales-based financing) of the 

financing; (6) periodic payment amounts; (7) 

prepayment charges; (8) all other fees and charges 

not otherwise disclosed; and (9) any collateral 

requirements or security interests. See Cal. S.B. 

1235 (Sept. 30, 2018), https://leginfo.

legislature.ca.gov/faces/billTextClient.xhtml?bill_

id=201720180SB1235; N.Y. S.B. S5470B (July 23, 

2020), https://legislation.nysenate.gov/pdf/bills/ 

2019/S5470B. 

133See Fundbox/PYMNTS.com, The Trade Credit 

Dilemma, at 11 (May 2019), https://

www.pymnts.com/wp-content/uploads/2019/05/ 

Trade-Credit-Dilemma-Report.pdf (estimating 

accounts payable for businesses with revenue of 

under $250,000 at $6.7 billion and for businesses 

with revenue of $250,000 to $999,000 at $44.6 

billion). 

134 Id. The trade credit market is estimated to total 

$1.6 trillion across all business sizes in the United 

States. In the overall $1.4 trillion market size total 

for all small business financing products, the 

Bureau has included only the trade credit market 

for businesses of up to $1 million in revenue for 

consistency with its White Paper. 

with the sole proprietor or primary 

business owner as an applicant.123

Equipment and vehicle leasing, 

whereby businesses secure the right to 

possess and use a piece of equipment or 

vehicle for a term in return for 

consideration, is another important 

product category that is estimated to 

value roughly $160 billion in 

outstanding balances in 2019. Using 

data from the Equipment Leasing and 

Financing Foundation for 2019, the 

Bureau estimates the total size of the 

equipment and vehicle leasing market 

for all sized businesses in 2019 to be 

approximately $900 billion.124 The 

Bureau further assumes that small 

businesses comprise around 18 percent 

of the total equipment and vehicle 

leasing market.125

Factoring is a similarly significant 

product type, estimated at around $100 

billion in market size for 2019.126 In a 

factoring transaction, factors purchase, 

at a discount, a legally enforceable claim 

for payment (i.e., accounts receivables 

or invoices) for goods already supplied 

or services already rendered by a 

business for which payment has not yet 

been made; hence, a factor’s risk related 

to repayment often lies with the 

business’s customer and not the 

business itself. In most cases, specific 

companies, called factors, provide 

factoring products. 

The market for MCAs is developing 

rapidly and data are even more scarce 

than for other segments of the small 

business lending market. This limits the 

reliability of estimates as to the MCA 

market’s size. Based on market research 

conducted by Bryant Park Capital (BPC) 

and reported on by deBanked.com, the 

Bureau estimates the 2019 market size 

to be around $20 billion.127 The MCA 

market is also of particular significance 

for smaller and traditionally 

underserved businesses that may not 

qualify for other types of credit.128

MCAs are typically structured to 

provide a lump sum payment up front 

(a cash advance) in exchange for a share 

of future revenue until the advance, 

plus an additional amount, is repaid. 

Unlike the majority of other small 

business financing products, MCAs 

typically purport to be for short 

durations.129 The Bureau understands 

that MCAs also tend to be relatively 

high-cost products.130 Two States, New 

York and California, will soon 

implement laws that will require 

providers of ‘‘sales-based financing,’’ 

such as MCAs, to provide disclosures 

(including estimated APR) similar to 

those required under the Truth in 

Lending Act (TILA),131 which generally 

only applies to consumer credit.132

Finally, trade credit is another 

significant market, which the Bureau 

estimates to total $51 billion in 

outstanding balances in 2019. Using a 

report by Fundbox/PYMNTS, the 

Bureau estimates the trade credit market 

size by adding the total accounts 

payable for businesses under $1 million 

in annual revenue.133 Considering the 

total value of accounts payable for 

businesses between $1 million and $5 

million would increase the market size 

by $88 billion.134 Trade credit is an 

often informal, business-to-business 

transaction, usually between nonfinancial firms whereby suppliers allow 

their customers to acquire goods and/or 


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135Calculated from FFIEC Call Report data 

accessed on June 8, 2021. 

136 2019 NCUA Call Report. (One hundred twelve 

credit unions were not federally insured as of 

December 2019 but are included here as depository 

institutions. Calculated from NCUA Call Report 

data accessed on June 8, 2021.) 

137There may also be cooperative or nonprofit 

lenders as well as equipment and vehicle finance 

dealers originating in their own name that are not 

captured by the Bureau in these figures. For 

example, by searching Uniform Commercial Code 

(UCC) filings, Manasa Gopal and Philipp Schnabl 

identified 19 cooperative lenders that originated at 

least 1,500 loans over the period from 2006 to 2016. 

Manasa Gopal & Philipp Schnabl, The Rise of 

Finance Companies and FinTech Lenders in Small 

Business Lending, N.Y.U. Stern Sch. of Bus., at 18 

(May 13, 2020), https://ssrn.com/abstract=3600068. 

Additionally, these figures do not include trade 

creditors, which are non-financial companies that 

extend credit by allowing customers a period of 

time in which to pay and which are much greater 

in number since the practice is widespread across 

the economy. 

138 Id. This figure combines 192 independent 

finance companies with 95 captive finance 

companies. Since this estimate captures only those 

commercial finance companies averaging at least 

150 loans per year over the 2006 to 2016 period, 

it may exclude smaller volume lenders and should 

be considered conservative. 

139 Id. Since this estimate captures only those 

fintechs averaging at least 150 loans per year over 

the 2006 to 2016 period, it may exclude smaller 

volume lenders and should be considered 

conservative. On the other hand, since 2019, the 

COVID–19 economic shock may have led to some 

fintechs scaling back or exiting the small business 

financing market. See, e.g., Ingrid Lunden, Amex 

Acquires SoftBank-backed Kabbage After Tough 

2020 for the SMB Lender, TechCrunch (Aug. 17, 

2020), https://techcrunch.com/2020/08/17/amexacquires-softbank-backed-kabbage-after-tough2020-for-the-smb-lender/ (noting that Kabbage 

temporarily shut down credit lines to small 

businesses during April 2020 and then spun off its 

small business loan portfolio when it was 

subsequently acquired by American Express). 

140CDFI Fund, CDFI Annual Certification and 

Data Collection Report (ACR): A Snapshot for Fiscal 

Year 2019, at 8 (Oct. 2020), https://

www.cdfifund.gov/sites/cdfi/files/2021-01/ACRPublic-Report-Final-10292020-508Compliant.pdf. 

141 Id. at 15–16. 

142See Mortg. Bankers Ass’n, Annual Report on 

Multi-Family Lending—2019, at 9–66 (2020), 

https://www.mba.org/store/products/research/ 

general/report/2019-annual-report-on-multifamilylending. 

143deBanked, UCC–1 and UCC–3 Filings by 

Merchant Cash Advance Companies & Alternative 

Business Lenders, https://debanked.com/merchantcash-advance-resource/merchant-cash-advanceucc/ (last visited July 11, 2021). 

144See Secured Fin. Found., 2019 Secured 

Finance: Market Sizing & Impact Study Extract 

Report, at 15 (June 2019), https://www.sfnet.com/ 

docs/default-source/data-files-and-researchdocuments/sfnet_market_sizing___impact_study_

extract_f.pdf?sfvrsn=72eb7333_2 (estimating the 

number of factors at between 700 and 900). 

145 In addition to several Federal small business 

lending programs, States and major municipalities 

also often have one or more programs of their own. 

One State and one municipal program in each State 

would already total 100 government lending 

programs across Federal, State, and municipal 

governments. 

146Fed. Farm Credit Banks Funding Corp., Farm 

Credit 2019 Annual Information Statement of the 

Farm Credit System, at 7 (Feb. 28, 2020), https:// 

www.farmcreditfunding.com/ffcb_live/serve/public/ 

pressre/finin/.pdf?assetId=395570. The Bureau 

notes that Farm Credit System banks do not report 

FFIEC Call Reports and are thus not counted in the 

number of banks and savings associations discussed 

above. 

services without requiring immediate 

payment. 

The Bureau estimates that there were 

approximately 8,100 financial 

institutions extending small business 

financing in 2019, almost 80 percent of 

which were depository institutions. 

Based on FFIEC Call Report data for 

December 2019, the Bureau estimates 

that about 5,100 banks and savings 

associations are active in the small 

business lending market, out of a total 

of about 5,200 banks and savings 

associations.135 The Bureau assumes 

that a bank or savings association is 

‘‘active’’ in the market if it reports a 

positive outstanding balance of small 

loans, lines of credit, and credit cards to 

businesses. 

Based on the NCUA Call Report data 

for December 2019, the Bureau 

estimates that about 1,200 out of 5,300 

total credit unions were active in the 

small business lending market.136 The 

Bureau defines a credit union as 

‘‘active’’ in the market if it reported a 

positive number of originations of loans, 

lines of credit, and credit cards to 

members for commercial purposes in 

2019. 

The Bureau estimates that there are 

about 1,800 nondepository institutions 

active in the small business financing 

market,137 accounting for around $550 

billion in outstanding credit to small 

businesses. 

The Bureau estimates that about 300 

commercial finance companies are 

engaged in small business lending. By 

searching UCC filings, Manasa Gopal 

and Philipp Schnabl identified almost 

300 commercial finance companies, 

including both independent and captive 

finance companies, with at least 1,500 

small business loans between 2006 and 

2016.138 The Bureau also estimates there 

to be about 30 or more fintechs 

currently active in the small business 

lending market, not including MCA 

providers. Using the same methodology 

as for commercial finance companies, 

Gopal and Schnabl identified 19 fintech 

companies.139 The Bureau 

conservatively increases this estimate to 

30 to account for rapid growth in the 

industry from 2016 to 2019. 

The Bureau estimates that 340 

nondepository CDFIs are engaged in 

small business lending. Both depository 

and nondepository institutions can be 

CDFIs. Depository CDFIs are counted in 

the numbers of banks, savings 

associations, and credit unions engaged 

in small business lending. According to 

the CDFI fund, 487 nondepository funds 

(i.e., loan funds and venture capital 

funds) reported as CDFIs in 2019.140 Of 

these, 340 institutions reported that 

business finance or commercial real 

estate finance were a primary or 

secondary line of business in 2019.141

The Bureau estimates that about 270 

nondepository mortgage lenders 

participated in the credit market for 5+ 

unit residential dwellings in 2019 and 

that about 50 of these institutions 

extended 25 or more of these loans to 

small businesses. In its ‘‘2019 

Multifamily Lending Report,’’ the 

Mortgage Bankers Association lists 

annual multifamily lending volumes by 

institution, including a distinction for 

loans of under $1 million in value at 

origination.142 Using the same small 

loan to business proxy as is used in the 

FFIEC Call Report, the Bureau estimates 

the number of nondepository mortgage 

lenders by counting the number of 

institutions that appear on this list that 

are not depository institutions and that 

extended at least 50 loans in 2019. The 

Bureau counts institutions extending at 

least 50 loans of any size in order to 

estimate institutions extending at least 

25 small loans, based on the assumption 

that some 50 percent of these loans may 

have been for values greater than $1 

million. 

Based on data from UCC filings 

collected by deBanked.com, the Bureau 

estimates that about 100 institutions 

were active in the market for providing 

MCA products to small businesses in 

2021.143

The Bureau estimates the number of 

factors to be between 700–900 and 

assumes that most factors are providing 

financing to small business.144

Finally, many government agencies 

and government-sponsored enterprises 

provide or facilitate a significant 

proportion of small business credit. As 

the flagship government lender, the 

Small Business Administration 

managed in 2019 a portfolio of over 

$140 billion in loans to small 

businesses, to which it added over $1 

trillion in loans extended as part of the 

COVID–19 emergency lending 

programs. Across Federal, State, and 

municipal governments, the Bureau 

estimates that there are likely over 100 

government small business lending 

programs.145 Additionally, the Farm 

Credit System reports that, as of 

December 2019, the Farm Credit System 

contains a total of 72 banks and 

associations.146 The Bureau assumes 

that all of these Farm Credit System 

institutions are engaged in lending to 

small farms. 


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147White Paper at 12, 15. 

148Robert Fairlie, Stanford Inst. for Economic 

Policy Research, Working Paper No. 20–022, The 

Impact of COVID–19 on Small Business Owners: 

Evidence of Early Stage Losses from the April 2020 

Current Population Survey, at 5 (May 2020), https:// 

siepr.stanford.edu/sites/default/files/publications/ 

20-022.pdf. The authors define the rate of business 

ownership as the percentage of the labor force that 

owns and is actively employed in a business as 

their main job in the survey month. Id. at 3. As 

such, the decline in business ownership could 

reflect owners not only exiting the labor market but 

also switching to a different (wage and salary) job. 

In many cases, these exit or switching trends were 

temporary reactions to public health lockdowns and 

have since partially reversed. 

149 Id. at 6, 8. 

150Eric Groves, Cash Strapped SMBs, While 75% 

Of PPP Is Still Available, Alignable (Feb. 9, 2021), 

https://www.alignable.com/forum/alignable-roadto-recovery-report-february-2021?utm_campaign=

February&utm_medium=Press&utm_source=Press. 

151 JPMorgan Chase Inst., Place Matters: Small 

Business Financial Health in Urban Communities, 

at 5 (Sept. 2019), https://www.jpmorganchase.com/ 

content/dam/jpmc/jpmorgan-chase-and-co/ 

institute/pdf/institute-place-matters.pdf. 

152Biz2Credit, Small Business Lending Index, 

https://www.biz2credit.com/small-businesslending-index (last visited July 27, 2021). 

153Sara Savat, Who you know matters, even when 

applying for PPP loans, The Source, Newsroom, 

Wash. Univ. in St. Louis (Feb. 15, 2021), https://

source.wustl.edu/2021/02/who-you-know-matterseven-when-applying-for-ppp-loans/ (previous 

lender relationship increased likelihood of 

obtaining a PPP loan by 57 percent). See generally 

86 FR 7271, 7280 (Jan. 27, 2021) (noting that many 

banks restricted access to PPP loans to existing 

customers, which may run a risk of violating the 

ECOA and Regulation B). 

154Claire Kramer Mills, Fed. Reserve Bank of 

N.Y., Double Jeopardy: COVID–19’s Concentrated 

Health and Wealth Effects in Black Communities, 

at 6 (Aug. 2020), https://www.newyorkfed.org/ 

medialibrary/media/smallbusiness/ 

DoubleJeopardy_COVID19andBlackOwned

Businesses (arguing that a lack of strong banking 

relationships among Black-owned firms may have 

led to relatively lower rates of access to PPP loans 

for such firms); Fed. Reserve Banks, Small Business 

Credit Survey: 2021 Report on Firms Owned by 

People of Color, at ii (Apr. 15, 2021), https://

www.fedsmallbusiness.org/medialibrary/ 

FedSmallBusiness/files/2021/sbcs-report-on-firmsowned-by-people-of-color (Small Business Credit 

Survey of Firms Owned by People of Color) (finding 

that ‘‘firms owned by people of color tend to have 

weaker banking relationships’’). 

155 Greg Iacurci, Coronavirus loan program 

delayed for independent contractors and selfemployed workers, CNBC (Apr. 3, 2020), https://

www.cnbc.com/2020/04/03/delays-in-sba-loans-forindependent-contractors-self-employedworkers.html. 

156Stacy Cowley, ‘It Was a Joke’: Some Small 

Businesses Got $1 Relief Loans, N.Y. Times (Jan. 11, 

2021), https://www.nytimes.com/2021/01/11/ 

business/small-businesses-ppp-covid.html 

(observing that sole proprietorships were initially 

eligible for PPP loans only if they were profitable); 

see also Stacy Cowley, Minority Entrepreneurs 

Struggled to Get Small-Business Relief Loans, N.Y. 

Times (Apr. 4, 2021), https://www.nytimes.com/ 

2021/04/04/business/ppp-loans-minoritybusinesses.html (noting that sole proprietorships 

and independent contractor business structures are 

particularly prevalent among minority-owned 

businesses, which led to minority-owned 

businesses being disproportionately restricted from 

accessing PPP loans during initial roll-out of the 

program). 

157Claire Kramer Mills, Fed. Reserve Bank of 

N.Y., Double Jeopardy: COVID–19’s Concentrated 

Health and Wealth Effects in Black Communities, 

at 5–7 (Aug. 2020), https://www.newyorkfed.org/ 

medialibrary/media/smallbusiness/ 

DoubleJeopardy_COVID19andBlackOwned

Businesses. 

158 Jessica Battisto et al., Liberty Street 

Economics, Fed. Reserve Bank of N.Y., Who 

Benefited from PPP Loans by Fintech Lenders? (May 

27, 2021), https://libertystreeteconomics.

newyorkfed.org/2021/05/who-benefited-from-ppploans-by-fintech-lenders.html. 

159Rocio Sanchez-Moyano, Fed. Reserve Bank of 

S.F., Paycheck Protection Program Lending in the 

Twelfth Federal Reserve District (Mar. 3, 2021), 

https://www.frbsf.org/community-development/ 

publications/community-development-researchbriefs/2021/february/ppp-lending-12th-district/ 

(citing matched-pair audit studies that found 

discouragement and provision of incomplete 

information for minority business owners seeking 

PPP loans); 86 FR 7271, 7280 (Jan. 27, 2021) (noting 

that facially neutral PPP policies such as limiting 

loans to businesses with pre-existing relationships 

may run a risk of violating the ECOA and 

Regulation B due to a disproportionate impact on 

a prohibited basis). 

E. Challenges for Women-Owned and 

Minority-Owned Small Businesses 

Within the context of small business 

financing, women-owned and minorityowned businesses often face relatively 

more challenges than their counterparts. 

Specifically, women-owned and 

minority-owned small businesses can be 

even more susceptible to the impact of 

economic shocks and have a harder time 

accessing credit to survive and thrive in 

better times. 

Although women-owned and 

minority-owned businesses are found in 

many industry sectors, women-owned 

businesses are concentrated in the 

health care and social assistance sector, 

while minority-owned businesses are 

primarily concentrated in the service 

sector, the healthcare and social 

assistance sector, and the administrative 

support, waste management and 

remediation sectors.147 During 

economic downturns, such as the Great 

Recession and the financial crisis 

resulting from the COVID–19 pandemic, 

women-owned and minority-owned 

small businesses tend to fare worse than 

other small businesses. Women and 

minority business owners have been 

disproportionately hurt by the COVID– 

19 pandemic, with rates of business 

ownership dropping from February to 

April 2020 by 41 percent, 32 percent, 

and 26 percent for African American, 

Latinx, and Asian individuals, 

respectively, compared with 17 percent 

for white individuals.148 Female 

business ownership declined by 25 

percent, compared with 20 percent for 

male ownership.149

Women-owned and minority-owned 

small businesses often have smaller 

cash reserves on average, leaving them 

less able to weather downturns and 

credit crunches. For example, in 

February 2021, 39 percent of womenowned businesses had one month or 

less in cash reserves, compared with 29 

percent of men-owned firms.150 And in 

around 90 percent of majority Black and 

Hispanic communities, most businesses 

have fewer than 14 days of cash buffer, 

while this is true of only 35 percent of 

majority white communities.151 As a 

result, many small businesses, 

especially those owned by women and 

minorities, may have had a greater need 

for financing just as small business 

lenders began to approve fewer loans in 

response to economic uncertainty. Loan 

approvals at smaller banks dropped 

from 50 percent pre-pandemic to 12 

percent in April 2020 and have settled 

between 18 and 19 percent since June 

2020; the trend is similar for large 

banks, credit unions, and fintechs.152

The PPP—part of the Federal 

government’s response to the 

pandemic—helped to keep many small 

businesses afloat, but a number of 

factors prevented minority-owned small 

businesses from accessing PPP loans as 

easily as other firms. For example, 

established banking relationships 

between applicants and lending 

providers were often critical to 

approvals in early PPP underwriting; 153

many minority-owned businesses did 

not have such relationships.154 Further, 

many minority-owned firms are sole 

proprietorships and independent 

contractors, both of which received 

delayed access to PPP loans.155

Unprofitable non-employer firms were 

also initially barred from receiving 

loans.156 Although Black-owned firms 

are more likely to use fintech providers, 

these lenders were only belatedly 

allowed to disburse PPP funds.157

However, once fintech providers were 

allowed to disburse PPP loans, Black 

borrowers in particular benefited from 

this access, highlighting the ability of 

fintech firms to reach minority-owned 

business borrowers.158

Finally, applicants whose owners 

belong to protected categories may have 

received different credit outcomes when 

applying for PPP loans, although 

limitations in demographic information 

for PPP loans have hindered fair lending 

analyses.159

Given the severity of the COVID–19 

pandemic for small businesses generally 

and its potentially disproportionate 

impact on women-owned and minorityowned small businesses, it is essential 

to better understand the small business 

financing landscape to maintain support 

for this key part of the U.S. economy 

both during and after the pandemic. 


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160See 12 U.S.C. 5493(c)(2)(A) (directing the 

Office of Fair Lending and Equal Opportunity to 

provide ‘‘oversight and enforcement of Federal laws 

intended to ensure the fair, equitable, and 

nondiscriminatory access to credit for both 

individuals and communities that are enforced by 

the Bureau,’’ including ECOA and the Home 

Mortgage Disclosure Act). 

161ECOA section 704B(a). 

162 Id. 

163 12 U.S.C. 2801 et seq. 

164 42 U.S.C. 3601 through 3619. 

165Public Law 93–495, tit. V, section 502, 88 Stat. 

1500, 1521 (1974). 

166See Equal Credit Opportunity Act 

Amendments of 1976, Public Law 94–239, section 

701(a), 90 Stat. 251, 251 (1976). 

167 In March 2021, the Bureau issued an 

interpretive rule clarifying that the scope of ECOA’s 

and Regulation B’s prohibition on credit 

discrimination on the basis of sex encompasses 

discrimination based on sexual orientation and 

gender identity, including discrimination based on 

actual or perceived nonconformity with sex-based 

or gender-based stereotypes and discrimination 

based on an applicant’s associations. 86 FR 14363 

(Mar. 16, 2021). See also Press Release, Bureau of 

Consumer Fin. Prot., CFPB Clarifies That 

Discrimination by Lenders on the Basis of Sexual 

Orientation and Gender Identity Is Illegal (Mar. 9, 

2021), https://www.consumerfinance.gov/about-us/ 

newsroom/cfpb-clarifies-discrimination-by-lenderson-basis-of-sexual-orientation-and-gender-identityis-illegal/. The interpretive rule states that an 

example of discriminatory sex-based or genderbased stereotyping occurs if a small business lender 

discourages a small business owner appearing at its 

office from applying for a business loan and tells 

the prospective applicant to go home and change 

because, in the view of the creditor, the small 

business customer’s attire does not accord with the 

customer’s gender. 86 FR at 14365. 

168 15 U.S.C. 1601 et seq. 

169See Regulation B § 1002.4(a) and (b). 

170 Id. § 1002.4(b). 

171 Id. § 1002.5(b) through (d). 

172See Bureau of Consumer Fin. Prot., CFPB 

Bulletin 2012–04 (Fair Lending), Lending 

Discrimination (Apr. 18, 2012), https://

files.consumerfinance.gov/f/201404_cfpb_bulletin_

lending_discrimination.pdf (Interagency Policy 

Statement on Discrimination in Lending) 

(concurring with Interagency Task Force on Fair 

Lending, Policy Statement on Discrimination in 

Lending, 59 FR 18266 (Apr. 15, 1994)). 

173See Interagency Policy Statement on 

Discrimination in Lending at 18268. 

174See Regulation B comment 4(a)–1 (stating that 

‘‘[d]isparate treatment on a prohibited basis is 

illegal whether or not it results from a conscious 

intent to discriminate’’); Bureau of Consumer Fin. 

Prot., Equal Credit Opportunity Act (ECOA) 

Examination Procedures, at 1 (Oct. 30, 2015), 

https://files.consumerfinance.gov/f/documents/ 

201510_cfpb_ecoa-narrative-and-procedures.pdf 

(ECOA Examination Procedures); see also 

Interagency Policy Statement on Discrimination in 

Lending at 18268. 

175See Regulation B comment 6(a)–2; ECOA 

Examination Procedures at 1; see also Interagency 

Policy Statement on Discrimination in Lending at 

18269. 

176These regulators include the OCC, the Board, 

the FDIC, the NCUA, the Surface Transportation 

Board, the Civil Aeronautics Board, the Secretary of 

Agriculture, the Farm Credit Administration, the 

Securities and Exchange Commission, the SBA, the 

Secretary of Transportation, the Bureau, and the 

FTC. See 15 U.S.C. 1691c; Regulation B 

§ 1002.16(a). 

F. The Purposes and Impact of Section 

1071 

The Dodd-Frank Act sets forth the 

Bureau’s purposes and mission. It 

provides that a key component of the 

Bureau’s fair lending work is to ensure 

fair, equitable, and nondiscriminatory 

access to credit for both individuals and 

their communities.160 And in passing 

section 1071, Congress articulated two 

purposes for requiring the Bureau to 

collect data on small business credit 

applications and loans—to ‘‘facilitate 

enforcement of fair lending laws’’ and to 

‘‘enable communities, governmental 

entities, and creditors to identify 

business and community development 

needs and opportunities of womenowned, minority-owned, and small 

businesses.’’ 161 Although the DoddFrank Act does not further explain or 

clarify these dual statutory purposes, 

other Federal laws shed light on both 

purposes. That is, a set of existing 

Federal laws form the backdrop for the 

use of 1071 data to facilitate the 

enforcement of fair lending laws, and to 

identify business and community 

development needs of small businesses 

across the United States. 

1. Facilitating Enforcement of Fair 

Lending Laws 

Congress intended for section 1071 to 

‘‘facilitate enforcement of fair lending 

laws,’’ 162 which include ECOA, the 

Home Mortgage Disclosure Act of 1975 

(HMDA),163 the Fair Housing Act 

(FHAct),164 and other Federal and State 

anti-discrimination laws. 

i. Equal Credit Opportunity Act (ECOA) 

ECOA, which is implemented by 

Regulation B, applies to all creditors. 

Congress first enacted ECOA in 1974 to 

require financial institutions and other 

firms engaged in the extension of credit 

to ‘‘make credit equally available to all 

creditworthy customers without regard 

to sex or marital status.’’ 165 Two years 

later, Congress expanded ECOA’s scope 

to include age, race, color, religion, 

national origin, receipt of public 

assistance benefits, and exercise of 

rights under the Federal Consumer 

Credit Protection Act.166

ECOA makes it unlawful for any 

creditor to discriminate against any 

applicant with respect to any aspect of 

a credit transaction (1) on the basis of 

race, color, religion, national origin, sex 

(including sexual orientation and 

gender identity),167 marital status, or age 

(provided the applicant has the capacity 

to contract); (2) because all or part of the 

applicant’s income derives from any 

public assistance program; or (3) 

because the applicant has in good faith 

exercised any right under the Consumer 

Credit Protection Act.168 In keeping 

with the broad reach of the statute’s 

prohibition, Regulation B covers 

creditor activities before, during, and 

after the extension of credit.169

Regulation B also bars creditors from 

making any oral or written statement, in 

advertising or otherwise, to applicants 

or prospective applicants that would 

discourage, on a prohibited basis, a 

reasonable person from making or 

pursuing an application.170 Regulation 

B also generally prohibits creditors from 

making inquiries about whether an 

applicant is a member of certain 

protected categories.171

The Bureau has recognized the 

following methods of proving lending 

discrimination under ECOA and 

Regulation B: Overt evidence of 

discrimination, evidence of disparate 

treatment, and evidence of disparate 

impact.172 Overt evidence of 

discrimination exists when a creditor 

blatantly discriminates on a prohibited 

basis.173 Disparate treatment occurs 

when a creditor treats an applicant 

differently based on a prohibited basis 

such as race or national origin.174

Disparate impact occurs when a creditor 

employs facially neutral policies or 

practices that have an adverse effect or 

impact on a member of a protected class 

unless the facially neutral policies or 

practices meet a legitimate business 

need that cannot reasonably be achieved 

by means that are less disparate in their 

impact.175

Multiple Federal regulators can 

enforce violations of ECOA and 

Regulation B and apply various 

penalties. Enforcement and penalties for 

those who violate ECOA and Regulation 

B are set forth in 15 U.S.C. 1691e(b) and 

12 CFR 1002.16. Violations may also 

result in civil money penalties, which 

are governed by 12 U.S.C. 5565(c)(3). 

The Bureau and multiple other Federal 

regulators have the statutory authority 

to bring actions to enforce the 

requirements of ECOA.176 These 

regulators have the authority to engage 

in research, conduct investigations, file 

administrative complaints, hold 

hearings, and adjudicate claims through 

the administrative enforcement process 

regarding ECOA. Regulators also have 

independent litigation authority and can 

file cases in Federal court alleging 

violations of fair lending laws under 

their jurisdiction. Like other Federal 

regulators who are assigned 

enforcement authority under section 

704 of ECOA, the Bureau is required to 

refer matters to the Department of 

Justice (DOJ) when it has reason to 


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177See 15 U.S.C. 1691e(h). 

178 15 U.S.C. 1691e(a); Regulation B 

§ 1002.16(b)(1). 

179See U.S. Dep’t of Hous. & Urban Dev., 

Implementation of Executive Order 13988 on the 

Enforcement of the Fair Housing Act (Feb. 11, 

2021), https://www.hud.gov/sites/dfiles/PA/ 

documents/HUD_Memo_EO13988.pdf. 

180The Bureau uses the term ‘‘disability’’ to refer 

to what the FHA and its implementing regulations 

term a ‘‘handicap’’ because that is the preferred 

term. See, e.g., Hunt v. Aimco Props., L.P., 814 F.3d 

1213, 1218 n.1 (11th Cir. 2016) (noting the term 

disability is generally preferred over handicap). 

181 42 U.S.C. 3601 through 3619, 3631. 

182 42 U.S.C. 3605(b) (noting that for purposes of 

3605(a), a ‘‘residential real estate-related 

transaction’’ includes the making or purchasing of 

loans or providing other financial assistance for 

purchasing, constructing, improving, repairing, or 

maintaining a dwelling, or transactions secured by 

residential real estate). 

183 24 CFR 100.120. 

184 24 CFR 100.125. 

185 24 CFR 100.130. 

186A ‘‘dwelling,’’ as defined by the Fair Housing 

Act, is any building, structure, or portion thereof 

which is occupied as, or designed or intended for 

occupancy as, a residence by one or more families, 

and any vacant land which is offered for sale or 

lease for the construction or location thereon of any 

such building, structure, or portion thereof. 42 

U.S.C. 3602(b). 

187See Interagency Policy Statement on 

Discrimination in Lending at 18268. See also 78 FR 

11459, 11459 (Feb. 15, 2013) (stating that HUD, 

which is statutorily charged with the authority and 

responsibility for interpreting and enforcing the 

Fair Housing Act and with the power to make rules 

implementing the Act, ‘‘has long interpreted the Act 

to prohibit practices with an unjustified 

discriminatory effect, regardless of whether there 

was an intent to discriminate’’). 

188 42 U.S.C. 3610(g)(1) and (2). 

189See 42 U.S.C. 3614(a). 

190 42 U.S.C. 3612(o)(1). 

191See 42 U.S.C. 3612, 3614. 

192 59 FR 2939, 2939 (Jan. 17, 1994). 

193See 42 U.S.C. 3613. 

194See 12 U.S.C. 2901 et seq. 

195See 42 U.S.C. 12101 et seq. 

196 42 U.S.C. 1981(a). 

197 42 U.S.C. 1982. 

198See, e.g., Jackson v. Novastar Mortg., Inc., 645 

F. Supp. 2d 636 (W.D. Tenn. 2007) (motion to 

dismiss claim that defendants violated sections 

1981 and 1982 by racial targeting and by offering 

credit on less favorable terms on the basis of race 

denied); Johnson v. Equicredit Corp., No. 01–CIV– 

5197, 2002 U.S. Dist. LEXIS 4817 (N.D. Ill. Mar. 22, 

2002) (predatory lending/reverse redlining case 

brought pursuant to section 1981); Hargraves v. 

Cap. City Mortg. Corp., 140 F. Supp. 2d 7 (D.D.C. 

2000) (predatory lending/reverse redlining case 

brought under both sections 1981 and 1982), 

reconsideration granted in part, denied in part, 147 

F. Supp. 2d 1 (D.D.C. 2001) (section 1981 claim 

dismissed for lack of standing, but not section 1982 

claim); Doane v. Nat’l Westminster Bank USA, 938 

believe that a creditor has engaged in a 

pattern or practice of lending 

discrimination.177 Private parties may 

also bring claims under the civil 

enforcement provisions of ECOA, 

including individual and class action 

claims against creditors for actual and 

punitive damages for any violation of 

ECOA.178

ii. Home Mortgage Disclosure Act 

(HMDA) 

HMDA, implemented by the Bureau’s 

Regulation C (12 CFR part 1003), 

requires lenders who meet certain 

coverage tests to report detailed 

information to their Federal supervisory 

agencies about mortgage applications 

and loans at the transaction level. These 

reported data are a valuable resource for 

regulators, researchers, economists, 

industry, and advocates assessing 

housing needs, public investment, and 

possible discrimination as well as 

studying and analyzing trends in the 

mortgage market for a variety of 

purposes, including general market and 

economic monitoring. There may be 

some overlap between what is required 

to be reported under HMDA and what 

is covered by section 1071 for certain 

mortgage applications and loans for 

women-owned, minority-owned, and 

small businesses. 

A violation of HMDA and Regulation 

C is subject to administrative sanctions, 

including civil money penalties. 

Compliance can be enforced by the 

Bureau, the U.S. Department of Housing 

and Urban Development (HUD), the 

FDIC, the Board, the National Credit 

Union Administration (NCUA), or the 

Office of the Comptroller of Currency 

(OCC). These regulators have the 

statutory authority to bring actions to 

enforce the requirements of HMDA and 

to engage in research, conduct 

investigations, file administrative 

complaints, hold hearings, and 

adjudicate claims through the 

administrative enforcement process 

regarding HMDA. 

iii. Fair Housing Act (FHAct) 

Title VIII of the Civil Rights Act of 

1968, as amended (Fair Housing Act, or 

FHAct), prohibits discrimination in the 

sale, rental, or financing of dwellings 

and in other housing-related activities 

because of race, color, religion, sex 

(including sexual orientation and 

gender identity),179 disability,180

familial status, or national origin.181 The 

Fair Housing Act 182 and its 

implementing regulations specifically 

prohibit discrimination in the making of 

loans,183 the purchasing of loans,184 and 

in setting the terms and conditions for 

making loans available,185 without 

reference to consumers, legal entities, or 

the purpose of the loan being made, 

although these prohibitions relate 

exclusively to dwellings.186 As with 

ECOA, the courts have recognized three 

methods of proof of lending 

discrimination under the FHAct: (1) 

Overt evidence of discrimination; (2) 

evidence of disparate treatment; and (3) 

evidence of disparate impact.187

The DOJ and HUD are jointly 

responsible for enforcing the Fair 

Housing Act. The Fair Housing Act 

authorizes the HUD Secretary to issue a 

Charge of Discrimination on behalf of 

aggrieved persons following an 

investigation and a determination that 

reasonable cause exists to believe that a 

discriminatory housing practice has 

occurred.188 The DOJ may bring 

lawsuits where there is reason to believe 

that a person or entity is engaged in a 

‘‘pattern or practice’’ of discrimination 

or where a denial of rights to a group of 

persons raises an issue of general public 

importance,189 or where a housing 

discrimination complaint has been 

investigated by HUD, HUD has issued a 

Charge of Discrimination, and one of the 

parties to the case has ‘‘elected’’ to go 

to Federal court.190 In FHAct cases, 

HUD and the DOJ can obtain injunctive 

relief, including affirmative 

requirements for training and policy 

changes, monetary damages and, in 

pattern or practice cases, civil 

penalties.191

Upon receipt of a complaint alleging 

facts that may constitute a violation of 

the FHAct or upon receipt of 

information from a consumer 

compliance examination or other 

information suggesting a violation of the 

FHAct, Federal executive agencies 

forward such facts or information to 

HUD and, where such facts or 

information indicate a possible pattern 

or practice of discrimination in 

violation of the FHAct, to the DOJ.192

Private parties may also bring claims 

under the civil enforcement provisions 

of FHAct.193

iv. Other Fair Lending Laws 

Several other Federal statutes seek to 

promote fair lending. The CRA seeks 

affirmatively to encourage institutions 

to help to meet the credit needs of the 

entire community served by each 

institution covered by the statute, and 

CRA ratings take into account lending 

discrimination by those institutions.194

The Americans with Disabilities Act of 

1990 prohibits discrimination against 

persons with disabilities in the 

provision of goods and services, 

including credit services.195 Sections 

1981196 and 1982 197 of the Federal Civil 

Rights Acts are broad antidiscrimination laws that have been 

applied to many aspects of credit 

transactions.198


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F. Supp. 149 (E.D.N.Y. 1996) (mortgage redlining 

case brought under sections 1981 and 1982); 

Fairman v. Schaumberg Toyota, Inc., No. 94–CIV– 

5745, 1996 U.S. Dist. LEXIS 9669 (N.D. Ill. July 10, 

1996) (section 1981 suit over allegedly predatory 

credit scheme targeting African Americans and 

Hispanics); Steptoe v. Sav. of Am., 800 F. Supp. 

1542 (N.D. Ohio 1992) (mortgage redlining case 

brought under sections 1981 and 1982 and the Fair 

Housing Act); Evans v. First Fed. Sav. Bank of Ind., 

669 F. Supp. 915 (N.D. Ind. 1987) (section 1982 can 

be used in mortgage lending discrimination case); 

Assocs. Home Equity Servs. v. Troup, 778 A.2d 529 

(N.J. 2001) (predatory lending/reverse redlining 

case brought pursuant to section 1981). 

199See, e.g., Cal. Civ. Code 51 and 51.5 and Cal. 

Gov’t Code 12955; Colo. Rev. Stat. 24–34–501(3) 

and 5–3–210; Conn. Gen. Stat. 46a-81e, 46a-81f, and 

46a-98; Del. Code Ann. tit. 6, 4604; D.C. Code 2– 

1402.21; Haw. Rev. Stat. 515–3 and 515–5; 775 Ill. 

Comp. Stat. 5/1–102, 5/1–103, 5/4–102, 5/3–102, 

and 5/4–103; Iowa Code 216.8A and 216.10; Me. 

Rev. Stat. tit. 5, 4553(5–C) and (9–C), 4595 to 4598, 

and 4581 to 4583; Md. Code Ann. State Gov’t 20– 

705, 20–707, and 20–1103; Mass. Gen. Laws ch. 

151B, 4(3B), (14); Minn. Stat. 363A.03 (Subd. 44), 

363A.09(3), 363A.16 (Subds. 1 and 3), and 363A.17; 

N.H. Rev. Stat. Ann. 354–A:10; N.J. Stat. Ann. 10:5– 

12(i); N.M. Stat. Ann. 28–1–7; N.Y. Civ. Rights Law 

40-c(2); N.Y. Exec. Law 296–A; Or. Rev. Stat. 

174.100(7) and 659A.421; R.I. Gen. Laws 34–37–4(a) 

through (c), 34–37–4.3, and 34–37–5.4; Va. Code 

Ann. 6.2–501(B)(1), 15.2–853, and 15.2–965; Vt. 

Stat. Ann. tit. 8, 10403 and tit. 9, 2362, 2410, and 

4503(a)(6); Wash. Rev. Code 49.60.030, 49.60.040 

(14), (26), and (27), 49.60.175, and 49.60.222; Wis. 

Stat. 106.50 and 224.77. There are also a number 

of municipalities that have enacted credit 

discrimination ordinances. See, e.g., Austin City 

Code 5–1–1 et seq.; N.Y.C. Admin. Code 8–101 and 

8–107 et seq.; S.F. Police Code 3304(a) et seq. 

200See, e.g., Mass. Gen. Laws ch. 151B, 4(3B) 

(prohibiting discrimination based on genetic 

information); N.J. Stat. Ann. 10:5–1 to 10:5–42 

(same); D.C. Code 2–1401.02 and 2–1402.21 

(extending protections from discrimination to 

domestic violence victims); Wis. Stat. 224.77 

(same); N.Y. Exec. Law 296-a (prohibiting 

discrimination on the basis of military status) 

(credit transactions); N.Y. Exec. Law 296(5)(a) 

through (c) (same) (housing transactions); Wash. 

Rev. Code 49.60.176 (protecting veterans and 

honorably discharged service members); 775 Ill. 

Comp. Stat. 5/3–101 and 5/4–101 (prohibiting 

discrimination based on an applicant’s unfavorable 

discharge from the military); 815 Ill. Comp. Stat. 

140/1a (same). Several other State statutes also 

prohibit discrimination based on the geographic 

area of residence. See, e.g., 815 Ill. Comp. Stat. 120/ 

1 to 120/6; Iowa Code 535A.1 to 535A.9; Md. Code 

Ann., Com. Law 12–603 (West); Mich. Comp. Laws 

445.1601 to 445.1614; Minn. Stat. 363A.09(3)(c); 

N.Y. Banking Law 9–f; Wash. Rev. Code 30.04.500 

to 30.04.515. 201ECOA section 704B(a). 

202Public Law 103–325, tit. I, section 102, 108 

Stat. 2160, 2163 (1994) (12 U.S.C. 4701 through 

4719). 

203 12 U.S.C. 2901(a)(3). 

204 12 U.S.C. 2901(b). 

205See H.R. Rep. No. 561, 94th Cong., 1st Sess. 

4 (1975) (‘‘[The practice of redlining] increasingly 

Continued 

Many States and municipalities have 

also enacted fair lending, fair housing, 

and/or civil rights laws (often modeled 

on their Federal counterparts) that seek 

to broadly prohibit credit 

discrimination, including protections 

for business credit.199 Some of these 

laws expressly enumerate protections 

beyond those expressly enumerated in 

the Federal statutes.200

v. Facilitating Enforcement 

In order for the 1071 rule to facilitate 

enforcement of the fair lending laws 

discussed above, the Bureau believes 

that it must collect and make available 

sufficient data to help the public and 

regulators identify potentially 

discriminatory lending patterns that 

could constitute violations of fair 

lending laws. Financial regulators and 

enforcement agencies need a consistent 

and comprehensive dataset for all 

financial institutions subject to 1071 

reporting in order to also use 1071 data 

in their initial prioritization, peer 

analysis, redlining reviews, and 

screening processes to select institutions 

for monitoring, examination, or 

investigation. Section 1071 data would 

facilitate more efficient fair lending 

examinations. For example, regulators 

could use pricing and other data to 

prioritize fair lending examinations— 

without such data, some financial 

institutions would face unnecessary 

examination burden while others whose 

practices warrant closer review would 

not receive sufficient scrutiny. 

Moreover, as discussed in part V 

below, the Bureau believes specific 

aspects of its proposal offer particular 

benefits for the enforcement of fair 

lending laws. For example, the Bureau’s 

proposal regarding transactional and 

institutional coverage would allow 

community groups and government 

agencies to include most of the small 

business financing market in fair 

lending analyses. The proposed 

inclusion of pricing data fields such as 

interest rate and fees would provide 

information on disparities in pricing 

outcomes, and data fields such as gross 

annual revenue, denial reasons, and 

time in business would allow for a more 

refined analysis and understanding of 

disparities in both underwriting and 

pricing outcomes. While 1071 data 

alone generally will not offer proof of 

compliance with fair lending laws, 

regulators, community groups, 

researchers, and financial institutions 

will be able to use 1071 data to identify 

potential disparities in small business 

lending based on disaggregated 

categories of race and ethnicity. Overall, 

the data collection under 1071 rule will 

allow, for the first time, for 

comprehensive and market-wide fair 

lending risk analysis. 

2. Identifying Business and Community 

Development Needs 

The second purpose of section 1071 is 

to enable communities, governmental 

entities, and creditors to identify 

business and community development 

needs and opportunities of womenowned, minority-owned, and small 

businesses.201

Section 1071 does not expressly 

define the phrase ‘‘business and 

community development needs.’’ 

However, other Federal statutes and 

regulations, including the CRA and the 

Riegle Community Development and 

Regulatory Improvement Act of 1994,202

reference or define the phrases 

‘‘business development’’ and 

‘‘community development’’ and can 

help explain what it means to enable 

communities, governmental entities, 

and creditors to ‘‘identify business and 

community development needs and 

opportunities.’’ 

The Bureau believes, based on its 

consideration of these other Federal 

statutes and regulations, that the 

proposed 1071 rule would provide more 

data to the public—including 

communities, governmental entities, 

and creditors—for analyzing whether 

financial institutions are serving the 

credit needs of their small business 

customers. In addition, with 1071 data, 

the public would be better able to 

understand access to and sources of 

credit in particular communities or 

industries, such as a higher 

concentration of risky loan products in 

a given community, and to identify the 

emergence of new loan products, 

participants, or underwriting practices. 

The data would not only assist in 

identifying potentially discriminatory 

practices, but would also contribute to 

a better understanding of the 

experiences that members within 

certain communities may share in the 

small business financing market. 

i. Community Reinvestment Act (CRA) 

The CRA, a part of the Housing and 

Community Development Act, was 

passed by Congress in 1977, which 

found that ‘‘regulated financial 

institutions have continuing and 

affirmative obligation to help meet the 

credit needs of the local communities in 

which they are chartered.’’ 203 As such, 

one of the statutory purposes of the CRA 

is to encourage such institutions to help 

meet the credit needs of the local 

communities in which they are 

chartered consistent with the safe and 

sound operation of such institutions.204

The legislative history for the CRA 

suggests that the concerns motivating 

the Act’s passage included certain 

practices by banks including redlining 

(i.e., declining to extend credit in 

neighborhoods populated by ethnic or 

racial minorities) 205 and community 


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has served to polarize elements of our society . . . . 

As polarization intensifies, neighborhood decline 

accelerates.’’), reprinted in 1975 U.S.C.C.A.N. 2303, 

2305–06. 

206Robert C. Art, Social Responsibility in Bank 

Credit Decisions: The Community Reinvestment Act 

One Decade Later, 18 Pac. L.J. 1071, 1076–77 & n.23 

(1987) (citing 123 Cong. Rec. S8958 (daily ed. June 

6, 1977), which stated that Sen. Proxmire, the 

congressional sponsor of the Act described 

redlining as ‘‘the fact that banks and savings and 

loans will take their deposits from a community 

and instead of reinvesting them in that community, 

they will invest them elsewhere, and they will 

actually or figuratively draw a red line on a map 

around the areas of their city,’’ further noting that 

those lines are drawn ‘‘sometimes in the inner city, 

sometimes in the older neighborhoods, sometimes 

ethnic and sometimes black . . . .’’). 

207 12 U.S.C. 2906(a)(1). 

208 43 FR 47144 (Oct. 12, 1978). 

209 60 FR 22156 (May 4, 1995). 

210 70 FR 44256 (Aug. 2, 2005). 

211 12 CFR 228.11. 

212See, e.g., 12 CFR 25.42, 228.11. 

213 12 CFR part 25. 

214 12 CFR part 228. 

215 12 CFR parts 345, 195. 

216Most specifically, that record is taken into 

account in considering an institution’s application 

for deposit facilities, including mergers and 

acquisitions with other financial institutions and 

the opening of bank branches. 

217OCC regulations define ‘‘CRA desert’’ as an 

area that has ‘‘significant unmet community 

development or retail lending needs’’ and where: 

(1) Few banks have branches or non-branch deposittaking facilities, (2) There is ‘‘less retail or 

community development lending than would be 

expected based on demographic or other factors,’’ 

or (3) The area ‘‘lacks community development 

organizations or infrastructure.’’ 12 CFR 25.03. 

218 12 CFR 228.12(g)(1), 345.12(g)(1). 

219 12 CFR 228.12(g)(2), 345.12(g)(2). 

220 12 CFR 228.12(g)(3), 345.12(g)(3). 

221 12 CFR 228.12(g)(4), 345.12(g)(4). 

222 85 FR 66410 (Oct. 19, 2020). 

223 Id. at 66459–63. 

224 Id. at 66462. 

225The FDIC initially joined the OCC in issuing 

its early 2020 proposed rule to expand the 

definition of ‘‘community development’’ for 

purposes of CRA compliance, but it did not join the 

OCC in its issuance of a rule finalizing that 

proposal. Compare 85 FR 1204 (Jan. 9, 2020) (joint 

FDIC–OCC proposal to amend the agencies’ 

respective CRA regulations), with 85 FR 34734 (June 

5, 2020) (OCC final rule amending CRA 

regulations). The rule added to the range of 

activities that comprise ‘‘community development’’ 

for purposes of the OCC’s revisions to the CRA 

regulations. Specifically, the OCC expanded the 

qualifying activities criteria to capture activities the 

OCC stated were consistent with the statutory 

purpose of the CRA but that generally did not 

receive credit under CRA regulations prior to the 

OCC’s revisions, including certain activities in 

identified ‘‘areas of need beyond LMI areas (i.e., 

underserved areas, distressed areas, disaster areas, 

Indian country and other tribal and native lands)’’ 

as well as those activities that ‘‘benefit a whole 

community, while maintaining an appropriate focus 

on LMI neighborhoods.’’ 85 FR 34734, 34735 (June 

5, 2020); see also 12 CFR 25.04(a)(1) (stating that 

a retail loan, a community development loan, a 

community development investment, or a 

community development service ‘‘that helps to 

meet the credit needs of a bank’s entire community, 

including low- and moderate-income communities, 

is a qualifying activity if it meets the criteria in this 

section at the time the activity is originated, made, 

or conducted’’); 12 CFR 25.04(b)(3) (listing 12 sets 

of activities that qualify as community development 

loans, investments and services). 

226Off. of the Comptroller of the Currency, OCC 

Statement on Rescinding its 2020 Community 

Reinvestment Act Rule (News Release 2021–76) 

(July 20, 2021), https://www.occ.gov/newsissuances/news-releases/2021/nr-occ-2021-76.html 

(stating that the OCC will propose rescinding its 

June 2020 CRA final rule). 

227 Id. (noting the crucial nature of strengthening 

the CRA jointly with the Board and FDIC and 

signaling intention to issue a joint notice of 

proposed rulemaking building on the ANPR 

proposed by the Board in September 2020). 

228 12 U.S.C. 4701(b). 

229 12 U.S.C. 4701(a)(1). 

230 12 U.S.C. 4701(b). 

231 12 CFR 1805.201(b)(1). 

disinvestment (i.e., taking deposits from 

lower-income areas, often populated by 

ethnic or racial minorities, without 

extending credit or banking services to 

residents of those areas).206 The CRA 

requires the ‘‘appropriate Federal 

financial supervisory agency’’ of a given 

depository institution to ‘‘prepare a 

written evaluation of the institution’s 

record of meeting the credit needs of its 

entire community, including low- and 

moderate-income neighborhoods.’’ 207

These requirements were first 

implemented by a 1978 rulemaking,208

and were amended in 1995 209 and 

2005.210 These rulemakings, adopted by 

each of the agencies responsible for 

ensuring compliance with the CRA, 

established specific performance 

measures,211 requiring banks to disclose 

information about small business, small 

farm and community development 

lending.212

The agencies tasked with ensuring 

compliance—including the OCC,213 the 

Board,214 and the FDIC215—evaluate 

each insured depository institution’s 

record in helping meet the credit needs 

of its entire community.216 Overall, the 

CRA and its regulations generate data 

that help agencies and the public at 

large identify instances of redlining, 

community disinvestment, and 

geographical areas that are ‘‘banking 

deserts.’’ 217 The CRA regulations of the 

Board and the FDIC currently have the 

same definitions of ‘‘community 

development’’ that include banking and 

credit services that support the 

following: (1) Affordable housing for 

low- and moderate-income (LMI) 

individuals; 218 (2) community services 

for LMI individuals; 219 (3) activities 

that promote economic development by 

financing small business and small 

farms; 220 and (4) activities that 

revitalize or stabilize LMI geographies, 

disaster areas, and certain distressed or 

underserved middle-income areas based 

on other factors.221

In September 2020, the Board 

announced an advance notice of 

proposed rulemaking to update its CRA 

regulations, specifically to more 

effectively meet the needs of LMI 

communities and address inequities in 

credit access.’’ 222 As part of this 

exercise, the Board requested feedback 

on potential revisions to its data 

collection and reporting 

requirements.223 The Board suggested 

that more granular reporting of 

community development loan and 

investment data may be needed to aid 

community development and improve 

compliance with the CRA, noting that 

the lack of such data ‘‘means that there 

is no aggregate community development 

data at a local level available to create 

the local benchmarks for the community 

development financing metric.’’ 224 As 

such, the publication of 1071 data 

would also be a useful resource for 

supporting community development 

efforts under the CRA. 

In June 2020, the OCC promulgated a 

final rule that adopted a broader 

definition of ‘‘community development’’ 

than the one used by the Board and the 

FDIC.225 However, in July 2021, the 

OCC announced that it was 

reconsidering the June 2020 revisions to 

its CRA regulations,226 and that it may 

join the Board’s consideration of 

proposed revisions to strengthen bank 

compliance with CRA regulations.227

ii. Community Development Financial 

Institution Fund (CDFI Fund) 

The Riegle Community Development 

and Regulatory Improvement Act of 

1994 authorized the CDFI Fund.228 In 

passing that statute, Congress found that 

many of the Nation’s urban, rural, and 

Native American communities face 

‘‘critical social and economic problems 

arising in part from the lack of economic 

growth, people living in poverty, and 

the lack of employment and other 

opportunities.’’ 229

To address these problems, Congress 

created the CDFI Fund to ‘‘promote 

economic revitalization and community 

development’’ through investment in 

and assistance to CDFIs, including 

enhancing the liquidity of CDFIs.230

The concept of community 

development is central to the operation 

of the CDFI Fund. While CDFI Fund 

regulations do not directly define that 

term, any entity applying for CDFI 

certification must have ‘‘promoting 

community development’’ as its 

‘‘primary mission.’’ 231 In making this 

determination, the CDFI Fund considers 

whether the activities of the entity are 

purposefully directed toward improving 

the social and/or economic conditions 

of underserved people, which may 

include low-income persons or persons 


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232 Id. 

233 12 CFR 1805.803(e) (requiring recipients of 

technical and financial assistance to provide to the 

CDFI Fund certain information and 

documentation). 

234 12 CFR 1805.803(e)(4). 

235Citigroup, Citi GPS: Global Perspectives & 

Solutions, Closing the Racial Inequality Gaps: The 

Economic Cost of Black Inequality in the U.S., at 

4 (Sept. 2020), https://ir.citi.com/NvIUklHPilz14

Hwd3oxqZBLMn1_XPqo5FrxsZD0x6hhi

l84ZxaxEuJUWmak51UHvYk75VKeHCMI%3D. 

236Blog post, Dave Uejio, Acting Director, Bureau 

of Consumer Fin. Prot., Addressing racial inequities 

in consumer finance markets (June 2, 2021), https:// 

www.consumerfinance.gov/about-us/blog/ 

addressing-racial-inequities-consumer-financemarkets/. 

237See Bureau of Consumer Fin. Prot., https://

www.consumerfinance.gov/about-us/racial-equity/. 238 82 FR 22318 (May 15, 2017). 

who lack adequate access to capital and 

financial services and residents of 

economically distressed 

communities.232

The CDFI Fund collects data from the 

recipients of its financial and technical 

assistance, shedding some light on the 

extent of community development in 

the areas where CDFIs operate.233 The 

CDFI Fund also publishes the data it 

receives with appropriate redactions to 

protect privacy interests.234 However, 

given that CDFIs comprise a relatively 

small share of the overall small business 

lending market, section 1071 would 

materially enhance understanding of the 

broader extent of community 

development outside of areas where 

CDFIs already operate. The data from a 

1071 rulemaking would also likely 

augment the data the CDFI Fund already 

receives. 

3. Potential Impact of Section 1071 Data 

A section 1071 rule would provide on 

an annual basis application-level data 

on small business credit, including 

certain protected demographic 

information about applicants and their 

principal owners. This would include 

information on applications for credit 

that are originated, as well as those that 

are denied, withdrawn, incomplete, or 

approved by the financial institution but 

not accepted by the applicant. This 

information would enable stakeholders 

of all kinds in the small business 

lending market to gain unprecedented 

insight into trends in small business 

lending, specifically with respect to 

women-owned and minority-owned 

small businesses. It would also provide 

insight into the interaction of supply 

and demand over time. 

In terms of facilitating fair lending 

enforcement, interested government 

agencies and other stakeholders would 

be able to use 1071 data to analyze 

potential instances of practices resulting 

in the disparate treatment of or 

disparate impact on women- and 

minority-owned small businesses, using 

statistical methods to identify possible 

fair lending risks. 

Regarding the identification of 

business and community development 

needs, the data that would be made 

available by the Bureau under this 

rulemaking, if finalized as proposed, 

would help government entities and 

public and private lenders identify and 

target sub-segments of the market that 

remain underserved, facilitating 

entrepreneurship and business 

development in those communities. 

The advancement of both statutory 

purposes of section 1071—facilitating 

fair lending enforcement and identifying 

business and community development 

needs—in turn will support small 

businesses across all sectors of the 

economy, which are fundamental to the 

economic health of the U.S. and which 

have been hard hit by recent economic 

and financial crises. The use of data that 

would be provided pursuant to 

regulations under section 1071 can both 

support the underlying purposes of 

section 1071 and help the economy as 

a whole. For example, according to one 

estimate, fair and equitable lending to 

Black entrepreneurs could have added 

$13 trillion in business revenue over the 

last 20 years and created 6 million 

jobs.235 As the economy recovers from 

the effects of the COVID–19 pandemic, 

data collected and published pursuant 

to regulations implementing section 

1071 would help to support equitable 

and sustainable growth and prosperity 

in all communities in the U.S. 

4. Bureau Priorities 

On June 2, 2021, the Bureau 

announced as priorities action to 

address issues of pervasive racial 

injustice and the long-term economic 

impacts of the COVID–19 pandemic on 

consumers.236 The Acting Director 

explained that the Bureau will use all of 

its tools and authority—including 

rulemaking—to protect and fight for 

fairness for all consumers in financial 

markets.237 The Bureau believes that 

implementing the section 1071 data 

collection, maintenance, and reporting 

obligations established in the DoddFrank Act would advance those 

priorities. 

Congress enacted section 1071 for the 

purposes of facilitating enforcement of 

fair lending laws, and enabling 

communities, governmental entities, 

and creditors to identify business and 

community development needs and 

opportunities for women-owned, 

minority-owned, and small businesses. 

The Bureau believes that 1071 data will 

come to play an important role as 

HMDA data have done for the mortgage 

market. HMDA data have provided 

lenders, community groups, and others 

the tools to identify and address fair 

lending risks and strengthen fair lending 

oversight and enforcement. In a similar 

way, section 1071 data will allow 

diverse stakeholders to analyze lending 

patterns that are potentially 

discriminatory. By identifying and 

addressing discriminatory small 

business lending practices, the Bureau 

will help to ensure fair, equitable, and 

nondiscriminatory access to credit for 

both individuals and their communities. 

HMDA data have also proven effective 

in creating transparency in the mortgage 

market that improves the understanding 

of credit needs, where they may remain 

unmet, and the relationship between 

mortgage lending and community 

development. The Bureau believes that 

the 1071 data will provide the Bureau 

and other stakeholders with critical 

insights into the small business lending 

market. The current COVID–19 

pandemic has shown that transparency 

is essential at a time of crisis, when 

small businesses, especially those 

owned by women and minorities, may 

be in urgent need of credit in order to 

recover from the economic shocks. As at 

least one SER suggested, a 1071 rule 

would help lenders across the country 

better connect underserved 

entrepreneurs to working capital and 

resources in order to build a more 

inclusive economy. 

III. Outreach 

In the years leading up to the release 

of this proposed rule, the Bureau held 

over 100 outreach meetings with 

financial institutions, trade associations, 

community groups, researchers, 

governmental entities, and other 

stakeholders regarding the 1071 

rulemaking. The Bureau also took a 

number of other steps, beyond 

individual stakeholder meetings, to 

solicit feedback more broadly from the 

public on a 1071 rule. 

Request for information, field hearing, 

and White Paper on small business 

lending. On May 10, 2017, the Bureau 

published a request for information 

(RFI) regarding the small business 

lending market 238 in which it sought 

public comment to understand more 

about the products that are offered to 

small businesses, the financial 

institutions that offer such credit, the 

small business lending data that 

currently are used and may be 

maintained by financial institutions, the 

potential complexity and cost of small 

business data collection and reporting, 


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239 In response to the RFI, the Bureau received 

over 2,000 comments in total, and over 100 unique 

comments offering detailed substantive responses 

on the topics raised in the RFI. These comments 

from the public helped to inform the Bureau’s 

approach in its SBREFA Outline. See Bureau of 

Consumer Fin. Prot., Request for Information 

Regarding the Small Business Lending Market, 

Docket ID CFPB–2017–0011, https://

www.regulations.gov/docket/CFPB-2017-0011. 

240See Bureau of Consumer Fin. Prot., Prepared 

Remarks of CFPB Director Richard Cordray at the 

Small Business Lending Field Hearing (May 10, 

2017), https://www.consumerfinance.gov/about-us/ 

newsroom/prepared-remarks-cfpb-director-richardcordray-small-business-lending-field-hearing/. 

241Bureau of Consumer Fin. Prot., Key 

dimensions of the small business lending landscape 

(May 2017), https://files.consumerfinance.gov/f/ 

documents/201705_cfpb_Key-Dimensions-SmallBusiness-Lending-Landscape.pdf. 

242Bureau of Consumer Fin. Prot., Symposium: 

Section 1071 of the Dodd-Frank Act (held Nov. 6, 

2019), https://www.consumerfinance.gov/about-us/ 

events/archive-past-events/cfpb-symposiumsection-1071-dodd-frank-act/. 

243Public Law 104–121, 110 Stat. 857 (1996). 

244 5 U.S.C. 609(b). 

245Bureau of Consumer Fin. Prot., Small Business 

Advisory Review Panel for Consumer Financial 

Protection Bureau Small Business Lending Data 

Collection Rulemaking, Outline of Proposals Under 

Consideration and Alternatives Considered (Sept. 

15, 2020), https://files.consumerfinance.gov/f/ 

documents/cfpb_1071-sbrefa_outline-of-proposalsunder-consideration_2020-09.pdf (SBREFA 

Outline). See also Bureau of Consumer Fin. Prot., 

Consumer Financial Protection Bureau Releases 

Outline of Proposals Under Consideration to 

Implement Small Business Lending Data Collection 

Requirements (Sept. 15, 2020), https://

www.consumerfinance.gov/about-us/newsroom/ 

cfpb-releases-outline-proposals-implement-smallbusiness-lending-data-collection-requirements/. 

246These questions also appeared in a shorter 

Discussion Guide for Small Entity Representatives. 

See Bureau of Consumer Fin. Prot., Small Business 

Advisory Review Panel for Consumer Financial 

Protection Bureau Small Business Lending Data 

Collection Rulemaking, Discussion Guide for Small 

Entity Representatives (Sept. 15, 2020), https://

files.consumerfinance.gov/f/documents/cfpb_1071- 

sbrefa_discussion-guide_2020-09.pdf. 

247Bureau of Consumer Fin. Prot., Final Report of 

the Small Business Review Panel on the CFPB’s 

Proposals Under Consideration for the Small 

Business Lending Data Collection Rulemaking (Dec. 

14, 2020), https://files.consumerfinance.gov/f/ 

documents/cfpb_1071-sbrefa-report.pdf (SBREFA 

Panel Report). See also Bureau of Consumer Fin. 

Prot., Consumer Financial Protection Bureau 

Releases Report on Implementing the Dodd-Frank 

Act’s Small Business Lending Data Collection 

Requirement (Dec. 15, 2020), https://www.consumer

finance.gov/about-us/newsroom/consumerfinancial-protection-bureau-releases-report-onimplementing-the-dodd-frank-acts-small-businesslending-data-collection-requirement/. The Bureau’s 

SBREFA Outline and related materials, as well as 

the Bureau’s presentation slides framing the 

discussion during the Panel Outreach Meetings, are 

appended to the SBREFA Panel Report. See 

SBREFA Panel Report at app. C through F. 

248The written feedback from SERs is appended 

to the Panel Report. See id. at app. A. 

and privacy concerns related to the 

disclosure purposes of section 1071.239

On the same date, the Bureau held a 

field hearing regarding section 1071 at 

which the RFI was announced and thenDirector Richard Cordray noted the 

importance of a section 1071 

rulemaking given the absence of 

systematic data on how small 

businesses are faring and whether or 

how much they are being held back by 

financing constraints.240 Finally, at the 

same time, the Bureau also published its 

White Paper on small business 

lending,241 which reflected the initial 

findings of the Bureau’s research 

providing a preliminary understanding 

of the small business lending 

environment, with a particular 

emphasis on lending to women-owned 

and minority-owned small businesses. 

1071 Symposium. In November 2019, 

the Bureau held a symposium on 

section 1071 to assist the Bureau in its 

policy development process and to 

receive feedback from experts, including 

academic, think tank, consumer 

advocate, industry, and government 

experts in the small business lending 

arena.242 The symposium had two 

panels. The first panel focused on the 

evolution in the small business lending 

marketplace. The second panel included 

a discussion surrounding the 

implementation of section 1071, 

including issues raised in response to 

the Bureau’s RFI. 

Small Business Advisory Review 

Panel. Under the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (SBREFA),243 which amended the 

Regulatory Flexibility Act (RFA), the 

Bureau must convene and chair a Small 

Business Advisory Review Panel (Panel) 

if it is considering a proposed rule that 

could have a significant economic 

impact on a substantial number of small 

entities.244 The Panel considers the 

impact of the proposals under 

consideration by the Bureau and obtains 

feedback from representatives of the 

small entities that would likely be 

subject to the rule. The Panel is 

comprised of a representative from the 

Bureau, the Chief Counsel for Advocacy 

of the Small Business Administration 

(SBA), and a representative from the 

Office of Information and Regulatory 

Affairs (OIRA) in the Office of 

Management and Budget (OMB). 

Representatives from 20 small 

businesses were selected as small entity 

representatives (SERs) for this SBREFA 

process. These SERs were 

representatives of small businesses that 

are financial institutions that would 

likely be directly affected by a 1071 

rule. These SERs did not represent the 

small business applicants for credit 

about whom information would be 

collected and reported under a 1071 

rule. 

On September 15, 2020, the Bureau 

issued its Outline of Proposals under 

Consideration and Alternatives 

Considered (Outline or SBREFA 

Outline) for the section 1071 

rulemaking, a detailed document that 

discusses (1) the relevant law, (2) the 

regulatory process, (3) the rule 

proposals the Bureau was considering, 

and (4) an economic analysis of the 

potential impacts of those proposals on 

directly affected small entities.245

The Bureau convened the Panel for 

this proposed rule on October 15, 2020 

and held a total of four meetings with 

SERs during October 19–22, 2020, 

conducted online via video conference 

(Panel Outreach Meetings). In 

preparation for the Panel Outreach 

Meetings and to facilitate an informed 

and detailed discussion of the proposals 

under consideration, discussion 

questions for the SERs were included 

throughout the Bureau’s Outline.246

In advance of the Panel Outreach 

Meetings, the Bureau, SBA’s Office of 

Advocacy, and OIRA held a series of 

video conferences with the SERs to 

describe the Small Business Review 

Process, obtain important background 

information about each SER’s current 

business practices, and begin 

discussions on selected portions of the 

proposals under consideration. 

All 20 SERs participated in the Panel 

Outreach Meetings. Representatives 

from the Bureau, SBA’s Office of 

Advocacy, and OIRA provided 

introductory remarks. The meetings 

were then organized around discussions 

led by the Bureau about each aspect of 

the proposals under consideration and 

the potential impact on small 

businesses. The Bureau also invited 

SERs to submit written feedback by 

November 9, 2020; most SERs did so. 

On December 15, 2020, the Bureau 

released the Final Report of the Small 

Business Review Panel on the CFPB’s 

Proposals Under Consideration for the 

Small Business Lending Data Collection 

Rulemaking.247 This report includes a 

summary of the feedback received from 

SERs during the panel process 

(including oral feedback received during 

the pre-Panel video conferences and 

Panel Outreach Meetings, as well as 

timely submitted written feedback) and 

findings and recommendations made by 

the Panel.248 As required by the RFA, 

the Bureau considers the Panel’s 

findings in its initial regulatory 

flexibility analysis, as set out in part VIII 

below. 

The Bureau also invited other 

stakeholders to submit feedback on the 

SBREFA Outline by December 14, 2020. 

The Bureau received approximately 60 

submissions from a variety of other 

stakeholders, including financial 

institutions, trade associations, 


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249Feedback received from these stakeholders on 

the SBREFA Outline will be placed on the public 

docket for this notice. 

250Bureau of Consumer Fin. Prot., Survey: Small 

Business Compliance Cost Survey (July 22, 2020), 

https://files.consumerfinance.gov/f/documents/ 

cfpb_1071-survey_2020-10.pdf. 

251 Id. at 1. 

252See part VI below for additional details 

regarding this survey. 

253Bureau of Consumer Fin. Prot., Consumer 

Financial Protection Bureau Requests Information 

on Ways to Prevent Credit Discrimination and Build 

a More Inclusive Financial System (July 28, 2020), 

https://www.consumerfinance.gov/about-us/ 

newsroom/cfpb-rfi-prevent-credit-discriminationbuild-more-inclusive-financial-system/. 

254 85 FR 46600, 46602 (Aug. 3, 2020). 255 15 U.S.C. 1691(a)(1). 

256 12 CFR part 1002. 

257Regulation B § 1002.5(a)(2). 

258ECOA section 704B. 

259ECOA section 704B(a). 

260ECOA section 704B(g)(1). 

community groups, a think tank, and a 

government agency.249 Feedback from 

these other stakeholders was not 

considered by the Panel and is not 

reflected in the Panel Report. 

The Bureau has considered the 

feedback it received from SERs, the 

findings and recommendations of the 

Panel, and the feedback from other 

stakeholders in preparing this proposed 

rule. The feedback, findings, and 

recommendations are summarized 

throughout this notice where relevant. 

One-Time Cost Survey. On July 22, 

2020, the Bureau released a voluntary 

survey to measure the one-time costs of 

compliance with an eventual small 

business lending data collection rule.250

The objective of the survey was to 

solicit, from institutions offering small 

business credit products that could 

potentially be covered by this rule, 

information about potential one-time 

costs to prepare to collect and report 

data. The survey did not cover potential 

on-going costs from actually collecting 

and reporting 1071 data, and assumed 

that reporting was required only for the 

13 statutorily required data points and 

that compliance with the statutory 

firewall requirement was not 

required.251 The deadline for responses 

was October 16, 2020. The Bureau 

received responses from 105 financial 

institutions.252 The results of the survey 

inform the Bureau’s analyses of the 

potential impacts of the proposed rule 

as set out in parts VII and VIII below. 

ECOA request for information. On 

July 28, 2020, the Bureau issued a 

request for information to seek public 

input on ECOA and Regulation B.253 In 

the RFI, the Bureau sought public 

comment on a number of topics, 

including small business lending and 

the ways that the Bureau, in light of its 

authority under ECOA and Regulation 

B, might support efforts to meet the 

credit needs of small businesses, 

particularly those that are minorityowned and women-owned.254

Ongoing market monitoring. The 

Bureau conducts outreach to industry 

and other stakeholders to understand 

their experiences with the small 

business finance market, economic 

conditions, and the collection and 

reporting of data regarding that market. 

A particular near-term priority in the 

Bureau’s recent market monitoring has 

been the impacts of the pandemic and 

the effectiveness of the Federal 

government response. Findings from 

market monitoring activities inform the 

Bureau on matters affecting the small 

business sector. 

Technical outreach. In the months 

before the publication of this proposed 

rule, the Bureau began conducting 

technical outreach with third party 

software providers that serve financial 

institutions and software and 

technology staff from financial 

institutions that are likely to have to 

report 1071 data to the Bureau. With 

these software vendors and technical 

staffs, the Bureau has held and, after 

publication of this proposed rule, will 

continue to hold discussions concerning 

the technical systems and procedures 

the Bureau will provide to collect 1071 

data. The Bureau intends to understand 

the technology solutions currently 

provided by vendors to support the 

small business lending activities of 

financial institutions. The Bureau 

believes this information will be helpful 

in informing the Bureau in its design 

and implementation of a platform for 

intake and processing of 1071 data to 

help the platform integrate, to the 

degree possible, with existing systems 

and data collection procedures. These 

meetings also serve to raise awareness of 

technology providers as to their 

potential future role in supporting the 

1071 rule as well as the lead time that 

may be necessary for some or all 

affected financial institutions to come 

into compliance with the requirements 

of a final section 1071 rule. The 

feedback that the Bureau is gathering is 

purely technical in nature. This 

outreach process is ongoing and will 

continue throughout the rulemaking. 

IV. Legal Authorities 

The Bureau is issuing this proposed 

rule pursuant to its authority under 

section 1071. Some aspects of this rule 

are also proposed under the Bureau’s 

more general rulemaking authorities in 

ECOA. Congress enacted ECOA to 

prohibit discrimination against any 

applicant, regarding any aspect of a 

credit transaction, on the basis of, 

amongst other things, race, color, 

national origin, and sex.255 The Bureau 

has certain oversight, enforcement, and 

supervisory authority over ECOA 

requirements and has rulemaking 

authority under the statute. 

ECOA is implemented in Regulation 

B.256 Among other things, Regulation B 

generally prohibits creditors from 

inquiring about an applicant’s race, 

color, religion, national origin, or sex, 

with limited exceptions, including if it 

is required by law.257

As discussed above, in the DoddFrank Act Congress amended ECOA by 

adding section 1071, which directs the 

Bureau to adopt regulations governing 

the collection and reporting of small 

business lending data. Specifically, 

section 1071 requires financial 

institutions to collect and report to the 

Bureau certain data on applications for 

credit for women-owned, minorityowned, and small businesses.258

Congress enacted section 1071 for the 

purpose of (1) facilitating enforcement 

of fair lending laws and (2) enabling 

communities, governmental entities, 

and creditors to identify business and 

community development needs and 

opportunities of women-owned, 

minority-owned, and small 

businesses.259 The Bureau often refers to 

these as section 1071’s fair lending 

purpose and its business and 

community development purpose, 

respectively. 

To advance these statutory purposes, 

section 1071 grants the Bureau general 

rulemaking authority for section 1071, 

providing that the Bureau shall 

prescribe such rules and issue such 

guidance as may be necessary to carry 

out, enforce, and compile data pursuant 

to section 1071.260 ECOA section 

704B(g)(2) also permits the Bureau to 

adopt exceptions to any requirement of 

section 1071 and to conditionally or 

unconditionally exempt any financial 

institution or class of financial 

institutions from the requirements of 

section 1071, as the Bureau deems 

necessary or appropriate to carry out the 

purposes of section 1071. The Bureau 

principally relies on its 704B(g)(1) 

authority in this proposed rule and 

relies on 704B(g)(2) when proposing 

specific exceptions or exemptions to 

section 1071’s requirements. Section 

704B(g)(3) directs the Bureau to issue 

guidance designed to facilitate 

compliance with the requirements of 

section 1071. 

In addition, section 703(a) of ECOA 

gives the Bureau broad authority to 

prescribe regulations to carry out the 

purposes of ECOA, including provisions 


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261ECOA section 704B(b)(1), (b)(2), (c), (d)(1) and 

(2). 262 12 U.S.C. 2801 et seq. 

that in the judgment of the Bureau are 

necessary or proper to effectuate the 

purposes of ECOA, to prevent 

circumvention or evasion thereof, or to 

facilitate or substantiate compliance 

therewith. That section also states that 

the Bureau may provide for such 

adjustments and exceptions for any 

class of transactions, as in the judgment 

of the Bureau are necessary or proper to 

effectuate the purposes of ECOA, to 

prevent circumvention or evasion 

thereof, or to facilitate or substantiate 

compliance therewith. 

Section 1071 establishes requirements 

or obligations for financial institutions 

that the Bureau would implement in 

this proposed rule. These provisions 

include the requirement in ECOA 

section 704B(b) that a financial 

institution shall inquire whether an 

applicant for credit is a women-owned, 

minority-owned, or small business; that 

a financial institution must maintain a 

record of responses to such inquiry, 

separate from the application; that an 

applicant may refuse to provide any 

information requested regarding the 

inquiry under 704B(b); that a financial 

institution must limit access of loan 

underwriters, or other officers or 

employees of the financial institution or 

any affiliate, to applicant responses to 

inquiries under 704B(b); and that if a 

financial institution determines that a 

loan underwriter or other officer or 

employee should have access to any 

information provided by the applicant 

pursuant to a request under 704B(b) that 

the financial institution shall provide 

notice to the applicant of the access of 

the underwriter to such information, 

along with notice that the financial 

institution may not discriminate on the 

basis of such information.261

ECOA section 704B(e)(1) directs 

financial institutions to compile and 

maintain, in accordance with 

regulations of the Bureau, records of the 

information provided by applicants for 

credit pursuant to a request under 

704B(b). Section 704B(e)(2) requires that 

the information compiled and 

maintained under 704B(e)(1) be 

itemized in order to clearly and 

conspicuously disclose an enumerated 

list of data points. Section 704B(e)(2)(H) 

requires financial institutions to 

compile and maintain any additional 

data that the Bureau determines would 

aid in fulfilling the purposes of section 

1071. 

Several provisions of section 1071 

expressly refer to regulations that the 

Bureau shall promulgate to implement 

certain requirements, including in 

ECOA section 704B(e)(1) regarding how 

financial institutions must compile and 

maintain data pursuant to section 1071, 

and in 704B(f)(2)(B) and (C) regarding 

the form of information made available 

by financial institutions to the public 

and the form and manner in which the 

Bureau itself should make 1071 data 

available to the public generally. 

Two provisions expressly give the 

Bureau discretion with respect to public 

availability of 1071 data. Specifically, 

ECOA section 704B(e)(4) states that the 

Bureau may, at its discretion, delete or 

modify 1071 data before making it 

available to the public if the Bureau 

determines that the deletion or 

modification of the data would advance 

a privacy interest. Section 704B(f)(3) 

gives the Bureau the discretion to 

compile and aggregate 1071 data for its 

own use, as well as to make public such 

compilations of aggregate data. 

V. Section-by-Section Analysis 

Overview 

In this Overview of part V, the Bureau 

first provides an overview of section 

1071 and then a brief summary of the 

proposed rule. Each provision, along 

with its rationale and relevant feedback 

received through the SBREFA process, 

is discussed in detail in the section-bysection analyses that follow. The 

Bureau’s proposed rule is largely 

consistent with, though more detailed 

than, its proposals under consideration 

in the SBREFA Outline. However, the 

Bureau has altered or refined its 

approach since SBREFA in certain 

respects, which are noted in the 

summary of the proposed rule below 

and discussed in detail in the sectionby-section analyses that follow. 

Next, the Bureau discusses the highlevel and general comments regarding 

this rulemaking that it received from 

SERs and other stakeholders on its 

SBREFA Outline. Finally, the Bureau 

addresses several issues for which there 

is no proposed regulatory text or 

commentary. 

The Bureau seeks comment on its 

proposed approach to implementing 

section 1071. Requests for comment on 

each provision and on particular issues 

are included throughout the section-bysection analyses in this part V. 

A. Overview of Section 1071 

As discussed above, section 1071 of 

the Dodd-Frank Act requires that 

financial institutions collect and report 

to the Bureau certain data regarding 

applications for credit for womenowned, minority-owned, and small 

businesses. Section 1071’s statutory 

purposes are to (1) facilitate 

enforcement of fair lending laws, and (2) 

to enable communities, governmental 

entities, and creditors to identify 

business and community development 

needs and opportunities of womenowned, minority-owned, and small 

businesses. 

Section 1071 specifies a number of 

data points that financial institutions 

are required to collect and report, and 

also provides authority for the Bureau to 

require any additional data that the 

Bureau determines would aid in 

fulfilling section 1071’s statutory 

purposes. Section 1071 also contains a 

number of other requirements, 

including those that address restricting 

the access of underwriters and other 

persons to certain 1071 data and 

publication of 1071 data. In addition, 

section 1071 permits the Bureau, at its 

discretion, to modify or delete data prior 

to publication if it determines that such 

a deletion or modification would 

advance a privacy interest. 

Section 1071 directs the Bureau to 

prescribe such rules, and issue such 

guidance as may be necessary to carry 

out, enforce, and compile data pursuant 

to section 1071. It also permits the 

Bureau to adopt exceptions to any 

requirement or to exempt financial 

institutions from the requirements of 

section 1071 as the Bureau deems 

necessary or appropriate to carry out the 

purposes of section 1071. Section 1071 

also directs the Bureau to issue 

guidance designed to facilitate 

compliance with the requirements of 

section 1071. As discussed in part IV 

above and throughout the section-bysection analyses in this part V, most of 

the Bureau’s proposal is dedicated to 

implementing these statutory 

provisions. 

B. Section 1071 in the Context of HMDA 

The Bureau’s proposal for 

implementing section 1071 necessarily 

exists against the backdrop of HMDA 262

(as discussed in part II.F.1.ii above). 

With the passage of the Dodd-Frank Act 

in 2010, Congress enacted section 1071 

at the same time that it amended HMDA 

and transferred HMDA rulemaking 

authority and other functions to the 

Bureau. HMDA is a data collection and 

reporting statute that requires certain 

depository institutions and for-profit 

nondepository institutions to collect, 

report, and disclose data about 

originations and purchases of mortgage 

loans, as well as mortgage loan 

applications that do not result in 

originations (for example, applications 

that are denied or withdrawn). The 

Bureau’s Regulation C, 12 CFR part 


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263Under the Economic Growth, Regulatory 

Relief, and Consumer Protection Act, Public Law 

115–174, 132 Stat. 1296 (2018), as implemented in 

Regulation C § 1003.3(d), certain HMDA-covered 

institutions may be eligible for partial exemptions 

from some of the HMDA reporting requirements 

and only certain covered loans and applications are 

covered under partial exemptions. If a covered loan 

or application is covered under a partial exemption, 

the covered institution is not required to collect, 

record, and report certain data points. 

264As with section 1071, collection of an 

applicant’s ethnicity, race, and sex under HMDA is 

an exception to the general prohibition on inquiring 

into protected demographic information in existing 

§ 1002.5(b). 

265A disclosure statement contains aggregated 

data derived from loan-level data. 

266A HMDA LAR contains the record of 

information required to be collected and the record 

submitted annually or quarterly, as applicable. A 

modified LAR is a covered institution’s LAR 

modified by the Bureau, on its website, to protect 

applicant and borrower privacy. The Bureau 

interprets HMDA, as amended by the Dodd-Frank 

Act, to call for the use of a balancing test to 

determine whether and how HMDA data should be 

modified prior to its disclosure to the public in 

order to protect applicant and borrower privacy 

while also fulfilling HMDA’s public disclosure 

purposes. See 80 FR 66127, 66133–34 (Oct. 28, 

2015). In December 2018, the Bureau issued final 

policy guidance describing the modifications the 

Bureau intends to apply to the loan-level HMDA 

data that covered institutions report before the data 

are disclosed publicly. See 84 FR 649 (Jan. 31, 

2019). 

267See ECOA (15 U.S.C. 1691 through 1691f), 

Regulation B, 12 CFR part 1002, and FHA, 42 U.S.C. 

3605, 24 CFR part 100. 

268 12 U.S.C. 2901 through 2908, and 12 CFR 

parts 25, 195, 228, and 345. 

1003, implements HMDA. In light of the 

similarities between 1071 and HMDA, 

the Bureau’s section-by-section analyses 

in this part V often discusses how 

similar provisions are addressed in the 

context of HMDA. 

HMDA’s purposes are: (1) To help 

determine whether financial institutions 

are serving their communities’ housing 

needs; (2) to assist public officials in 

distributing public investment to attract 

private investment; and (3) to assist in 

identifying potential discriminatory 

lending patterns and enforcing 

antidiscrimination statutes. 

A covered institution for purposes of 

HMDA reporting is a depository or 

nondepository institution that meets the 

relevant coverage criteria set forth in the 

regulation. A depository institution is 

required to comply with Regulation C if 

it meets the asset-size threshold, 

location test, loan activity test, federally 

related test, and the loan-volume 

threshold for either closed-end loans or 

open-end lines of credit set forth in the 

regulation. A nondepository institution 

is required to comply with Regulation C 

if it meets the location test and the loanvolume threshold for either closed-end 

loans or open-end lines of credit set 

forth in the regulation. 

A covered transaction under HMDA is 

generally a loan or line of credit secured 

(or, for applications, proposed to be 

secured) by a lien on a dwelling, that is 

not specifically excluded under 

Regulation C § 1003.3(c). The data 

points generally required to be reported 

about each covered transaction can be 

grouped into four broad categories: 263

• Information about the applicants, 

borrowers, and underwriting process, 

such as ethnicity, race, and sex of the 

applicant,264 the applicant’s gross 

income and debt-to-income ratio, the 

application channel, action taken, and, 

if applicable, reason(s) for denial. 

• Information about the property 

securing the loan or proposed to secure 

the loan, such as census tract and other 

property location information, 

construction method, property value, 

and additional information about 

manufactured and multifamily housing. 

• Information about the features of 

the loan, such as the loan type, pricing 

information (including interest rate and 

origination charges), loan term, 

introductory rate period, and nonamortizing features. 

• Certain unique identifiers, such as a 

universal loan identifier, loan originator 

identifier, and a legal entity identifier 

for the financial institution. 

Covered institutions are required to 

submit their HMDA data by March 1 

following the calendar year for which 

data are collected. Covered institutions 

with larger volumes of covered loans 

and applications are required to submit 

their HMDA data for each of the first 

three quarters of the year in addition to 

their annual submission. 

Following the calendar year in which 

HMDA data are collected, a covered 

institution’s disclosure statement 265

and modified loan/application register 

(LAR) become publicly available on the 

FFIEC’s HMDA Platform.266 In addition, 

aggregate reports for each Metropolitan 

Statistical Area and Metropolitan 

Division that show lending patterns by 

property location, age of housing stock, 

and income level, sex, ethnicity, and 

race become publicly available. 

HMDA data are the primary source of 

information for regulators, researchers, 

economists, industry, and advocates 

analyzing the mortgage market both for 

HMDA’s purposes and for general 

market monitoring. HMDA data are used 

by the Federal supervisory agencies to 

support a variety of activities. For 

example, Federal supervisory agencies 

use HMDA data as part of their fair 

lending 267 examination process, and 

also use HMDA data in conducting 

Community Reinvestment Act 268

performance evaluations. HMDA 

disclosures provide the public with 

information on the home mortgage 

lending activities of particular reporting 

entities and on activity in their 

communities. These disclosures are 

used by local, State, and Federal 

officials to evaluate housing trends and 

issues and by community organizations 

to monitor financial institution lending 

patterns. 

C. Summary of the Proposed Rule 

The Bureau is proposing to add a new 

subpart B to Regulation B to implement 

the requirements of section 1071 and to 

make conforming amendments to 

existing Regulation B. The Bureau’s 

proposal is summarized below, in the 

order of the section-by-section analyses 

in this part V that follow. 

1. General Provisions (§§ 1002.5(a)(4), 

1002.101, and 1002.102) 

Changes to existing Regulation B 

(§ 1002.5(a)(4)). The Bureau is 

proposing to amend existing 

§ 1002.5(a)(4) to expressly permit 

voluntary collection and reporting of 

information regarding the ethnicity, 

race, and sex of applicants’ principal 

owners, or whether the applicant is a 

minority-owned business or a womenowned business, in certain 

circumstances. 

Scope, purpose, and authority 

(§ 1002.101). The Bureau is proposing in 

§ 1002.101 to set forth the authority, 

purpose, and scope for proposed 

subpart B. Among other things, this 

proposed section would set forth section 

1071’s two statutory purposes of 

facilitating enforcement of fair lending 

laws and enabling communities, 

governmental entities, and creditors to 

identify business and community 

development needs and opportunities of 

women-owned, minority-owned, and 

small businesses. 

Definitions (§ 1002.102). The Bureau 

is proposing in § 1002.102 a number of 

definitions for terms used in proposed 

subpart B, which generally fall into 

several categories. First, some proposed 

definitions refer to terms defined 

elsewhere in proposed subpart B— 

specifically, terms of particular 

importance including business, covered 

application, covered credit transaction, 

covered financial institution, financial 

institution, and small business. Second, 

some proposed definitions refer to terms 

defined elsewhere in existing 

Regulation B (i.e., business credit, 

credit, and State) or other regulations 

(i.e., the definition of dwelling and a 

portion of the definition of affiliate 

reference Regulation C and an SBA 

regulation, respectively). Finally, the 

remaining terms are defined in 

proposed § 1002.102, including 


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269 12 U.S.C. 2801 et seq. 

270The Bureau is proposing that subpart B does 

not apply to a person excluded from coverage by 

section 1029 of the Consumer Financial Protection 

Act of 2010, title X of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, Public Law 

111–203, 124 Stat. 1376, 2004 (2010). 

applicant, closed-end credit transaction, 

minority individual, minority-owned 

business, open-end credit transaction, 

principal owner, small business lending 

application register, women-owned 

business, and a portion of the definition 

of affiliate. 

2. Coverage (§§ 1002.103 Through 

1002.106) 

Covered applications (§ 1002.103). 

The Bureau is proposing § 1002.103 to 

define what is, and is not, a covered 

application under proposed subpart B; 

this definition would trigger the data 

collection and reporting requirements 

under subpart B for covered financial 

institutions. The Bureau is proposing to 

define a covered application in 

§ 1002.103(a) as an oral or written 

request for a covered credit transaction 

that is made in accordance with 

procedures used by a financial 

institution for the type of credit 

requested. The Bureau is also proposing 

that a covered application does not 

include (1) reevaluation, extension, or 

renewal requests on an existing business 

credit account, unless the request seeks 

additional credit amounts; and (2) 

inquiries and prequalification requests. 

Covered credit transactions 

(§ 1002.104). The Bureau is proposing to 

require that covered financial 

institutions collect and report data for 

all covered applications from small 

businesses for transactions that meet the 

definition of business credit under 

existing Regulation B, with certain 

exceptions. The Bureau is proposing 

§ 1002.104(a) to define the term covered 

credit transaction as an extension of 

business credit that is not an excluded 

transaction under proposed 

§ 1002.104(b). Loans, lines of credit, 

credit cards, and MCAs (including such 

credit transactions for agricultural 

purposes and those that are also covered 

by HMDA‘‘ 269 (that is, HMDAreportable transactions)) would all fall 

within the scope of this proposed rule. 

The Bureau is proposing in 

§ 1002.104(b) to exclude from the 

requirements of proposed subpart B 

trade credit, public utilities credit, 

securities credit, and incidental credit. 

Factoring, leases, consumer-designated 

credit used for business purposes, and 

credit secured by certain investment 

properties would also not be covered 

credit transactions. 

Covered financial institutions 

(§ 1002.105). The Bureau is proposing to 

define in § 1002.105(a) the term 

financial institution, consistent with the 

definition in section 1071, as any 

partnership, company, corporation, 

association (incorporated or 

unincorporated), trust, estate, 

cooperative organization, or other entity 

that engages in any financial activity. 

Under this proposed definition, 

proposed subpart B’s requirements 

would apply to a variety of entities that 

engage in small business lending, 

including depository institutions (i.e., 

banks, savings associations, and credit 

unions), online lenders, platform 

lenders, CDFIs, lenders involved in 

equipment and vehicle financing 

(captive financing companies and 

independent financing companies), 

commercial finance companies, 

governmental lending entities, and 

nonprofit nondepository lenders. The 

Bureau is not proposing to cover motor 

vehicle dealers.270 The Bureau is 

proposing in § 1002.105(b) to define the 

term covered financial institution as a 

financial institution that originated at 

least 25 covered credit transactions for 

small businesses in each of the two 

preceding calendar years. Only financial 

institutions that meet this loan-volume 

threshold would be required to collect 

and report small business lending data 

under proposed subpart B. 

Small business definition 

(§ 1002.106). The Bureau is proposing in 

§ 1002.106 to adopt the SBA’s 

definitions of ‘‘business’’ and ‘‘small 

business’’ as set out in the Small 

Business Act and SBA regulations. The 

Bureau is also proposing that, 

notwithstanding the small business size 

standards established by SBA 

regulations, for purposes of proposed 

subpart B, a business is a small business 

if and only if its gross annual revenue 

is $5 million or less for its preceding 

fiscal year. The Bureau is seeking SBA 

approval for this alternate small 

business size standard pursuant to the 

Small Business Act. 

3. Compiling, Maintaining, and 

Reporting 1071 Data (§§ 1002.107 

Through 1002.111) 

Compilation of reportable data 

(§ 1002.107). The Bureau is proposing in 

§ 1002.107 to address several aspects of 

collecting data on covered applications 

from small businesses. The Bureau is 

proposing in § 1002.107(a) to require 

financial institutions to compile and 

maintain the data points enumerated in 

§ 1002.107(a)(1) through (21) regarding 

covered applications from small 

businesses. These data points would be 

collected and reported in accordance 

with the proposed official commentary 

and the Filing Instructions Guide that 

the Bureau anticipates later providing 

for the appropriate year. Certain of these 

data points are or could be collected 

from the applicant (or otherwise 

determined based on information 

provided or authorized by the 

applicant); other data points are based 

on information solely within the 

financial institution’s control. Proposed 

appendix E would provide a sample 

data collection form for requesting from 

applicants their minority- and womenowned business status and the race, sex, 

and ethnicity of their principal owners. 

Proposed appendices F and G provide 

additional details and guidance 

regarding collecting those data points. 

The Bureau is proposing in 

§ 1002.107(c)(1) that covered financial 

institutions maintain procedures to 

collect applicant-provided data at a time 

and in a manner that is reasonably 

designed to obtain a response. The 

Bureau’s proposal also addresses what 

financial institutions should do if, 

despite having such procedures in 

place, they are unable to obtain certain 

data from an applicant. Pursuant to 

proposed § 1002.107(b), financial 

institutions would be permitted to rely 

on statements made by an applicant 

(whether in writing or orally) or 

information provided by an applicant 

when collecting and reporting 1071 

data, although for most data points if the 

financial institution verifies the 

information provided it must report the 

verified information. Proposed 

§ 1002.107(c)(2) would also permit 

financial institutions to reuse certain 

previously collected data in certain 

circumstances. 

Firewall (§ 1002.108). The Bureau is 

proposing § 1002.108 to implement the 

requirement in section 1071 that certain 

data collected be shielded from 

underwriters and certain other persons; 

the Bureau refers to this as the 

‘‘firewall.’’ Pursuant to proposed 

§ 1002.108(b), an employee or officer of 

a financial institution or a financial 

institution’s affiliate that is involved in 

making any determination concerning 

the application would be prohibited 

from accessing an applicant’s responses 

to inquiries that the financial institution 

makes pursuant to section 1071 

regarding whether the applicant is a 

minority-owned or women-owned 

business, and the ethnicity, race, and 

sex of the applicant’s principal owners. 

However, pursuant to proposed 

§ 1002.108(c), this prohibition would 

not apply to an employee or officer if 

the financial institution determines that 

it is not feasible to limit that employee’s 

or officer’s access to an applicant’s 


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responses to the financial institution’s 

inquiries regarding the applicant’s 

protected demographic information, and 

the financial institution provides a 

notice to the applicant regarding that 

access. It would not be feasible to limit 

access if the financial institution 

determines that an employee or officer 

involved in making any determination 

concerning a covered application 

should have access to one or more 

applicants’ responses to inquiries 

regarding the applicant’s protected 

demographic information. The notice 

must be provided to each applicant 

whose information will be accessed or, 

alternatively, the financial institution 

could provide the notice to all 

applicants whose information could be 

accessed. The Bureau is proposing 

sample language that a financial 

institution could use in providing this 

notice. 

Reporting data to the Bureau 

(§ 1002.109). The Bureau is proposing 

§ 1002.109 to address several aspects of 

financial institutions’ obligations to 

report section 1071 data to the Bureau. 

First, the Bureau is proposing in 

§ 1002.109(a) that 1071 data be collected 

on a calendar year basis and reported to 

the Bureau on or before June 1 of the 

following year. The Bureau also 

addresses collection and reporting 

requirements of subsidiaries of financial 

institutions and collection and reporting 

requirements of financial institutions 

where multiple financial institutions are 

involved in a transaction in proposed 

§ 1002.109(a). Second, the Bureau lists 

in proposed § 1002.109(b) the 

information that financial institutions 

would be required to provide about 

themselves when reporting 1071 data to 

the Bureau, including the financial 

institution’s name, headquarters 

address, contact person, Federal 

prudential regulator, institutional 

identifiers, and parent entity 

information. Finally, the Bureau is 

proposing § 1002.109(c) to address 

technical instructions for the 

submission of data to the Bureau, 

including information about the Filing 

Instructions Guide, which the Bureau 

anticipates later providing for the 

appropriate year. 

Publication of 1071 data by the 

Bureau (§ 1002.110). The Bureau is 

proposing in § 1002.110 to address 

several issues regarding the publication 

of 1071 data. The Bureau is proposing 

in § 1002.110(a) that it shall make 

available to the public, on an annual 

basis and on the Bureau’s website, the 

data submitted to it by financial 

institutions. The Bureau is proposing to 

make these data available subject to 

deletions or modifications made by the 

Bureau, at its discretion, if the Bureau 

determines that such deletions or 

modifications would advance a privacy 

interest. To determine whether and how 

the Bureau might use its discretion to 

modify or delete data prior to 

publication, the Bureau is proposing a 

‘‘balancing test’’ that assesses the risks 

and benefits of public disclosure. The 

Bureau’s proposed approach to the 

balancing test is discussed in detail in 

part VI below. Proposed § 1002.110(b) 

would state that the Bureau may, at its 

discretion, compile and aggregate data 

submitted by financial institutions and 

may publish such compilations or 

aggregations. 

Proposed § 1002.110(c) would require 

a covered financial institution to 

publish on its website a statement that 

its 1071 data, as modified by the 

Bureau, are or will be available on the 

Bureau’s website. Proposed 

§ 1002.110(d) would set forth when a 

covered financial institution shall make 

this statement available and how long 

the financial institution shall maintain 

the statement on its website. These 

requirements would satisfy financial 

institutions’ statutory obligation to make 

data available to the public upon 

request. 

Recordkeeping (§ 1002.111). The 

Bureau is proposing § 1002.111 to 

address several aspects of the 

recordkeeping requirements for 1071 

data. First, the Bureau is proposing 

§ 1002.111(a) to require a covered 

financial institution to retain evidence 

of compliance with proposed subpart B, 

which includes a copy of its small 

business lending application register, 

for at least three years after the register 

is required to be submitted to the 

Bureau pursuant to proposed 

§ 1002.109. Second, the Bureau is 

proposing § 1002.111(b) to require a 

financial institution to maintain, 

separately from the rest of an 

application for credit and accompanying 

information, an applicant’s responses to 

a financial institution’s inquiries 

regarding the applicant’s protected 

demographic information. Finally, the 

Bureau is proposing § 1002.111(c) to 

require that, in compiling and 

maintaining its small business lending 

application register, a financial 

institution not include any personally 

identifiable information concerning any 

individual who is, or is connected with, 

an applicant. 

4. Other Provisions (§§ 1002.112 

Through 1002.114) 

Enforcement (§ 1002.112). The Bureau 

is proposing § 1002.112 to address 

several issues related to the enforcement 

of proposed subpart B. First, the Bureau 

is proposing § 1002.112(a) to state that 

a violation of section 1071 or proposed 

subpart B is subject to administrative 

sanctions and civil liability as provided 

in sections 704 and 706 of ECOA. 

Second, the Bureau is proposing in 

§ 1002.112(b) to provide that a bona fide 

error in compiling, maintaining, or 

reporting data with respect to a covered 

application is an error that was 

unintentional and occurred despite the 

maintenance of procedures reasonably 

adapted to avoid such an error, and that 

such an error is presumed not to be a 

violation of ECOA or proposed subpart 

B if the number of such errors does not 

exceed the thresholds set forth in 

proposed appendix H. Third, the Bureau 

is proposing in § 1002.112(c) to identify 

four safe harbors under which certain 

errors—specifically those regarding 

census tract, NAICS code, small 

business status, and application date— 

would not constitute violations of ECOA 

or Regulation B. 

Severability (§ 1002.113). The Bureau 

is proposing in § 1002.113 to provide 

that the provisions of proposed subpart 

B are separate and severable from one 

another, and that if any provision is 

stayed or determined to be invalid, it is 

the Bureau’s intent that the remaining 

provisions shall continue in effect. 

Effective date, compliance date, and 

special transitional rules (§ 1002.114). 

The Bureau is proposing § 1002.114 to 

address several issues related to the 

Bureau’s eventual final rule to 

implement section 1071. First, the 

Bureau is proposing in § 1002.114(a) 

that its final rule to implement section 

1071 would become effective 90 days 

after publication in the Federal 

Register, but pursuant to proposed 

§ 1002.114(b) compliance with the final 

rule would not be required until 

approximately 18 months after 

publication in the Federal Register. 

Second, the Bureau is proposing in 

§ 1002.114(c) certain transitional 

provisions that would permit covered 

financial institutions to begin collecting 

protected applicants’ demographic 

information beginning 12 months prior 

to the compliance date and would 

permit financial institutions to use a 

different time period to determine 

whether they will be covered by the rule 

as of the compliance date. 

D. High-Level and General Comments 

on the SBREFA Outline 

During the SBREFA process, SERs 

provided feedback on nearly all aspects 

of the Bureau’s proposals under 

consideration as set forth in the 

SBREFA Outline. Other stakeholders 

did likewise in their written feedback 

on the SBREFA Outline. That feedback 


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271See generally SBREFA Panel Report. 

272The SER feedback discussed herein can be 

found in the SBREFA Panel Report at 17–18. 273 Id. 

is discussed in the section-by-section 

analyses of the proposed rule below. 

SERs and other stakeholders also 

provided feedback of a more general 

nature on the Bureau’s section 1071 

rulemaking. That feedback is 

summarized here; the SBREFA Panel 

Report provides a more complete 

summary of the SBREFA process and 

comments provided by SERs.271

Most SERs and stakeholders were 

generally supportive of the statutory 

purposes of section 1071.272 Several 

SERs as well as a range of other 

stakeholders—including community 

groups, CDFIs, several community 

banks, and a State consumer financial 

protection agency—were supportive of 

the Bureau’s statutory mandate to 

promulgate a section 1071 rule. Many 

stakeholders, including community 

groups, several CDFI banks, and a small 

community bank, expressly supported 

broad coverage of both financial 

institutions and products in the 1071 

rulemaking. One community bank 

stakeholder stated that larger financial 

institutions should not be excluded; 

another community bank asserted that a 

1071 rule should cover credit unions, 

governmental entities, commercial 

finance firms, and alternative online 

lenders. 

Several trade association stakeholders 

supported a more limited approach to 

implementation of a 1071 rulemaking. A 

number of trade associations requested 

exemptions for the specific types of 

financial institutions they represented, 

including credit unions, vendor finance 

and dealer-related institutions, and 

community banks. One trade association 

argued that Federal credit union laws 

limited the extent to which credit 

unions could seek to expand their small 

business lending operations. Two trade 

association stakeholders suggested that 

the Bureau adopt a phased or staged 

approach to implementation, starting 

only with certain products and 

institutions. One trade association 

suggested that the Bureau adopt a high 

size-based exemption for institutions. 

A number of SERs and stakeholders, 

including several CDFIs, a number of 

community groups and a community 

bank, expressed the view that data 

transparency in the small business 

lending market is critical to advance the 

goals of fair lending enforcement and 

access to credit for small businesses, 

especially those that are minorityowned and women-owned. One SER 

and several stakeholders, including two 

community groups and one small 

business trade association, stated that 

the limited data currently available 

show that the lending practices of many 

financial institutions exclude womenowned and minority-owned businesses, 

exacerbating a racial wealth gap, and 

that section 1071 has the opportunity to 

address such lending disparities, which 

are costly to businesses, lenders, and the 

economy as a whole. The SER also said 

that data transparency and fairness 

should be an advantage to smaller, local 

financial institutions, allowing them to 

better distinguish their value 

proposition compared to larger financial 

institutions or predatory lenders.273 A 

CDFI stakeholder and a community 

group stakeholder emphasized that 1071 

data would be an important supplement 

to CRA and HMDA data to determine 

community development needs. 

Another community group stakeholder 

and a small business trade association 

emphasized the importance of 

supporting access to credit for womenowned and minority-owned small 

businesses. One community group 

argued that the availability of 1071 data 

would spur innovation in the small 

business lending market. 

Several SERs and several community 

groups and CDFI stakeholders stated 

that the completion of a 1071 

rulemaking was welcome, given the 

many years stakeholders have been 

waiting for these data. Several SERs and 

other stakeholders, including 

community groups and CDFIs, 

supported a 1071 rulemaking as 

necessary to better understand the small 

business lending market, as the COVID– 

19 pandemic highlighted how the most 

vulnerable small businesses can be 

disproportionately impacted by 

economic shocks. Several community 

groups and a small business trade 

association stakeholders argued that the 

response to the COVID–19 pandemic, 

including the PPP program, exacerbated 

existing gender and racial disparities, 

and did not provide access to credit to 

excluded lower- and middle-income 

communities and women-owned or 

minority-owned small businesses. Two 

community bank trade associations 

noted the outsized importance of 

community banks and CDFIs in 

providing PPP loans to their local 

communities, including to minorityowned small businesses, and warned 

that an unintended consequence of a 

1071 rulemaking may be to impair this 

existing lending. One trade association 

suggested that the Bureau delay issuing 

any proposal until the economic forces 

driven by the COVID–19 pandemic have 

subsided and recovery is evident. 

Other stakeholders expressed 

concerns about the uses of data coming 

from a 1071 rulemaking. One trade 

association suggested that the collection 

of data on race and gender would create 

the perception among customers that 

these factors played a role in credit 

decisions. One community bank 

stakeholder asserted that 1071 data 

should not be used in regulatory 

oversight or examinations of financial 

institutions, but rather to better 

understand the small lending market 

and help regulators support lending. 

Several trade associations expressed 

concerns that misleading conclusions 

could be drawn from data from a 1071 

rulemaking, and that small business 

lending was complex and varied. 

SERs nearly uniformly suggested that 

the Bureau aim to draft simple 

regulations, and choose simpler options 

if possible, noting that more complex 

rules tend to make compliance more 

difficult and drive up compliance costs, 

which could potentially increase prices 

or reduce small businesses’ access to 

credit. A number of stakeholders— 

including community banks, 

community groups, a small business 

trade association, and bank and credit 

union trade associations—similarly 

supported simple and clear regulations 

and requested that the Bureau avoid 

complex or ambiguous rules, which 

they asserted would make compliance 

more costly. One CDFI bank stakeholder 

asserted that existing ambiguities and 

conflicts in the law have caused 

financial institutions to avoid collecting 

the very data they would need to 

identify lending discrimination, and 

that mandating data collection and 

clarifying rules would be critical to 

addressing these concerns. 

Many SERs and a community bank 

stakeholder requested clear written 

guidance and implementation support 

materials from the Bureau, such as small 

entity compliance guides, a ‘‘help desk’’ 

for questions, and sample disclosure 

language (translated into languages 

other than English for individuals with 

limited English proficiency). Several 

SERs also discussed the need for 

applicant-facing materials explaining 

what the section 1071 regulation is and 

why the financial institution must 

collect data. Relatedly, one SER 

requested that the Bureau educate and 

train currently unregulated financial 

institutions to help them implement the 

rule. 

A number of SERs (representing 

financial institutions that operate 

primarily online as well as financial 

institutions that interact with small 

business applicants in-person) indicated 

their belief that financial institutions 


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274 Id. at 43. 

275 Id. 

with extensive online lending 

operations would be able to comply 

with an eventual 1071 rule more easily, 

more quickly, and at lower cost due to 

their greater degree of automation than 

financial institutions with primarily inperson and/or paper-based operations. 

SERs and several stakeholders 

(including a community bank trade 

association, a community group, and a 

community bank) urged the Bureau to 

align with other Federal data reporting 

regimes—such as HMDA, CRA, CDFI 

Fund, or SBA—if possible, and thought 

that financial institutions with 

experience complying with these other 

Federal data reporting regimes would 

have an easier time complying with an 

eventual 1071 rule than would financial 

institutions, including some SERs, with 

no such experience. One trade 

association suggested that any 

comparisons with HMDA were 

misplaced, as the small business 

lending market is more varied and 

complex than the market for residential 

mortgage lending. 

Several SERs stated that a 1071 rule 

should take into account the different 

types of financial institutions operating 

in the small business lending market. 

One SER suggested that the Bureau had 

not focused enough attention on the 

impact of a 1071 rule on nondepository 

institutions, which they said play a vital 

role in providing essential credit to 

small businesses in the United States, 

many of which are women-owned and 

minority-owned. Another SER and two 

trade associations asserted that the data 

collected from credit unions, which are 

bound by their charters (pursuant to 

Federal and State laws and regulations) 

to serve a specific field of membership, 

would likely be incomparable with data 

from other financial institutions that are 

permitted to serve any kind of customer. 

Many SERs supported broad coverage 

of both financial institutions and 

products, as reflected in section 1071’s 

language covering any application to a 

financial institution for credit for a 

women-owned, minority-owned, or 

small business. 

The SBREFA Panel recommended 

that the Bureau issue implementation 

and guidance materials (including a 

small entity compliance guide as 

required by the RFA, as well as other 

materials), specifically to assist small 

financial institutions in complying with 

the eventual 1071 rule.274 The Panel 

also recommended that the Bureau 

consider providing sample disclosure 

language related to the collection of 

ethnicity, race, and sex of applicants.275

The Bureau agrees with the general 

comments made in favor of keeping the 

scope of the proposed rule broad. In 

general, the Bureau believes that broad 

coverage of institutions and products as 

requested by a number of SERs and 

stakeholders would result in the 

collection of more data and would be 

consistent with the statutory purposes 

of section 1071. The Bureau does not 

believe that the request made by several 

trade association stakeholders to take a 

more limited approach to scope— 

including the various limitations on the 

coverage of certain types of financial 

institutions and products—would be 

consistent with the statutory purposes 

of section 1071. The Bureau addresses 

these issues directly in the section-bysection analyses of proposed 

§§ 1002.104 and 1002.105 below. 

The Bureau agrees with the SERs and 

stakeholders that expressed the view 

that data transparency in the small 

business lending market is critical to 

advancing the statutory purposes of 

section 1071. The Bureau believes that 

the limited data that do exist, cited by 

one SER and several stakeholders, 

appear to support the existence of 

disparities in the small business lending 

markets, as identified in part II above. 

The Bureau agrees—as do other Federal 

regulators that the Bureau has consulted 

in developing this proposed rule—that 

1071 data would be an important 

supplementation to CRA and HMDA 

data in helping a variety of parties 

determine and address business and 

community development needs. The 

Bureau agrees with the SERs and 

stakeholders that identified specific 

ways that the publication of 1071 data 

would advance this statutory purpose in 

helping the public identify business 

needs, including, as one SER suggested, 

creating data that would be useful to 

help smaller, local financial institutions 

distinguish their value proposition 

compared to other lenders, and could be 

used to spur innovation in the small 

business lending market. 

Regarding the support of certain SERs 

and other stakeholders welcoming the 

completion of a 1071 rulemaking, the 

Bureau’s views on this are best 

expressed in the section-by-section 

analyses of proposed §§ 1002.113 and 

1002.114 concerning effective date and 

compliance date. Regarding the data 

cited by SERs and other stakeholders 

concerning lending disparities in the 

PPP program during the COVID–19 

pandemic, the Bureau believes that the 

availability of data on PPP lending 

further supports the importance of 

collecting and publishing 1071 data; it 

was only the existence of PPP lending 

data, despite its limitations, that 

enabled these stakeholders to make 

arguments regarding the state of fair 

lending and business and community 

development under PPP. 

The Bureau appreciates the concerns 

expressed by some stakeholders 

concerning the uses of 1071 data. The 

Bureau believes that the firewall 

provision of proposed § 1002.108, 

including the proposed notice 

provision, are intended to address the 

concern by one trade association 

stakeholder that the collection of 

ethnicity, race, and sex data may create 

the perception among customers that 

these factors play a role in credit 

decisions. The Bureau disagrees with 

the stakeholder that asserted that 1071 

data should not be used in regulatory 

oversight or examinations. Such use is 

contemplated by ECOA section 

704B(a)(2), which provides that the data 

are intended to facilitate the 

enforcement of fair lending laws. The 

Bureau does agree with the same 

stakeholder, however, that 1071 data 

should be used to help regulators better 

understand the small business lending 

markets and better support such 

lending. The Bureau does not disagree 

in the abstract with the assertions made 

by several trade associations that 

misleading conclusions could be drawn 

from 1071 data; the Bureau notes that 

these stakeholders did not cite any 

examples and that any source of data 

may be misinterpreted absent robust 

procedures and methodologies. The 

Bureau believes, given its experience 

with HMDA data, that such concerns are 

misplaced—overall, HMDA data have 

helped shed light on previously hidden 

issues and proven highly effective in 

accomplishing its congressionally 

mandated purposes. 

The Bureau has attempted as much as 

possible to propose rules that are both 

simple and clear, as SERs and other 

stakeholders suggested. For instance, 

the Bureau is proposing a simple 

definition of small business in proposed 

§ 1002.106 below. While the Bureau has 

endeavored to avoid unnecessary 

ambiguity and complexity in its 

proposed rule, complexity in the 

proposed rule reflects the inherent 

complexity of the subject, including the 

variations and diversity in the small 

business lending market as well as the 

complications of collecting data to 

conduct fair lending analyses and 

identify business and community 

development needs. 

Regarding the request for clear written 

guidance and implementation support 

materials, the Bureau intends to develop 

various compliance materials, as it does 

with most major rules. These materials 

will include a small entity compliance 


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276SBREFA Outline at 9. 

277See the section-by-section analysis of 

proposed § 1002.106 below for additional 

discussion regarding the definition of ‘‘small 

business’’ for purposes of this rulemaking. 

278SBREFA Outline at 9. 

279 Id. 

280The SER feedback discussed in herein can be 

found in the SBREFA Panel Report at 18. 

281 Id. at 43. 

guide that will provide regulatory 

implementation guidance, and a Filing 

Instructions Guide that will provide 

technical instructions for the 

submission of 1071 data to the Bureau. 

With regard to the comment that the 

Bureau should provide applicant-facing 

materials, the Bureau proposes in 

appendix E a sample data collection 

form that can be used to collect from 

applicants their minority-owned 

business status, women-owned business 

status, and the ethnicity, race, and sex 

of their principal owners, along with the 

related required disclosures. 

The Bureau generally agrees with the 

observation of a number SERs that 

financial institutions with extensive 

online lending operations would likely 

find compliance with a section 1071 

rule easier than those with primarily inperson operations. The Bureau sets out 

its preliminary assessment of the costs 

of the rule on financial institutions in 

parts VII and VIII below. 

The Bureau has attempted, whenever 

possible, to align or conform its 

proposed rule with other Federal data 

reporting regimes, as several SERs and 

other stakeholders requested. The 

Bureau references and, where possible, 

aligns the proposed rule with specific 

Federal data reporting regimes, as 

explained in the section-by-section 

analyses below. The Bureau appreciates 

the comments made by some SERs and 

other stakeholders that there are 

different types of financial institutions 

in the small business lending market 

and that the differences between 

institutional types may complicate data 

analysis. The Bureau notes, however, 

that simply excluding certain types of 

institutions from 1071 reporting 

requirements would be inconsistent 

with the statutory purposes of section 

1071, and that it would be more 

congruent with section 1071 instead to 

collect information on financial 

institution type as set out in proposed 

§ 1002.109(b)(9), for the reasons set out 

below. 

E. Cross-Cutting Interpretive Issues 

1. The Bureau’s Approach to Non-Small 

Women-Owned and Minority-Owned 

Businesses in This Rulemaking 

The Bureau is proposing to require 

financial institutions to collect and 

report data regarding applications for 

credit for small businesses; the Bureau 

is not, however, proposing to require 

financial institutions to collect and 

report data with respect to applicants 

that are not small businesses. ECOA 

section 704B(b) states that ‘‘in the case 

of any application to a financial 

institution for credit for [a] womenowned, minority-owned, or small 

business,’’ the financial institution must 

‘‘inquire whether the business is a 

women-owned, minority-owned or 

small business . . . .’’ For the reasons 

set forth below, the Bureau is proposing 

this approach as an interpretation of the 

statute pursuant to its authority under 

704B(g)(1), and, in the alternative, 

pursuant to its authority under 

704B(g)(2) to adopt exceptions to any 

requirement of section 1071 as the 

Bureau deems necessary or appropriate 

to carry out the purposes of section 1071 

and its implied de minimis authority. 

The Bureau explained in the SBREFA 

Outline that in light of the 

comprehensive coverage of womenowned and minority-owned businesses 

within the scope of small businesses 

(discussed in more detail below), it was 

considering proposing that the data 

collection and reporting requirements of 

its eventual 1071 rule would apply to 

any application to a financial institution 

for credit only for small businesses as 

defined under the eventual 1071 rule.276

The Bureau explained that it was 

concerned that a requirement to collect 

and report 1071 data on applications for 

women-owned and minority-owned 

businesses that are not small businesses 

could affect all aspects of financial 

institutions’ commercial lending 

operations while resulting in limited 

information beyond what would already 

be collected and reported about womenowned and minority-owned small 

businesses. In addition, financing for 

large businesses can be much more 

varied and complex than are the 

products used for small business 

lending. Thus, under the approach the 

Bureau was considering proposing, 

financial institutions would collect and 

report lending data for all applicants 

that satisfy the Bureau’s definition of a 

small business, including identifying 

women-owned and minority-owned 

businesses within that pool, but 

financial institutions would not be 

required to collect and report 1071 data 

for women-owned and minority-owned 

businesses that are not ‘‘small.’’ 

In the SBREFA Outline, the Bureau 

noted that most existing businesses, 

including almost all women-owned and 

minority-owned businesses, are ‘‘small 

business concerns’’ as that term is 

currently defined by the SBA.277

Therefore, the Bureau posited that 

coverage of small businesses by this rule 

would necessarily include nearly all 

women-owned and minority-owned 

businesses. Based on the 2018 Annual 

Business Survey by the U.S. Census, the 

Bureau estimated that 5.72 million 

employer firms—99.6 percent of all 

employer firms—are small (defined for 

the purposes of the survey as having 

fewer than 500 employees). That same 

definition covers one million minorityowned employer firms (99.9 percent of 

all minority-owned firms) and 1.1 

million women-owned employer firms 

(99.9 percent of all women-owned 

firms).278 The Bureau estimated that, 

among non-small businesses, which are 

only 0.4 percent of all firms nationally, 

10 percent of this small fraction are 

minority-owned firms and 13 percent 

are women-owned.279

A number of SERs expressed a belief 

that covering just small business 

applications would supply adequate or 

nearly complete lending data for 

purposes of section 1071.280 However, 

other SERs stated that the Bureau’s 

regulation should collect data regarding 

applications for credit for non-small 

minority-owned and women-owned 

businesses as well. One SER relayed 

first-hand observations in their 

community that larger minority-owned 

and women-owned businesses were 

excluded from full access to credit, and 

expressed an interest in the Bureau 

capturing and reporting that 

information. One SER observed that 

smaller financial institutions, or those 

that generally focus on small business 

lending, might find that collecting and 

reporting data for all business loan 

applications would be simpler than 

determining which applications would 

be within the scope of the eventual 1071 

rule. 

The SBREFA Panel recommended 

that the Bureau continue to explore 

whether the data collection and 

reporting requirements in its 1071 rule 

should be limited to any application to 

a financial institution for credit only for 

small businesses (as defined by the 

Bureau’s regulation) or whether it 

should also extend to applications for 

women-owned and minority-owned 

businesses that are not small.281 The 

Panel also recommended that the 

Bureau seek comment on the costs to 

small financial institutions of collecting 

and reporting 1071 data regarding 

applications for credit for womenowned and minority-owned businesses 


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282 Id. 

283Merriam-Webster defines ‘‘case’’ as meaning 

‘‘a set of circumstances or conditions,’’ ‘‘a situation 

requiring investigation or action (as by the police),’’ 

or ‘‘the object of investigation or consideration.’’ 

284As discussed in greater detail in the next 

section, the fact that the language of ECOA section 

704B(b)(1) is designed to expressly permit inquiry 

into protected demographic information, which 

would otherwise be prohibited by existing 

§ 1002.5(b), is also evidenced by the statute’s three 

provisions creating special protections for 

responses to the inquiry: 704B(b)(2) requires that 

responses to protected inquiries remain separate 

from the application and accompanying 

information; 704B(c) requires that applicants have 

a right to refuse to answer the protected inquiry; 

and 704B(d) requires that certain underwriters or 

other employees involved in making determinations 

on an application not have access to the responses 

to protected inquiries. 

that are not small (as defined by the 

Bureau’s regulation).282

Feedback from other stakeholders 

generally supported the Bureau’s 

approach to limiting 1071 data 

collection to small businesses, including 

identifying women- and minorityowned businesses within that pool. A 

number of commenters expressed 

support for the Bureau’s approach under 

consideration, arguing that requiring 

data collection for non-small womenand minority-owned businesses would 

increase compliance burden without 

significantly contributing to 1071’s 

purposes. Some responses also stated 

that this approach was consistent with 

legislative intent, positing that Congress 

did not intend for financial institutions 

to collect 1071 data on large companies. 

A community group noted that its 

support for the Bureau’s approach was 

conditional on the Bureau adopting a 

broad definition of small business, thus 

limiting the likelihood of missing 

significant women- and minority-owned 

business application data. A joint 

comment from a number of community 

groups urged the Bureau to monitor the 

market and to reevaluate this approach 

if later publications of the Annual 

Business Survey show that the number 

of non-small women- and minorityowned businesses exceed current 

estimates. Another joint comment from 

community groups did not support the 

Bureau’s approach under consideration, 

urging the Bureau to consider instead 

covering non-small women- and 

minority-owned businesses in the data 

collection and arguing that it might be 

easier for financial institutions to collect 

data for all applicants, as opposed to 

developing systems for screening out 

applicants that are not covered. Two 

banks suggested that 1071 data 

collection should extend to all 

businesses; one was concerned about 

fair lending disparities, while the other 

remarked that large business applicants 

should not be relieved of the burden of 

having their data collected under 1071. 

The Bureau believes that section 1071 

is ambiguous with respect to its 

coverage of applications for credit for 

non-small women- or minority-owned 

businesses, and the Bureau therefore 

proposes to interpret this ambiguity 

pursuant to ECOA section 704B(g)(1). 

The Bureau acknowledges that the plain 

language of 704B(b) could be read to 

require financial institutions to collect 

information from all women-owned and 

minority-owned businesses, including 

those that are not small businesses. But 

based on a close consideration of the 

text, structure, and purpose of the 

statute, and the interactions between 

section 1071 and other provisions of 

ECOA and Regulation B, the Bureau 

believes that the statute’s coverage of, 

and Congress’s intent with respect to, 

data regarding non-small businesses is 

ambiguous. 

The Bureau interprets ECOA section 

704B(b) and (b)(1) to require that 

financial institutions first determine 

whether an applicant is a small business 

within the scope of the rule’s data 

collection before making the required 

inquiries that would otherwise be 

prohibited by existing Regulation B. 

There is a general prohibition in 

existing Regulation B (in § 1002.5(b)) 

which states that a ‘‘creditor shall not 

inquire about the race, color, religion, 

national origin, or sex of an applicant or 

any other person in connection with a 

credit transaction, except’’ if expressly 

permitted to do so by law or regulation. 

In the introductory language to ECOA 

section 704B(b), Congress instructed 

that the 1071 data collection regime 

applies only ‘‘in the case of any 

application to a financial institution for 

credit for women-owned, minorityowned, or small business’’ (emphasis 

added). The Bureau believes that ‘‘in the 

case of’’ indicates Congress’s intent to 

limit application of section 1071 to 

these types of businesses, rather than 

requiring financial institutions to make 

1071-related inquiries of all business 

applicants for credit.283 The next 

paragraph (704B(b)(1)) does not use the 

conditional phrase ‘‘in the case of’’ used 

in 704B(b); rather, it instructs a financial 

institution to ‘‘inquire.’’ The Bureau 

believes that the instruction to 

‘‘inquire’’ in 704B(b)(1) is intended to 

provide the necessary exception to 

Regulation B’s general prohibition 

against ‘‘inquir[ing]’’ as to protected 

demographic information in connection 

with a credit transaction.284 Indeed, 

absent section 1071’s lifting of the 

prohibition, generally, a financial 

institution could not determine, or even 

ask about, an applicant’s women- or 

minority-owned status, because doing 

so would necessarily constitute 

‘‘inquir[ing] about the race, color, 

religion, national origin, or sex of an 

applicant’’ in violation of existing 

§ 1002.5(b). The Bureau believes that 

Congress likely intended to ensure that 

financial institutions could determine 

whether an applicant is covered by the 

1071 data collection without risking a 

violation of other provisions of ECOA 

and Regulation B. 

However, unlike with women- and 

minority-owned business status, there is 

no legal impediment to a financial 

institution’s determining whether an 

applicant is a small business, and 

financial institutions can make that 

determination as a threshold matter 

without risking running afoul of ECOA 

and Regulation B. Therefore, the Bureau 

believes that the scope of the 

introductory ‘‘in the case of’’ language 

in ECOA section 704(b) is ambiguous as 

to coverage of non-small women- and 

minority-owned businesses. To resolve 

this ambiguity, the Bureau has applied 

its expertise to interpreting the language 

and structure of 1071 within the context 

of the general prohibition on inquiring 

into protected demographic information 

in existing § 1002.5(b), and concludes 

that ECOA section 704B(b)(1) is best 

read as only referring to questions about 

applicants’ protected demographic 

information (i.e., women- and minorityowned business status as well as the 

race, sex, and ethnicity of the principal 

owners of the business). The Bureau 

believes 704B(b)’s more general ‘‘in the 

case of’’ language should be understood 

to indicate the conditions under which 

1071 data collection should take place, 

and requires financial institutions to 

make a threshold determination that an 

applicant is a small business before 

proceeding with an inquiry into the 

applicant’s protected demographic 

information. 

The Bureau also notes that the 

collection of data on applications for 

non-small women- or minority-owned 

businesses would not carry out either of 

section 1071’s stated purposes because 

the data would be of only limited 

usefulness for conducting the relevant 

analyses of non-small businesses. Such 

analyses would necessitate comparing 

data regarding non-small women-owned 

and minority-owned business 

applicants to data regarding non-small 

non-women-owned and non-minorityowned business applicants, in order to 

control for lending outcomes that result 

from differences in applicant size. But 

section 1071 does not require or 

otherwise address the collection of data 

for non-small business applicants that 


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285See, e.g., Pub. Citizen v. U.S. Dep’t of Just., 491 

U.S. 440, 454 (1989) (‘‘Where the literal reading of 

a statutory term would ‘compel an odd result,’ 

Green v. Bock Laundry Machine Co., 490 U.S. 504, 

509 (1989), we must search for other evidence of 

congressional intent to lend the term its proper 

scope.’’). 

286Almendarez-Torres v. United States, 523 U.S. 

224, 234 (1998) (‘‘ ‘[T]he title of a statute and the 

heading of a section’ are ‘tools available for the 

resolution of a doubt’ about the meaning of a 

statute.’’) (quoting Bhd. of R.R. Trainmen v. Balt. & 

Ohio R.R., 331 U.S. 519, 529 (1947)). 

287Waterkeeper All. v. EPA, 853 F.3d 527, 530 

(D.C. Cir. 2017) (quoting Pub. Citizen v. FTC, 869 

F.2d 1541, 1556 (D.C. Cir. 1989)); see Alabama 

Power Co. v. Costle, 636 F.2d 323, 360–61 (D.C. Cir. 

1979). 

288The Bureau does not believe that the minor 

linguistic variations in these four provisions 

themselves have significance. 

289While there is a presumption that a phrase 

appearing in multiple parts of a statute has the same 

meaning in each, ‘‘this is no more than a 

presumption. It can be rebutted by evidence that 

Congress intended the words to be interpreted 

differently in each section, or to leave a gap for the 

agency to fill.’’ Catskill Mountains Chapter of Trout 

Unlimited, Inc. v. EPA, 846 F.3d 492, 532 (2d Cir. 

2017) (citing Env’t Def. v. Duke Energy Corp., 549 

U.S. 561, 575 (2007)). Here, the Bureau believes 

Congress indicated such an intention by using the 

same phrase in the substantially different contexts 

of providing special protections for sensitive 

demographic information on the one hand and 

‘‘itemiz[ing]’’ all collected data on the other. 

are not women- or minority-owned. 

Therefore, the resulting data set will 

lack a control group, arguably the most 

meaningful comparator for any data on 

non-small women- or minority-owned 

businesses. It is unlikely that Congress 

intended, and the statute is reasonably 

read not to require, the collection of 

data that would be of limited utility.285

Finally, the Bureau notes that the title 

of section 1071 is ‘‘Small Business Data 

Collection,’’ and 1071 amends ECOA to 

add a new section titled ‘‘Small 

Business Loan Data Collection.’’ In the 

presence of ambiguity, these titles 

provide some additional evidence that 

Congress did not intend the statute to 

authorize the collection of data on 

businesses that are not small.286

For these reasons, the Bureau 

proposes to interpret ECOA section 

704B(b) to cover the collection only of 

data with respect to small businesses, 

including those that are women- and 

minority-owned. Likewise, as discussed 

immediately below in E.2 of this 

Overview to part V, the Bureau is 

proposing to clarify that the 704B(b)(1) 

inquiry, when applicable, pertains to an 

applicant’s minority-owned business 

status and women-owned business 

status as well as the race, sex, and 

ethnicity of its principal owners. For the 

same reasons, the Bureau believes that 

not requiring the collection of data with 

respect to applications for non-small 

businesses would be necessary or 

appropriate to carry out the purposes of 

section 1071; therefore, in the 

alternative, the Bureau proposes to 

exercise its exception authority in 

704B(g)(2) to effect this outcome. 

Finally, because the Bureau believes 

that the collection of data on non-small 

women- and minority-owned businesses 

would ‘‘yield a gain of trivial or no 

value,’’ the Bureau proposes, in the 

alternative, to exercise its implied de 

minimis authority to create this 

exception.287

The Bureau seeks comment on its 

proposed approach to limiting the scope 

of data collection pursuant to subpart B 

to covered applications for small 

businesses, but not women- or minorityowned businesses that are not small. As 

recommended by the SBREFA Panel, 

the Bureau also seeks comment on the 

costs to small financial institutions of 

collecting and reporting 1071 data 

regarding applications for credit for 

women-owned and minority-owned 

businesses that are not small businesses 

as defined in proposed § 1002.106(b). 

See the section-by-section analysis of 

proposed § 1002.106(b) below, where 

the Bureau is seeking comment on the 

proposed definition of a small business. 

2. The Meaning of ‘‘information 

requested pursuant to subsection (b)’’ 

Four different provisions of section 

1071 refer to or rely on ‘‘information 

requested pursuant to subsection (b)’’ or 

similar language. First, ECOA section 

704B(b)(2) provides that financial 

institutions must ‘‘maintain a record of 

the responses to such inquiry’’ and keep 

those records separate from the 

application and information that 

accompanies it. Second, 704B(c) states 

that applicants for credit ‘‘may refuse to 

provide any information requested 

pursuant to subsection (b).’’ Third, 

704B(d) requires financial institutions to 

limit the access of certain employees to 

‘‘information provided by the applicant 

pursuant to a request under subsection 

(b),’’ with certain exceptions. Fourth, 

704B(e) instructs financial institutions 

that ‘‘information provided by any loan 

applicant pursuant to a request under 

subsection (b) . . . shall be itemized in 

order to clearly and conspicuously 

disclose’’ data including the loan type 

and purpose, amount of credit applied 

for and approved, and gross annual 

revenue. 

In light of these four disparate 

provisions, the Bureau believes that 

section 1071 is ambiguous with respect 

to the meaning of ‘‘any information 

provided by the applicant pursuant to a 

request under subsection (b).’’ 288 On the 

one hand, ECOA section 704B(b)(1) 

directs financial institutions to inquire 

whether a business is ‘‘a women-owned, 

minority-owned, or small business,’’ so 

the phrase could be interpreted as 

referring only to those three data points. 

Section 704B(e), however, indicates that 

the scope of 704B(b) could be much 

broader; it suggests that all of the 

information that financial institutions 

are required to compile and maintain— 

not simply an applicant’s status as a 

women-owned, minority-owned, or 

small business—constitutes information 

provided by an applicant ‘‘pursuant to 

a request under subsection (b).’’ But as 

noted above, information deemed 

provided pursuant to subsection (b) is 

subject to the notable protections of 

separate recordkeeping under 

704B(b)(2), a right to refuse under 

704B(c), and the firewall under 704B(d). 

Applying these special protections to 

many of the data points in 704B(e), such 

as gross annual revenue or amount 

applied for, would be extremely 

difficult to implement, because this 

information is critical to financial 

institutions’ ordinary operations in 

making credit decisions. Additionally, 

704B(e) describes as ‘‘provided by any 

loan applicant’’ under 704B(b) data 

points that plainly must come from the 

financial institution itself, such as 

application number and action taken, 

further suggesting that Congress viewed 

this term as encompassing more 

information than lies within the four 

corners of 704B(b)(1). Finally, as noted 

above, the circular structure of 704B(b) 

complicates the question of what 

constitutes information provided 

‘‘pursuant to a request under subsection 

(b).’’ Read together, the introductory 

language in 704B(b) and (b)(1) direct 

financial institutions, ‘‘in the case of’’ a 

credit application ‘‘for [1] womenowned, [2] minority-owned, or [3] small 

business,’’ to ‘‘inquire whether the 

business is a [1] women-owned, [2] 

minority-owned, or [3] small business.’’ 

The Bureau believes that this circularity 

further demonstrates the ambiguity of 

the phrase ‘‘pursuant to a request under 

subsection (b).’’ 

The Bureau believes that it is 

reasonable to resolve these ambiguities 

by giving different meanings to the 

phrase ‘‘any information provided by 

the applicant pursuant to a request 

under subsection (b)’’ (or similar) with 

respect to ECOA section 704B(e) as 

opposed to 704B(b)(2), (c), and (d).289

With respect to 704B(e), the Bureau 

interprets the phrase to refer to all the 

data points now articulated in proposed 

§ 1002.107(a). Section 704B(e) is the 

source of financial institutions’ 

obligation to ‘‘compile and maintain’’ 

data that they must then submit to the 


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290The Bureau’s interpretations with respect to a 

separate data point for small business status are 

discussed in the next section. 291SBREFA Outline at 25. 

Bureau, so it would be reasonable to 

interpret this paragraph as referring to 

the complete data collection Congress 

devised in enacting section 1071. 

But with respect to the three statutory 

provisions creating special protections 

for certain information—the firewall in 

ECOA section 704B(d), separate 

recordkeeping in 704B(b)(2), and the 

right to refuse in 704B(c)—the Bureau 

interprets the phrase to refer to the data 

points in proposed § 1002.107(a)(18) 

(women-owned business status), (a)(19) 

(minority-owned business status), and 

(a)(20) (ethnicity, race, and sex of 

principal owners).290 Each of these data 

points requests sensitive demographic 

information that has no bearing on the 

creditworthiness of the applicant, about 

which existing § 1002.5(b) would 

generally prohibit the financial 

institution from inquiring absent section 

1071’s mandate to collect and report 

that information, and with respect to 

which applicants are protected from 

discrimination. The Bureau accordingly 

believes that it would be reasonable to 

apply section 1071’s special-protection 

provisions to apply to this information, 

regardless of whether the statutory 

authority to collect it originates in 

704B(b)(1) (women-owned and 

minority-owned business status) or 

704B(e)(2)(G) (race, sex, and ethnicity of 

principal owners). The Bureau similarly 

believes that it would have been 

unreasonable for Congress to have 

intended that these special protections 

would apply to any of the other data 

points now proposed in § 1002.107(a), 

which the financial institution is 

permitted to request regardless of 

coverage under section 1071 which are 

not the subject of Federal 

antidiscrimination law, and many of 

which financial institutions currently 

use for underwriting purposes. 

The Bureau implements these 

interpretations of ‘‘information 

requested pursuant to subsection (b)’’ in 

several different section-by-section 

discussions. With respect to ECOA 

section 704B(e), the Bureau discusses its 

interpretation of the phrase in the 

section-by-section analysis of proposed 

§ 1002.107(a). The Bureau’s 

interpretation of 704B(d)’s firewall 

requirement is addressed at greater 

length in the section-by-section analysis 

of proposed § 1002.108, and the 

Bureau’s interpretation of the separate 

recordkeeping requirement in 

704B(b)(2) is addressed in the sectionby-section analysis of proposed 

§ 1002.111(b). The right to refuse in 

704B(c) is discussed in the section-bysection analyses of the data points that 

the Bureau proposes to be subject to the 

right to refuse: Proposed 

§ 1002.107(a)(18) (women-owned 

business status), (19) (minority-owned 

business status), and (20) (ethnicity, 

race, and sex of principal owners). 

3. No Collection of Small Business 

Status as a Data Point 

The Bureau notes that neither of its 

interpretations of ‘‘information 

requested pursuant to subsection (b)’’ 

reference a specific data point for an 

applicant’s status as a small business, 

nor is the Bureau otherwise including in 

proposed § 1002.107(a) that financial 

institutions collect, maintain, or submit 

a data point whose sole function is to 

state whether the applicant is or is not 

a small business. 

At SBREFA, the Bureau conveyed that 

it was considering proposing small 

business status as a separate data point. 

The Bureau also stated that it was 

considering not proposing to extend the 

right to refuse or firewall to a financial 

institution’s specific inquiry regarding 

small business status; 291 the Bureau did 

not address in the SBREFA Outline 

whether small business status would be 

subject to the separate recordkeeping 

requirement. In lieu of further details 

about the potential data point on small 

business status, the Bureau noted that it 

was considering proposing that 

collection and reporting of whether an 

applicant for credit is a small business 

be based on applicant-reported 

information, but that the precise nature 

of the data point would depend on the 

ultimate definition of small business. 

As discussed below in the section-bysection analysis of proposed 

§ 1002.106(b), the Bureau is now 

proposing a definition of small business 

that largely adopts the SBREFA 

Outline’s First Alternative Approach 

with a threshold of $5 million. After 

considering the implications of this 

approach, the Bureau now believes that 

it would render redundant any 

requirement that financial institutions 

also collect a standalone data point 

whose sole purpose is to state whether 

an applicant is a small business, 

because the gross annual revenue data 

point wholly encompasses whether an 

applicant is a small business. Indeed, 

under the proposed definition of small 

business, when a financial institution 

asks an applicant its gross annual 

revenue, that question is functionally 

identical to asking, ‘‘are you a small 

business?’’ The Bureau believes that it 

would be a reasonable interpretation of 

ECOA section 704B(b)’s query as to 

small business status for that question to 

take the form of, ‘‘what is your gross 

annual revenue?’’ Furthermore, as 

discussed above with respect to the 

Bureau’s approach to non-small womenand minority-owned businesses, the 

Bureau is interpreting financial 

institutions’ data collection obligations 

as attaching only in the case of 

applications from small businesses; if a 

financial institution determines that an 

applicant is not a small business, none 

of the obligations under this rule would 

apply. As such, a standalone data point 

that serves only to designate whether a 

business qualifies as small for purposes 

of the rule would be redundant with the 

mere fact that the 1071 data collection 

occurs at all, as well as with the 

collection of gross annual revenue. 

The Bureau acknowledges that the 

plain language of ECOA section 704B(b) 

could be read to require financial 

institutions to ask applicants subject to 

the data collection the precise question, 

‘‘are you a small business?’’ Upon 

further analysis, however, the Bureau 

believes that Congress’s intended 

treatment of small business status as a 

standalone data point is ambiguous. As 

described in more detail above with 

respect to the rulemaking’s coverage of 

women- and minority-owned businesses 

that are not small, 704B(b)’s 

introductory language and 704B(b)(1) 

appear to require financial institutions 

to know the answer to whether an 

applicant is women-owned, minorityowned, or small before they make their 

inquiry; to resolve this ambiguity, the 

Bureau interprets 704B(b)’s introductory 

language and 704B(b)(1) to require that 

financial institutions first 

straightforwardly assess whether an 

applicant is a small business before 

proceeding to inquire into the 

applicant’s protected demographic 

information that would otherwise be 

prohibited by existing § 1002.5(b). 

In sum, pursuant to its authority 

under ECOA section 704B(g)(1) to 

prescribe such rules as may be 

necessary to carry out, enforce, and 

compile data pursuant to section 1071, 

the Bureau interprets 704B(b) and (b)(1) 

to obviate the need for financial 

institutions to collect a standalone data 

point whose sole purpose is to note an 

applicant’s small business status. For 

the same reasons, the Bureau believes 

that not requiring the collection of a 

separate data point on small business 

status would be necessary or 

appropriate to carry out the purposes of 

section 1071; therefore, in the 

alternative, the Bureau proposes to 

exercise its exception authority in 

704B(g)(2) to effect this outcome. 


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292Waterkeeper All., 853 F.3d at 530 (quoting 

Pub. Citizen, 869 F.2d at 1556); see Alabama Power, 

636 F.2d at 360–61. 

293 15 U.S.C. 1691(a). 

294 15 U.S.C. 1691(b)(5). 

295Existing § 1002.5(a)(2). 

296Equal Credit Opportunity Act (Regulation B) 

Ethnicity and Race Information Collection, 82 FR 

45680, 45684 (Oct. 2, 2017). 

297Existing § 1002.5(a)(4)(iii). 

298 15 U.S.C. 1691b(a). 

Finally, because the Bureau believes 

that the collection of a standalone data 

point on small business status would 

‘‘yield a gain of trivial or no value,’’ the 

Bureau proposes, in the alternative, to 

exercise its implied de minimis 

authority to create this exception.292

In light of the above, the Bureau seeks 

comment on whether a standalone data 

point solely dedicated to small business 

status might nonetheless be useful and, 

if so, how it might be implemented. 

F. Conforming Amendments to Existing 

Regulation B 

As discussed above, the Bureau is 

proposing to implement its section 1071 

rule in a new subpart B of Regulation B. 

The content of existing Regulation B 

would become subpart A of Regulation 

B. This change would not affect the 

current section numbering in Regulation 

B. The Bureau believes it is appropriate 

to make this rule a part of Regulation B, 

as section 1071 is a part of ECOA. 

Nonetheless, the Bureau seeks comment 

on whether it should instead codify its 

section 1071 rule as a free-standing 

regulation with its own CFR part and, if 

so, why. 

As noted above and as discussed in 

more detail below, the Bureau is 

proposing amendments to amend 

existing § 1002.5(a)(4) and associated 

commentary to expressly permit 

voluntary collection of minority-owned 

business status, women-owned business 

status, and the race, sex, and ethnicity 

of applicants’ principal owners in 

accordance with the requirements of 

subpart B. In addition, the Bureau 

anticipates revising certain references to 

the entire regulation (which use the 

terms ‘‘regulation’’ or ‘‘part’’) in existing 

Regulation B to instead refer specifically 

to subpart A. The Bureau does not 

intend to make any substantive changes 

with these revisions, but rather intends 

to maintain the status quo. 

Subpart A—General 

Section 1002.5 Rules Concerning 

Requests for Information 

5(a) General Rules 

5(a)(4) Other Permissible Collection of 

Information 

Background 

ECOA prohibits creditors from 

discriminating against applicants, with 

respect to any aspect of a credit 

transaction, on the basis of—among 

other things—race, color, religion, 

national origin, sex or marital status, or 

age.293 It also states that making an 

inquiry under 15 U.S.C. 1691c–2 (that 

is, section 1071), in accordance with the 

requirements of that section, shall not 

constitute discrimination for purposes 

of ECOA.294 Regulation B, in existing 

§ 1002.5(b), generally prohibits a 

creditor from inquiring about protected 

demographic information in connection 

with a credit transaction unless 

otherwise required by Regulation B, 

ECOA, or other Federal law or 

regulation.295

In 2017, the Bureau amended 

Regulation B, adding § 1002.5(a)(4) to 

allow creditors to collect ethnicity, race, 

and sex from mortgage applicants in 

certain cases where the creditor is not 

required to report under HMDA and 

Regulation C.296 As part of this 

rulemaking, the Bureau added 

§ 1002.5(a)(4) to expressly permit the 

collection of ethnicity, race, and sex 

information from mortgage applicants in 

certain cases where the creditor is not 

required to report under HMDA and 

Regulation C. For example, existing 

§ 1002.5(a)(4) expressly permits the 

collection of ethnicity, race, and sex 

information for certain transactions for 

which Regulation C permits optional 

reporting. However, nothing in existing 

Regulation B (or in ECOA) expressly 

permits voluntary collection and 

reporting of information regarding the 

ethnicity, race, and sex of applicants’ 

principal owners, or whether the 

applicant is a minority-owned business 

or women-owned business, under 

section 1071. 

SBREFA Proposal Under Consideration 

and Feedback Received 

During the SBREFA process, some 

SERs, primarily small CDFIs and 

mission-oriented community banks, 

stated that they would be inclined to 

collect and report 1071 data to the 

Bureau even if not required to do so, 

such as if they fell under loan-volume 

thresholds. These SERs expressed an 

intent to report data even if not required 

to out of a belief in the importance and 

utility of 1071 data. 

Proposed Rule 

The Bureau is proposing to amend 

existing § 1002.5(a)(4) to add three 

exemptions (in proposed 

§ 1002.5(a)(4)(vii), (viii), and (ix)) that 

would permit certain creditors that are 

not covered financial institutions under 

the rule to collect small business 

applicants’ protected demographic 

information under certain 

circumstances. The Bureau is also 

proposing to add comment 5(a)(2)–4 and 

to revise existing comment 5(a)(4)–1 to 

provide guidance on these proposed 

exemptions. 

Proposed § 1002.5(a)(4)(vii) would 

provide that a creditor that was required 

to report small business lending data 

pursuant to proposed § 1002.109 for any 

of the preceding five calendar years but 

is not currently a covered financial 

institution under proposed 

§ 1002.105(b) may collect information 

pursuant to proposed subpart B for a 

covered application as defined in 

proposed § 1002.103 regarding whether 

the applicant is a minority-owned 

business or a women-owned business, 

and the ethnicity, race, and sex of the 

applicant’s principal owners if it 

complies with the requirements of 

proposed subpart B as otherwise 

required for covered financial 

institutions pursuant to proposed 

§§ 1002.107, 1002.108, 1002.111, 

1002.112, and 1002.114 for that 

application. In short, proposed 

§ 1002.5(a)(4)(vii) would permit a 

previously covered financial institution 

to collect such information for covered 

applications for up to five years after it 

fell below the loan-volume threshold of 

proposed § 1002.105(b), provided that it 

does so in accordance with the relevant 

requirements of proposed subpart B. 

The Bureau expects that some 

creditors that are no longer covered 

financial institutions and thus no longer 

required to report 1071 data in a given 

reporting year may prefer to continue to 

collect applicants’ protected 

demographic information in the event 

they become a covered financial 

institution again, in order to maintain 

consistent compliance standards from 

year to year. As it did in a similar 

context for HMDA reporting,297 the 

Bureau believes that permitting such 

collection for five years provides an 

appropriate time frame under which a 

financial institution should be 

permitted to continue collecting the 

information without having to change 

its compliance processes. The Bureau 

believes that a five-year period is 

sufficient to help an institution discern 

whether it is likely to have to report 

1071 data in the near future but not so 

long as to permit it to collect such 

information in a period too attenuated 

from previous 1071 reporting. 

Therefore, the Bureau believes that it 

is an appropriate use of its statutory 

authority under sections 703(a) 298 and 


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704B(g)(1) of ECOA to permit creditors 

to collect the 1071 demographic 

information in the manner set out in 

proposed § 1002.5(a)(4)(vii). The 

proposal would effectuate the purposes 

of and facilitate compliance with ECOA 

and is necessary to carry out, enforce, 

and compile data pursuant to section 

1071 because it would permit creditors 

to collect information without 

interruption from year to year, thereby 

facilitating compliance with the 1071 

rule’s data collection requirements and 

improving the quality and reliability of 

the data collected. The Bureau also 

believes that this provision is narrowly 

tailored and would preserve and respect 

the general limitations in existing 

§ 1002.5(b) through (d). 

Proposed § 1002.5(a)(4)(viii) would 

provide that a creditor that exceeded the 

loan-volume threshold in the first year 

of the two-year threshold period 

provided in proposed § 1002.105(b) 

may, in the second year, collect 

information pursuant to proposed 

subpart B for a covered application as 

defined in proposed § 1002.103 

regarding whether the applicant is a 

minority-owned business or a womenowned business, and the ethnicity, race, 

and sex of the applicant’s principal 

owners if it complies with the 

requirements of subpart B as otherwise 

required for covered financial 

institutions pursuant to proposed 

§§ 1002.107, 1002.108, 1002.111, 

1002.112, and 1002.114 for that 

application. 

The Bureau believes that its proposal 

would benefit creditors in certain 

situations in which the creditor has not 

previously reported 1071 data but 

expects to be covered in the following 

year and wishes to prepare for that 

future reporting obligation. For 

example, where a creditor surpasses the 

loan-volume threshold of proposed 

§ 1002.105(b) for the first time in a given 

calendar year, it may wish to begin 

collecting applicants’ protected 

demographic information for covered 

applications received in the next 

calendar year (second calendar year) so 

as to ensure its compliance systems are 

fully functional before it is required to 

collect and report information pursuant 

to proposed subpart B in the following 

calendar year (third calendar year). 

The Bureau believes that it is an 

appropriate use of its statutory authority 

under sections 703(a) and 704B(g)(1) of 

ECOA to permit creditors to collect 

information under proposed 

§ 1002.5(a)(4)(viii). A creditor likely 

would benefit from being able to collect 

applicants’ protected demographic 

information with assurance of 

compliance with existing § 1002.5 

regardless of whether it actually 

becomes subject to proposed subpart B 

reporting at the end of the two-year 

threshold period. The proposal would 

effectuate the purposes of and facilitate 

compliance with ECOA and is necessary 

to carry out, enforce, and compile data 

pursuant to section 1071 because it 

would facilitate compliance with the 

1071 rule’s data collection requirements 

and improve the quality and reliability 

of the data collected by financial 

institutions that may be transitioning 

into being required to collect and report 

1071 data. 

Proposed § 1002.5(a)(4)(ix) would 

state that a creditor that is not currently 

a covered financial institution under 

proposed § 1002.105(b), and is not 

otherwise a creditor to which proposed 

§ 1002.5(a)(4)(vii) or (viii) applies, may 

collect information pursuant to 

proposed subpart B for a covered 

application as defined in proposed 

§ 1002.103 regarding whether an 

applicant for a covered credit 

transaction is a minority-owned 

business or a women-owned business, 

and the ethnicity, race, and sex of the 

applicant’s principal owners if the 

creditor complies with the requirements 

of proposed subpart B as otherwise 

required for covered financial 

institutions pursuant to proposed 

§§ 1002.107 through 1002.112 and 

1002.114 for that application. The 

proposal would permit a financial 

institution that wishes to voluntarily 

report 1071 data to collect applicants’ 

protected demographic information 

without running afoul of Regulation B. 

Unlike creditors subject to proposed 

§ 1002.5(a)(4)(vii) or (viii), a creditor 

seeking to voluntarily collect applicant’s 

protected demographic information 

under proposed § 1002.5(a)(4)(ix) would 

be required to report it to the Bureau. 

The Bureau believes that permitting 

creditors to collect 1071 demographic 

information pursuant to proposed 

§ 1002.5(a)(4)(vii) or (viii) would 

facilitate compliance and promote data 

quality in the event that creditors 

subject to those provisions later become 

covered financial institutions. For those 

creditors that wish to voluntarily report 

1071 data, as well as others covered by 

proposed § 1002.5(a)(4)(ix) (where 

reporting is required when applicants’ 

protected demographic information is 

collected), the reported data would be 

additional information that would 

further the intended purposes of the 

statute. An analysis of business and 

community development needs would 

benefit from the inclusion of voluntarily 

reported data from financial institutions 

below the reporting threshold. Such 

institutions more often serve sparsely 

populated rural, underserved 

communities or are member-owned 

organizations (such as credit unions). As 

some SERs suggested, the voluntary 

collection and reporting of 1071 data by 

such financial institutions may stem 

from a community development 

orientation and commitment to fair 

lending. Further, the reporting of such 

data would provide a more complete 

picture of total lending activity—and 

therefore enable a more complete 

analysis of fair lending risks as well as 

business and community development 

needs—especially given that larger 

financial institutions may be less likely 

to operate in sparsely populated, rural, 

and underserved communities, for the 

reasons set out in part II above. The 

Bureau is proposing § 1002.5(a)(4)(ix) in 

response to feedback from some 

stakeholders that indicated they might 

want to collect and report 1071 data 

even if they were not required to do so. 

The Bureau believes, for the reasons set 

out above, that it is an appropriate use 

of its general authority under sections 

703(a) and 704B(g)(1) of ECOA to permit 

creditors to collect information under 

proposed § 1002.5(a)(4)(ix), as such 

collection would effectuate the purposes 

of and facilitate compliance with ECOA 

and is necessary to carry out, enforce, 

and compile data pursuant to section 

1071. Further, the Bureau believes that 

permitting creditors to collect 

applicants’ protected demographic 

information would result in the 

collection of additional information that 

could carry out section 1071’s business 

and community development purpose. 

Existing comment 5(a)(4)–1 currently 

addresses recordkeeping requirements 

for ethnicity, race, and sex information 

that is voluntarily collected for HMDA 

under the existing provisions of 

§ 1002.5(a)(4). The Bureau is proposing 

to revise this comment by adding to it 

a parallel reference to proposed subpart 

B, along with a statement that the 

information collected pursuant to 

proposed subpart B must be retained 

pursuant to the requirements set forth in 

proposed § 1002.111. 

Proposed comment 5(a)(2)–4 would 

state that proposed subpart B of 

Regulation B generally requires 

creditors that are covered financial 

institutions as defined in proposed 

§ 1002.105(a) to collect and report 

information about the ethnicity, race, 

and sex of the principal owners of 

applicants for certain small business 

credit, as well as whether the applicant 

is minority-owned or women-owned as 

defined in proposed § 1002.102(m) and 

(s), respectively. The Bureau is 

proposing this comment for parity with 

existing comment 5(a)(2)–2, which 


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299The Bureau notes that there are certain terms 

defined in proposed subpart B outside of proposed 

§ 1002.102. This occurs where a definition is 

relevant only to a particular section. For example, 

the firewall provisions in proposed § 1002.108 use 

the phrases ‘‘involved in making any determination 

concerning a covered application’’ and ‘‘should 

have access.’’ Those phrases are defined in 

§ 1002.108(a). Those definitions are discussed in 

detail in the section-by-section analysis of the 

provisions in which they appear. 300 12 U.S.C. 1841 et seq. 

addresses the requirement to collect and 

report information about the race, 

ethnicity, and sex of applicants under 

HMDA. Existing comment 5(a)(2)–3 

explains that persons such as loan 

brokers and correspondents do not 

violate ECOA or Regulation B if they 

collect information that they are 

otherwise prohibited from collecting, 

where the purpose of collecting the 

information is to provide it to a creditor 

that is subject to HMDA or another 

Federal or State statute or regulation 

requiring data collection. The Bureau 

believes that the reference to another 

Federal statute or regulation adequately 

encompasses section 1071 and proposed 

subpart B, and thus it does not propose 

to amend this existing comment in order 

to make clear that loan brokers and 

other persons collecting applicants’ 

protected demographic information on 

behalf of covered financial institutions 

are not violating ECOA or Regulation B 

by doing so. 

The Bureau seeks comment on these 

three proposed exemptions to be added 

to existing § 1002.5(a)(4), and associated 

commentary, including whether there 

are other specific situations that should 

be added to the list of exemptions in 

§ 1002.5(a)(4) to permit the collection of 

applicants’ protected demographic 

information, and whether any similar 

modifications to other provisions are 

necessary. In particular, the Bureau 

seeks comment on whether it should 

add another exemption to § 1002.5(a)(4) 

relating to proposed § 1002.114(c)(1), 

wherein the Bureau is proposing to 

permit financial institutions to collect, 

but would not require them to report, 

applicants’ protected demographic 

information prior to the compliance 

date. 

The Bureau also notes that, as 

discussed in the section-by-section 

analysis of proposed § 1002.104(a) 

below, it seeks comment on whether it 

should permit financial institutions to 

voluntarily collect and report 1071 data 

on applications for products that the 

Bureau is not proposing to cover. If the 

Bureau were to permit such voluntary 

collection and reporting, the Bureau 

expects to add a provision similar to 

proposed § 1002.5(a)(4)(ix) to address it. 

Subpart B—Small Business Lending 

Data Collection 

Section 1002.101 Authority, Purpose, 

and Scope 

Proposed § 1002.101 would set forth 

the authority, purpose, and scope for 

proposed subpart B. Specifically, it 

would provide that proposed subpart B 

is issued by the Bureau pursuant to 

section 704B of ECOA (15 U.S.C. 1691c– 

2). It would further state that, except as 

otherwise provided therein, proposed 

subpart B applies to covered financial 

institutions, as defined in proposed 

§ 1002.105(b), other than a person 

excluded from coverage of this part by 

section 1029 of the Dodd-Frank Act. It 

also would set out section 1071’s two 

statutory purposes of facilitating fair 

lending enforcement and enabling the 

identification of business and 

community development needs and 

opportunities for women-owned, 

minority-owned, and small businesses. 

The Bureau seeks comment on its 

proposed approach to this section, 

including whether any other 

information on the 1071 rule’s 

authority, purpose, or scope should be 

addressed herein. 

Section 1002.102 Definitions 

The Bureau is proposing a number of 

definitions for terms used in subpart B, 

in § 1002.102.299 These definitions 

generally fall into several categories. 

First, some definitions in proposed 

§ 1002.102 refer to terms defined 

elsewhere in proposed subpart B— 

specifically, the terms business, covered 

application, covered credit transaction, 

covered financial institution, financial 

institution, and small business are 

defined in proposed §§ 1002.106(a), 

1002.103, 1002.104, 1002.105(b), 

1002.105(a), and 1002.106(b), 

respectively. These terms are of 

particular importance in proposed 

subpart B, and the Bureau is proposing 

to define them in separate sections, 

rather than in proposed § 1002.102, for 

ease of reading. 

Second, some terms in proposed 

§ 1002.102 are defined by crossreferencing the definitions of terms 

defined in existing Regulation B— 

specifically, business credit, credit, and 

State are defined by reference to existing 

§ 1002.2(g), (j), and (aa), respectively. 

Similarly, several definitions refer to 

terms defined in other regulations— 

specifically, a portion of the affiliate 

definition refers to the SBA’s regulation 

at 13 CFR 121.103, and dwelling refers 

to the definition in Regulation C 

§ 1003.2(f). These terms are each used in 

proposed subpart B, and the Bureau 

believes it is appropriate to incorporate 

them into the subpart B definitions in 

this manner. 

Finally, the remaining terms are 

defined directly in proposed § 1002.102. 

These include applicant, closed-end 

credit transaction, minority individual, 

minority-owned business, open-end 

credit transaction, principal owner, 

small business lending application 

register, and women-owned business, as 

well as a portion of the definition of 

affiliate. Some of these definitions draw 

on definitions in existing Regulation B 

or elsewhere in Federal laws or 

regulations. 

The Bureau believes that basing this 

proposal’s definitions on previously 

defined terms (whether in Regulation B, 

Regulation C, or regulations 

promulgated by another agency), to the 

extent possible, would minimize 

regulatory uncertainty and facilitate 

compliance, particularly where the 

other regulations are likely to apply, in 

their own right, to the same 

transactions. However, as discussed 

further below, the Bureau is in certain 

instances proposing to deviate from the 

existing definitions for purposes of this 

proposal. 

These definitions are each discussed 

in detail below. The Bureau is 

proposing these definitions pursuant to 

its authority under section 704B(g)(1) to 

prescribe such rules and issue such 

guidance as may be necessary to carry 

out, enforce, and compile data pursuant 

to section 1071. In addition, the Bureau 

is proposing certain of these definitions 

to implement particular definitions in 

section 1071 including the statutory 

definitions set out in 704B(h). Any other 

authorities that the Bureau is relying on 

to propose certain definitions are 

discussed in the section-by-section 

analysis of those specific definitions. 

The Bureau seeks comment on its 

proposed approach to each of these 

definitions, as well as whether there are 

any other terms that the Bureau should 

define for purposes of proposed subpart 

B. 

102(a) Affiliate 

Proposed § 1002.102(a) would define 

‘‘affiliate’’ based on whether the term is 

used to refer to a financial institution or 

to an applicant. 

Proposed § 1002.102(a) would define 

‘‘affiliate’’ with respect to a financial 

institution as any company that 

controls, is controlled by, or is under 

common control with, another 

company, as set forth in the Bank 

Holding Company Act of 1956.300

Existing Regulation B does not define 

affiliate. This proposed definition 


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301See Regulation C comment 4(a)(11)–3. 

302As explained in existing comment 3–1, under 

§ 1002.3, procedural requirements of Regulation B 

do not apply to certain types of credit. The 

comment further states that all classes of 

transactions remain subject to § 1002.4(a) (the 

general rule barring discrimination on a prohibited 

basis) and to any other provision not specifically 

excepted. 

303 Government entities are not ‘‘organized for 

profit’’ and thus would not be a ‘‘business concern’’ 

under proposed § 1002.106(a). 

would provide a consistent approach 

with the Bureau’s Regulation C, which 

applies the term to financial 

institutions, as defined in Regulation C, 

for certain reporting obligations.301 The 

Bureau believes that this definition 

would be appropriate to define an 

affiliate of a financial institution, and 

that it should provide sufficient clarity 

for financial institutions when 

determining responsibilities under 

proposed subpart B. 

Proposed § 1002.102(a) would define 

‘‘affiliate’’ with respect to a business or 

an applicant as having the same 

meaning as described in 13 CFR 

121.103, which is an SBA regulation 

titled ‘‘How does SBA determine 

affiliation?’’ This proposed definition 

would provide consistency with the 

Bureau’s proposed approach to what 

constitutes a small business for 

purposes of section 1071, as discussed 

in the section-by-section analysis of 

proposed § 1002.106(b) below. As 

discussed in the section-by-section 

analysis of proposed § 1002.106(b) 

below, the Bureau is proposing to define 

a small business by reference to the 

SBA’s regulations (with the exception of 

an alternate size standard, as set forth in 

proposed § 1002.106(b)). As discussed 

in the section-by-section analysis of 

proposed § 1002.107(a)(14), the Bureau 

is proposing to permit, but not require, 

a financial institution to report the gross 

annual revenue for the applicant in a 

manner that includes the revenue of 

affiliates as well. As discussed in the 

section-by-section analysis of proposed 

§ 1002.107(a)(16), the Bureau is 

proposing that a financial institution, if 

asked, shall explain to the applicant that 

workers for affiliates of the applicant 

would only be counted if the financial 

institution were also collecting the 

affiliates’ gross annual revenue. The 

Bureau is therefore proposing to define 

affiliate in subpart B for purposes of a 

business or an applicant by referring to 

the SBA’s definition of affiliate. 

The Bureau seeks comment on its 

proposed approach to this definition. 

102(b) Applicant 

Proposed § 1002.102(b) would define 

‘‘applicant’’ to mean any person who 

requests or who has received an 

extension of business credit from a 

financial institution. The term 

‘‘applicant’’ is undefined in section 

1071. Proposed § 1002.102(b) is based 

on the definition of applicant in existing 

Regulation B, though for consistency 

with other parts of this proposed rule, 

it adds a limitation that the credit be 

business credit and uses the term 

financial institution instead of creditor. 

It also omits the references to other 

persons who are or may become 

contractually liable regarding an 

extension of credit such as guarantors, 

sureties, endorsers, and similar parties. 

The Bureau is concerned that including 

other such persons could exceed the 

scope of the data collection anticipated 

by section 1071. Including them could 

also make the data collection more 

difficult as financial institutions might 

need to report data points (such as gross 

annual revenue, NAICS code, time in 

business, and others) regarding multiple 

persons in connection with a single 

application. Collecting such information 

on guarantors, sureties, endorsers, and 

similar parties would likely not support 

1071’s business and community 

development purpose. Thus, the Bureau 

believes it is appropriate to limit the 

definition of applicant in proposed 

subpart B to only those persons who 

request, or have received, an extension 

of business credit from a financial 

institution. 

The Bureau seeks comment on its 

proposed approach to this definition. 

102(c) Business 

Proposed § 1002.102(c) would refer to 

proposed § 1002.106(a) for a definition 

of the term ‘‘business.’’ See the sectionby-section analysis of proposed 

§ 1002.106(a) for a detailed discussion 

of that definition. 

102(d) Business Credit 

Proposed § 1002.102(d) would refer to 

existing § 1002.2(g) for a definition of 

the term ‘‘business credit.’’ The term 

‘‘credit’’ is undefined in section 1071. 

Section 1071 does not use the term 

‘‘business credit,’’ though it does define 

‘‘small business loan’’ as a loan made to 

a small business. Existing § 1002.2(g) 

defines ‘‘business credit’’ as ‘‘referring 

to extensions of credit primarily for 

business or commercial (including 

agricultural) purposes, but excluding 

extensions of credit of the types 

described in § 1002.3(a) through (d).’’ 

The Bureau believes it is appropriate to 

define business credit by reference to 

the existing definition in Regulation B. 

The Bureau’s proposal uses the term 

business credit principally in defining a 

covered credit transaction in proposed 

§ 1002.104(a). 

As described in the section-by-section 

analysis of proposed § 1002.104(a) 

below, loans, lines of credit, credit 

cards, and MCAs (including such credit 

transactions for agricultural purposes 

and those that are also covered by 

HMDA) would all fall under the 

proposed definition for business credit. 

The Bureau notes existing § 1002.2(g) 

excludes public utilities credit, 

securities credit, incidental credit, and 

government credit (that is, extensions of 

credit made to governments or 

governmental subdivisions, agencies, or 

instrumentalities—not extensions of 

credit made by governments), as defined 

in existing § 1002.3(a) through (d), from 

certain aspects of existing Regulation 

B.302 As described in the section-bysection analysis of proposed 

§ 1002.104(b) below, for the purpose of 

subpart B, the Bureau is proposing 

complete exclusions for public utilities 

credit, securities credit, and incidental 

credit from the definition of a covered 

credit transaction in proposed 

§ 1002.104(b). The Bureau is not 

proposing an exclusion for extensions of 

credit made to governments or 

governmental subdivisions, agencies, or 

instrumentalities, because governmental 

entities would not constitute small 

businesses under the proposed rule.303

Moreover, as described in the sectionby-section analysis of proposed 

§ 1002.104(b) below, the Bureau 

believes it is appropriate to interpret 

section 1071 as not applying to 

factoring, leases, consumer-designated 

credit used for business purposes, or 

credit secured by certain investment 

properties. 

The Bureau seeks comment on its 

proposed approach to this definition. 

102(e) Closed-End Credit Transaction 

Proposed § 1002.102(e) states that a 

closed-end credit transaction means an 

extension of credit that is not an openend credit transaction under proposed 

§ 1002.102(n). The Bureau’s proposal 

specifies different requirements for 

collecting and reporting certain data 

points based on whether the application 

is for a closed-end credit transaction or 

an open-end credit transaction. See the 

section-by-section analysis of proposed 

§ 1002.102(n) for a discussion of what 

constitutes an open-end credit 

transaction. 

The Bureau seeks comment on its 

proposed approach to this definition. 

102(f) Covered Application 

Proposed § 1002.102(f) would refer to 

proposed § 1002.103 for a definition of 

the term ‘‘covered application.’’ See the 


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304See 15 U.S.C. 1691a. Existing Regulation B 

uses the term ‘‘applicant’’ instead of ‘‘debtor.’’ 305See 12 CFR 1002.14. 

306Public Law 101–73, section 1204(c)(3), 103 

Stat. 183, 521 (1989) (12 U.S.C. 1811 note). 

307 Id. 

308SBREFA Outline at 18–19. 

309Appendix B to 12 CFR part 1003. 

310The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 22. 

311 Id. at 44. 

section-by-section analysis of proposed 

§ 1002.103 for a detailed discussion of 

that definition. 

102(g) Covered Credit Transaction 

Proposed § 1002.102(g) would refer to 

proposed § 1002.104 for a definition of 

the term ‘‘covered credit transaction.’’ 

See the section-by-section analysis of 

proposed § 1002.104 for a detailed 

discussion of that definition. 

102(h) Covered Financial Institution 

Proposed § 1002.102(h) would refer to 

proposed § 1002.105(b) for a definition 

of the term ‘‘covered financial 

institution.’’ See the section-by-section 

analysis of proposed § 1002.105(b) for a 

detailed discussion of that definition. 

102(i) Credit 

Proposed § 1002.102(i) would refer to 

existing § 1002.2(j) for a definition of the 

term ‘‘credit.’’ The term ‘‘credit’’ is 

undefined in section 1071. Existing 

§ 1002.2(j), which largely follows the 

definition of credit in ECOA,304 defines 

‘‘credit’’ to mean the right granted by a 

creditor to an applicant to defer 

payment of a debt, incur debt and defer 

its payment, or purchase property or 

services and defer payment therefor. 

The Bureau believes that referring to 

this existing definition of credit for 

purposes of subpart B would help to 

foster consistency with existing 

Regulation B. The term credit in 

proposed subpart B is used in the 

context of what constitutes a covered 

credit transaction—that is, whether the 

application is reportable under the 

section 1071 rule. See the section-bysection analysis of proposed § 1002.104 

below for more details. 

The Bureau seeks comment on its 

proposed approach to this definition. 

102(j) Dwelling 

Proposed § 1002.102(j) would refer to 

Regulation C § 1003.2(f) for a definition 

of the term ‘‘dwelling.’’ That provision 

defines dwelling to mean a residential 

structure, whether or not attached to 

real property. The term includes but is 

not limited to a detached home, an 

individual condominium or cooperative 

unit, a manufactured home or other 

factory-built home, or a multifamily 

residential structure or community. 

Proposed comment 102(j)–1 would 

provide that Bureau interpretations that 

appear in supplement I to part 1003 

containing official commentary in 

connection with § 1003.2(f) are 

generally applicable to the definition of 

a dwelling in proposed § 1002.102(j). 

Proposed comment 102(j)–2 would 

clarify that the definition of dwelling 

under existing § 1002.14(b)(2) applies to 

relevant provisions under existing 

Regulation B, and proposed 

§ 1002.102(j) is not intended to repeal, 

abrogate, annul, impair, or interfere 

with any existing interpretations, 

orders, agreements, ordinances, rules, or 

regulations adopted or issued pursuant 

to existing § 1002.14(b)(2). 

The Bureau believes that adopting the 

Regulation C definition of dwelling 

would streamline reporting and 

minimize compliance risks for financial 

institutions that are also reporting 

covered credit transactions under 

HMDA and would simplify data 

analysis for HMDA-reportable 

transactions. As an alternative, the 

Bureau considered adopting the existing 

Regulation B definition of dwelling, 

which is similar to the Regulation C 

definition. The Bureau understands that 

the existing Regulation B definition of 

dwelling is primarily applied in the 

context of the ECOA Valuations Rule305

and would thus not streamline reporting 

and minimize compliance risks in the 

same way as would adopting the 

Regulation C definition, which is 

already being applied to data collection 

and reporting requirements. The 

existing Regulation B definition of 

dwelling is also not supported by the 

same level of clarifying commentary as 

the definition under Regulation C. The 

Bureau believes that proposed comment 

102(j)–1 will address most if not all 

questions related to the definition of 

dwelling by incorporating the Bureau’s 

official commentary related to 

§ 1003.2(f). Proposed comment 102(j)–2 

also seeks to avoid potential confusion 

by clarifying that proposed § 1002.102(j) 

does not affect the status of existing 

§ 1002.14(b)(2), which defines the term 

‘‘dwelling’’ for purposes of existing 

Regulation B. 

The Bureau seeks comment on its 

proposed approach to this definition. 

102(k) Financial Institution 

Proposed § 1002.102(l) would refer to 

proposed § 1002.105(a) for a definition 

of the term ‘‘financial institution.’’ See 

the section-by-section analysis of 

proposed § 1002.105(a) for a detailed 

discussion of that definition. 

102(l) Minority Individual 

Background 

ECOA section 704B(b)(1) requires a 

financial institution to ask whether an 

applicant is a minority-owned business. 

Additionally, 704B(h)(5) uses the term 

‘‘minority individual’’ when defining 

the term minority-owned business. 

Although 704B(h)(5) defines the term 

‘‘minority,’’ section 1071 does not 

define the term ‘‘minority individual.’’ 

Section 704B(h)(4) defines the term 

‘‘minority’’ as having the same meaning 

as in section 1204(c)(3) of the Financial 

Institutions Reform, Recovery, and 

Enforcement Act of 1989 (FIRREA).306

That statute defines ‘‘minority’’ to mean 

any Black American, Native American, 

Hispanic American, or Asian 

American.307

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated that it was considering proposing 

guidance that would clarify that a 

minority individual is a natural person 

who is Black or African American, 

Asian, American Indian or Alaska 

Native, Native Hawaiian or Other 

Pacific Islander, and/or Hispanic or 

Latino 308 (i.e., would mirror the 

aggregate race and ethnicity categories 

in Regulation C).thnsp;309 The Bureau 

also stated it was considering proposing 

guidance clarifying that a multi-racial 

person would be considered a minority 

individual. 

Several SERs supported clarifying the 

meaning of minority individual using 

the aggregate categories for race and 

ethnicity in Regulation C.310 However, 

one SER suggested using the 

disaggregated categories in Regulation 

C, instead of the aggregate categories, for 

this purpose. Other stakeholders 

providing feedback on the SBREFA 

Outline generally supported using the 

aggregate categories when determining 

who is a minority individual for 

purposes of reporting whether a 

business is a minority-owned business. 

The SBREFA Panel recommended 

clarifying that, consistent with the 

aggregate categories for race and 

ethnicity in Regulation C, a minority 

individual is a natural person who is 

Black or African American, Asian, 

American Indian or Alaska Native, 

Native Hawaiian or Other Pacific 

Islander, and/or Hispanic or Latino.311

Proposed Rule 

Consistent with the approach that the 

Bureau took during the SBREFA 

process, proposed § 1002.102(1) would 

clarify that the term ‘‘minority 


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312See, e.g., 80 FR 36356 (June 24, 2015) (NCUA 

interpretive ruling and policy statement 

implementing an identical FIRREA definition of 

minority using this same modern terminology). 

313 12 CFR 1002.13(a)(1)(i). 

314Appendix B to 12 CFR part 1003. 

315For example, the OMB uses these same 

categories for the classification of Federal data on 

race and ethnicity. See Off. of Mgmt. & Budget, 

Revisions to the Standards for the Classification of 

Federal Data on Race and Ethnicity, 62 FR 58785 

(Oct. 30, 1996). 

316SBREFA Outline at 18–19. 

317See 31 CFR 1010.230. 

318The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 22. 319 Id. at 44. 

individual’’ means a natural person who 

is American Indian or Alaska Native, 

Asian, Black or African American, 

Native Hawaiian or Other Pacific 

Islander, and/or Hispanic or Latino. The 

Bureau believes that these categories 

represent contemporary, more specific 

delineations of the categories described 

in section 1204(c)(3) of FIRREA.312

Proposed comment 102(1)–2 would 

clarify that a multi-racial or multi-ethnic 

person would be a minority individual. 

Proposed comment 102(1)–1 would 

clarify that this definition would be 

used only when an applicant 

determines whether it is a minorityowned business pursuant to proposed 

§§ 1002.102(m) and 1002.107(a)(18). 

Proposed comment 102(1)–3 would 

clarify the relationship of the definition 

of minority individual to the 

disaggregated subcategories used to 

determine a principal owner’s ethnicity 

and race. The Bureau’s proposed 

approach is consistent with the SBREFA 

Panel’s recommendation discussed 

above. 

The Bureau believes this clarified 

terminology, which uses the aggregate 

ethnicity and race categories set forth in 

existing Regulation B313 and Regulation 

C,314 would avoid the potentially 

confusing situation where an applicant 

is using one set of aggregate race and 

ethnicity categories when answering 

questions about the principal owners’ 

race and ethnicity but is asked to use a 

different set of aggregate categories 

when indicating whether a business is 

a minority-owned business. It also 

avoids creating a situation where a 

financial institution is required to use 

different race and ethnicity categories 

when complying with different portions 

of Regulation B and, if applicable, 

Regulation C. Consistency among race 

and ethnicity data collection regimes 

may also allow for better coordination 

among data users when reviewing data 

across multiple data collection 

regimes.315

The Bureau seeks comment on its 

proposed approach to this definition, 

including its proposed clarification of 

the definition of minority individual, 

and requests comment on whether 

additional clarification is needed. 

Additionally, in section-by-section 

analysis of proposed § 1002.107(a)(20), 

the Bureau is requesting comment 

regarding whether an additional 

category for Middle Eastern or North 

African should be added for purposes of 

responding to a financial institution’s 

inquiry regarding a principal owner’s 

ethnicity or race and, if so, how this 

category should be included and 

defined. The Bureau also seeks 

comment on whether the definition of 

minority individual should include a 

natural person who is Middle Eastern or 

North African, as well as whether the 

inclusion of a natural person who is 

Middle Eastern or North African in the 

definition of minority individual for 

purposes of proposed § 1002.102(l) 

should be dependent on whether 

Middle Eastern or North African is 

added as an aggregate category for 

purposes of proposed § 1002.107(a)(20). 

102(m) Minority-Owned Business 

Background 

ECOA section 704B(b)(1) requires 

financial institutions to inquire whether 

applicants for credit are minority-owned 

businesses. For purposes of the financial 

institution’s inquiry under 704B(b), 

704B(h)(5) defines a business as a 

minority-owned business if (A) more 

than 50 percent of the ownership or 

control is held by one or more minority 

individuals, and (B) more than 50 

percent of the net profit or loss accrues 

to one or more minority individuals. 

Section 1071 does not expressly define 

the related terms of ‘‘ownership’’ or 

‘‘control,’’ nor does it describe what it 

means for net profits or losses to accrue 

to an individual. 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated it was considering proposing use 

of the statutory definition of ‘‘minorityowned business’’ (as set forth above) 

with further clarification of the terms 

‘‘ownership’’ and ‘‘control.’’ 316 The 

Bureau considered proposing use of 

concepts set forth in the Financial 

Crimes Enforcement Network’s 

(FinCEN) Customer Due Diligence 

(CDD) rule 317 to clarify these terms. 

Some SERs expressed concerns with 

certain aspects of the statutory 

definition of minority-owned business, 

asserting that the definition could cause 

confusion or pose particular 

complexities.318 Several SERs and some 

other stakeholders providing feedback 

on the SBREFA Outline asked that the 

definition of minority-owned business 

be revised to align with the definition 

used by other agencies, such as the SBA 

and the CDFI Fund. These SERs and 

other commenters recommended that 

the Bureau use a ‘‘50 percent or more’’ 

threshold for ownership or control, 

instead of the ‘‘more than 50 percent’’ 

standard in the statutory definition. 

Conversely, two SERs and several other 

commenters supported using the 

statutory definition of minority-owned 

business, including the ‘‘more than 50 

percent’’ portion of the definition. 

A number of SERs recommended that 

the Bureau simplify the definition to 

ensure it is understandable to small 

business applicants and to thereby 

facilitate consistent data collection. 

SERs’ suggestions included eliminating 

the portion of the definition that refers 

to accrual of net profits and losses, 

eliminating the portion of the definition 

that refers to control, and providing a 

simplified and standardized definition. 

Several SERs supported using the 

concepts of ownership and control in 

FinCEN’s CDD rule when defining 

minority-owned business; one SER said 

that doing so would be logical and 

efficient, while another said it would 

create regulatory consistency and ease 

compliance burden. One SER said that 

most credit unions are familiar with the 

CDD rule. Generally, other commenters 

supported use of the CDD concepts to 

clarify the terms ‘‘ownership’’ and 

‘‘control.’’ They stated that small 

business applicants are familiar with the 

concepts in the CDD rule or that they 

appreciated the consistency with 

existing regulatory requirements. 

However, one trade association 

commenter requested that the Bureau 

provide simplified applicant-facing 

materials without clarifying the 

definition, and two other stakeholders 

suggested that applicants might not be 

familiar with the CDD rule or may not 

understand the CDD rule. 

The SBREFA Panel recommended 

seeking comment on potential 

interpretations of the definition of 

minority-owned business to clarify the 

term and to ensure that small business 

applicants would be able to understand 

questions asking if they are minorityowned businesses.319

Proposed Rule 

Proposed § 1002.102(m) would define 

a minority-owned business as a business 

for which more than 50 percent of its 

ownership or control is held by one or 

more minority individuals, and more 

than 50 percent of its net profits or 


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320SBREFA Outline at 32. 

321The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 30. 

322 Id. at 46. 

losses accrue to one or more minority 

individuals. This definition is 

consistent with ECOA section 

704B(h)(5) and the Bureau’s proposal 

under consideration in the SBREFA 

Outline. 

Proposed comment 102(m)–1 would 

explain that a business must satisfy both 

prongs of the definition to be a 

minority-owned business—that is, (A) 

more than 50 percent of the ownership 

or control is held by one or more 

minority individuals, and (B) more than 

50 percent of the net profits or losses 

accrue to one or more minority 

individuals. 

Proposed comment 102(m)–2 would 

clarify that the definition of minorityowned business is used only when an 

applicant determines if it is a minorityowned business for purposes of 

proposed § 1002.107(a)(18). A financial 

institution would provide the definition 

of minority-owned business when 

asking the applicant to provide 

minority-owned business status 

pursuant to proposed § 1002.107(a)(18), 

but a financial institution would not be 

permitted or required to make its own 

determination regarding whether an 

applicant is a minority-owned business 

for this purpose. 

Proposed comment 102(m)–3 would 

further note that a financial institution 

would be permitted to assist an 

applicant when determining whether it 

is a minority-owned business but would 

not be required to do so, and could 

provide the applicant with the 

definitions of ownership, control, and 

accrual of net profits or losses set forth 

in proposed comments 102(m)–4 

through –6. Additionally, for purposes 

of reporting an applicant’s minorityowned business status, a financial 

institution would rely on the applicant’s 

determinations of its ownership, 

control, and accrual of net profits and 

losses. 

Consistent with the approach 

described during the SBREFA process, 

the Bureau is proposing to clarify 

‘‘ownership’’ and ‘‘control’’ using 

concepts from the CDD rule. Proposed 

comment 102(m)–4 would clarify that a 

natural person owns a business if that 

natural person directly or indirectly, 

through any contract, arrangement, 

understanding, relationship or 

otherwise, has an equity interest in the 

business. Proposed comment 102(m)–4 

would also provide examples of 

ownership and clarify that, where 

applicable, ownership would need to be 

traced or followed through corporate or 

other indirect ownership structures for 

purposes of proposed §§ 1002.102(m) 

and 1002.107(a)(18). Proposed comment 

102(m)–5 would clarify that a natural 

person controls a business if that natural 

person has significant responsibility to 

manage or direct the business, and 

would provide examples of natural 

persons who control a business. 

Proposed comment 102(m)–6 would 

clarify that a business’s net profits and 

losses accrue to a natural person if that 

natural person receives the net profits or 

losses, is legally entitled or required to 

receive the net profits or losses, or is 

legally entitled or required to recognize 

the net profits or losses for tax purposes. 

The Bureau believes many small 

business applicants already respond to 

questions about who owns and who 

controls a business entity when 

completing CDD forms or otherwise 

responding to questions related to the 

CDD rule and thus should be familiar 

with the concepts in the CDD rule. 

Because the CDD rule does not address 

the second prong of the definition in 

ECOA section 704B(h)(5) (regarding 

accrual of net profit or loss), the Bureau 

is proposing in § 1002.102(m) that this 

prong of the definition be defined to 

mean that one or more minority 

individuals must receive or be legally 

entitled to receive the net profits or 

losses or that one or more minority 

individuals must be legally required to 

recognize the net profits and losses. 

However, the Bureau shares some SERs’ 

concerns that the statutory definition of 

minority-owned business might, in 

some cases, be difficult for applicants to 

understand, which could in turn 

jeopardize the accuracy of reported data. 

Thus, consistent with the SBREFA 

Panel’s recommendation, the Bureau 

seeks comment on the proposed 

definition of minority-owned business 

and possible alternatives that may 

clarify the term in order to help ensure 

that small business applicants can 

determine whether they are minorityowned businesses for purposes of 

section 1071 data collection. 

102(n) Open-End Credit Transaction 

Proposed § 1002.102(n) would state 

that open-end credit transaction means 

an open-end credit plan as defined in 

Regulation Z § 1026.2(a)(20), but 

without regard to whether the credit is 

consumer credit, as defined in 

§ 1026.2(a)(12), is extended by a 

creditor, as defined in § 1026.2(a)(17), or 

is extended to a consumer, as defined in 

§ 1026.2(a)(11). The term ‘‘open-end 

credit transaction’’ is undefined in 

section 1071. The Bureau’s proposal 

specifies different rules for collecting 

and reporting certain data points based 

on whether the application is for a 

closed-end credit transaction or an 

open-end credit transaction. The Bureau 

believes its proposed definition is 

reasonable because it aligns with the 

definition of ‘‘open-end credit 

transaction’’ in Regulation Z 

§ 1026.2(a)(20). The Bureau further 

believes that such alignment will 

minimize confusion and facilitate 

compliance. 

The Bureau seeks comment on its 

proposed approach to this definition. 

102(o) Principal Owner 

Background 

ECOA section 704B(e) requires 

financial institutions to compile and 

maintain the ethnicity, race, and sex of 

an applicant’s principal owners. 

However, section 1071 does not 

expressly define who is a principal 

owner of a business. 

SBREFA Proposal Under Consideration 

and Feedback 

In the SBREFA Outline, the Bureau 

stated that it was considering proposing 

to define the term ‘‘principal owner’’ in 

a manner consistent with the CDD 

rule.320 Under a definition consistent 

with the CDD rule, an individual would 

be a principal owner if the individual 

directly or indirectly, through any 

contract, arrangement, understanding, 

relationship or otherwise, owns 25 

percent or more of the equity interests 

of the business. 

Several SERs and other stakeholders 

providing feedback on the SBREFA 

Outline expressed familiarity with the 

CDD rule, and supported aligning with 

that rule’s 25 percent ownership 

standard for defining a principal owner 

for the section 1071 rule.321 One SER 

said that aligning definitions with the 

CDD rule would be logical and efficient. 

Another SER supported use of the CDD 

rule’s concepts in determining who was 

a principal owner. Other SERs and 

stakeholders said they currently collect 

this information for beneficial owners at 

or above 20 percent in order to comply 

with SBA or other requirements and 

suggested aligning with that standard 

instead. 

The SBREFA Panel recommended 

that the Bureau propose aligning the 

definition of principal owner with 

concepts of ownership and control that 

exist in other Federal regulations with 

which financial institutions are already 

complying, to the extent possible.322

Proposed Rule 

Proposed § 1002.102(o) would define 

principal owner in a manner that is, in 


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323SBREFA Outline at 39. 

324 In contrast, the term ‘‘Loan/Application 

Register’’ in Regulation C § 1003.2(k) refers to both 

the record of information required to be collected 

pursuant to § 1003.4 as well as the record submitted 

annually or quarterly, as applicable, pursuant to 

§ 1003.5(a). 

part, consistent with the CDD rule. 

Specifically, a natural person would be 

a principal owner if the natural person 

directly owns 25 percent or more of the 

equity interests of the business. 

However, as proposed comment 102(o)– 

1 would note, a natural person would 

need to directly own an equity share of 

25 percent or more in the business in 

order to be a principal owner. Due to the 

potential complications with collecting 

a principal owner’s ethnicity, race, and 

sex information when a trust or entity 

is an owner, the Bureau is proposing 

that entities not be considered principal 

owners and indirect ownership by 

individuals likewise not be considered 

when determining if someone is a 

principal owner for purposes of 

collecting and reporting principal 

owners’ ethnicity, race, and sex or the 

number of principal owners. Thus, 

when determining who is a principal 

owner, ownership would not be traced 

through multiple corporate structures to 

determine if a natural person owns 25 

percent or more of the applicant’s equity 

interests. Additionally, because only a 

natural person would be a principal 

owner for the 1071 rule, entities such 

trusts, partnerships, limited liability 

companies, and corporations, would not 

be principal owners. 

Proposed comment 102(o)–2 would 

clarify that a financial institution would 

provide an applicant with the definition 

of principal owner when asking the 

applicant to provide the number of its 

principal owners pursuant to proposed 

§ 1002.107(a)(21) and the ethnicity, race, 

and sex of its principal owners pursuant 

to proposed § 1002.107(a)(20). If a 

financial institution meets in person 

with a natural person about a covered 

application, the financial institution 

may be required to determine if the 

natural person with whom it meets is a 

principal owner in order to collect and 

report the principal owner’s ethnicity 

and race based on visual observation 

and/or surname. (See proposed 

comments 107(a)(20)–5 and –9.) 

Additionally, proposed comment 

102(o)–2 would note that if an applicant 

does not provide the number of its 

principal owners in response to the 

financial institution’s request pursuant 

to proposed § 1002.107(a)(21), the 

financial institution may need to 

determine the number of the applicant’s 

principal owners and report that 

information based on other documents 

or information. (See proposed 

comments 107(a)(21)–1 through –3.) 

Consistent with its approach in the 

SBREFA Outline and with the SBREFA 

Panel’s recommendation, the Bureau is 

proposing that the definition of 

principal owner align with the 25 

percent ownership definition in the 

CDD rule. The Bureau believes that this 

standard, which aligns with another 

Federal regulation, is already broadly in 

use and is likely to be familiar to most 

financial institutions and applicants. 

Banks, credit unions, and certain other 

financial institutions must comply with 

the CDD rule. The Bureau believes 

applicants, as a general matter, are more 

likely to be familiar with CDD 

requirements than SBA or CDFI Fund 

requirements because they have to 

complete CDD forms before opening an 

initial account (i.e., loan or deposit 

account) at a bank or at certain other 

institutions. However, due to potential 

complications with collecting ethnicity, 

race, and sex information for principal 

owners, the Bureau is proposing that 

individuals that only indirectly own 25 

percent or more of an applicant’s equity 

interests, as well as entities and trusts, 

are not principal owners. 

The Bureau notes that it is possible 

under its proposed approach that an 

applicant might not identify any 

principal owners as being women or 

minorities but nonetheless could be a 

women- and/or minority-owned 

business. This could occur, for example, 

if a white male owned 40 percent of a 

business while three Asian women each 

owned 20 percent. Only the white male 

would be designated as a principal 

owner, but the business would be 

nonetheless both women-owned and 

minority-owned. While the Bureau 

acknowledges that some applicants 

could find this approach confusing, it is 

consistent with the statutory language in 

section 1071. To help mitigate against 

potential confusion, the Bureau has 

proposed that the questions regarding 

minority-owned business status and 

women-owned business status appear in 

the proposed sample data collection 

form before questions about the race, 

sex, and ethnicity of principal owners. 

The Bureau seeks comment on this 

proposed definition of a principal 

owner, including the proposal not to 

include individuals that only indirectly 

own 25 percent or more of an 

applicant’s equity interests as principal 

owners. The Bureau requests comment 

on whether additional clarification on 

any aspect of the proposed definition is 

needed. 

102(p) Small Business 

Proposed § 1002.102(p) would refer to 

proposed § 1002.106(b) for a definition 

of the term ‘‘small business.’’ See the 

section-by-section analysis of proposed 

§ 1002.106(b) for a detailed discussion 

of that definition. 

102(q) Small Business Lending 

Application Register 

Proposed § 1002.102(q) would define 

the term ‘‘small business lending 

application register’’ or ‘‘register’’ as the 

data reported, or required to be 

reported, annually pursuant to proposed 

§ 1002.109. The Bureau did not include 

a definition of small business lending 

application register in the SBREFA 

Outline, though it did address proposals 

under consideration for compiling, 

maintaining, and reporting 1071 data to 

the Bureau.323 See the section-bysection analysis of proposed § 1002.109 

for a detailed discussion of the proposed 

rule’s provisions addressing reporting 

data to the Bureau, including feedback 

received from SERs and other 

stakeholders on that subject. The 

Bureau’s proposed definition refers only 

to the data that is reported, or required 

to be reported, annually; it does not 

refer to the data required to be collected 

and maintained (prior to reporting).324

The Bureau seeks comment on its 

proposed definition of ‘‘small business 

lending application register’’ or 

‘‘register’’ in proposed § 1002.102(q). 

102(r) State 

Proposed § 1002.102(r) would refer to 

existing § 1002.2(aa) for a definition of 

the term ‘‘State.’’ Existing § 1002.2(aa) 

defines the term as any State, the 

District of Columbia, the 

Commonwealth of Puerto Rico, or any 

territory or possession of the United 

States. The Bureau did not include a 

definition of State in the SBREFA 

Outline nor did it receive any feedback 

on the term from SERs. This proposed 

definition of State would be consistent 

with existing Regulation B and familiar 

to financial institutions. 

The Bureau seeks comment on its 

proposed approach to this definition. 

102(s) Women-Owned Business 

Background 

ECOA section 704B(b)(1) requires 

financial institutions to inquire whether 

applicants for credit are women-owned 

businesses. For purposes of the financial 

institution’s inquiry under 704B(b), 

704B(h)(5) defines a business as a 

women-owned business if (A) more than 

50 percent of the ownership or control 

is held by one or more women, and (B) 

more than 50 percent of the net profit 

or loss accrues to one or more women. 


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325SBREFA Outline at 18–19. 

326The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 22. 327 Id. at 44. 

Section 1071 does not expressly define 

the related terms of ‘‘ownership’’ or 

‘‘control,’’ nor does it describe what it 

means for net profits or losses to accrue 

to an individual. 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated that it was considering proposing 

use of the statutory definition of a 

‘‘women-owned business’’ (as set forth 

above) with further clarification of the 

terms ‘‘ownership’’ and ‘‘control’’ using 

concepts set forth in the CDD rule.325

Some SERs expressed concerns with 

certain aspects of the statutory 

definition of women-owned business, 

asserting that the definition could cause 

confusion or pose particular 

complexities.326 Several SERs and some 

other stakeholders providing feedback 

on the SBREFA Outline asked that the 

definition of women-owned business be 

revised to align with the definition used 

by other agencies, such as the SBA and 

the CDFI Fund. Some SERs as well as 

some other commenters expressed 

concern that a business that is owned 

equally by a woman and a man would 

not be a ‘‘women-owned business’’ 

under the statutory definition of 

women-owned business because the 

woman would not own ‘‘more than 50 

percent’’ of the business and the woman 

might not control more than 50 percent 

of the business. These SERs and other 

commenters recommended that the 

Bureau instead use a ‘‘50 percent or 

more’’ threshold for ownership or 

control as the standard. Conversely, two 

SERs and several other stakeholders 

supported using the statutory definition 

of women-owned business, including 

the ‘‘more than 50 percent’’ portion of 

the definition. 

A number of SERs recommended that 

the Bureau simplify the definition to 

ensure it is understandable to small 

business applicants and to thereby 

facilitate consistent data collection. 

SERs’ suggestions included eliminating 

the portion of the definition that refers 

to accrual of net profit and loss, 

eliminating the portion of the definition 

that refers to control, and providing a 

simplified and standardized definition. 

Several SERs supported using the 

concepts of ownership and control in 

the CDD rule when defining womenowned business; one SER said that 

doing so would be logical and efficient, 

while another said it would create 

regulatory consistency and ease 

compliance burden. One SER said that 

most credit unions are familiar with the 

CDD rule. Generally, other commenters 

supported use of the CDD concepts to 

clarify the terms ‘‘ownership’’ and 

‘‘control.’’ They stated that small 

business applicants are familiar with the 

concepts in the CDD rule or that they 

appreciated the consistency with 

existing regulatory requirements. 

However, one trade association 

commenter thought the Bureau should 

provide simplified applicant-facing 

materials without clarifying the 

definition, and two other stakeholders 

suggested that applicants might not be 

familiar with the CDD rule or may not 

understand the CDD rule. 

The SBREFA Panel recommended 

seeking comment on potential 

interpretations of the definition of 

women-owned business to clarify the 

term and to ensure that small business 

applicants would be able to understand 

questions asking if they are a womenowned business.327

Proposed Rule 

Proposed § 1002.102(s) would define 

a women-owned business as a business 

for which more than 50 percent of its 

ownership or control is held by one or 

more women, and more than 50 percent 

of its net profits or losses accrue to one 

or more women. This definition is 

consistent with ECOA section 

704B(h)(6) and the Bureau’s proposal 

under consideration in the SBREFA 

Outline. 

Proposed comment 102(s)–1 would 

explain that a business must satisfy both 

prongs of the definition to be a womenowned business—that is, (A) more than 

50 percent of the ownership or control 

is held by one or more women, and (B) 

more than 50 percent of the net profits 

or losses accrue to one or more women. 

Proposed comment 102(s)–2 would 

clarify that the definition of womenowned business is used only when an 

applicant determines if it is a womenowned business for purposes of 

proposed § 1002.107(a)(19). A financial 

institution would provide the definition 

of women-owned business when asking 

the applicant to provide women-owned 

business status pursuant to proposed 

§ 1002.107(a)(19), but a financial 

institution would not be permitted or 

required to make its own determination 

regarding whether an applicant is a 

women-owned business for this 

purpose. 

Proposed comment 102(s)–3 would 

further note that a financial institution 

would be permitted to assist an 

applicant when determining whether it 

is a women-owned business but would 

not be required to do so, and could 

provide the applicant with the 

definitions of ownership, control, and 

accrual of net profits or losses set forth 

in proposed comments 102(s)–4 through 

–6. Additionally, for purposes of 

reporting an applicant’s women-owned 

business status, a financial institution 

would rely on the applicant’s 

determinations of its ownership, 

control, and accrual of net profits and 

losses. 

Consistent with the approach during 

the SBREFA process, the Bureau is 

proposing to clarify ‘‘ownership’’ and 

‘‘control’’ using concepts from the CDD 

rule. Proposed comment 102(s)–4 would 

clarify that a natural person owns a 

business if that natural person directly 

or indirectly, through any contract, 

arrangement, understanding, 

relationship or otherwise, has an equity 

interest in the business. Proposed 

comment 102(s)–4 would also provide 

examples of ownership and clarify that, 

where applicable, ownership would 

need to be traced or followed through 

corporate or other indirect ownership 

structures for purposes of proposed 

§§ 1002.102(s) and 1002.107(a)(19). 

Proposed comment 102(s)–5 would 

clarify that a natural person controls a 

business if that natural person has 

significant responsibility to manage or 

direct the business and would provide 

examples of natural persons who 

control a business. Proposed comment 

102(s)–6 would clarify that a business’s 

net profits and losses accrue to a natural 

person if that natural person receives 

the net profits, is legally entitled or 

required to receive the net profits or 

losses, or is legally entitled or required 

to recognize the net profits or losses for 

tax purposes. 

The Bureau believes many small 

business applicants already respond to 

questions about who owns and who 

controls a business entity when 

completing CDD forms or otherwise 

responding to questions related to the 

CDD rule and would be familiar with 

the concepts in the CDD rule. Because 

the CDD rule does not address the 

second prong of the definition in ECOA 

section 704B(h)(6) (regarding accrual of 

net profit or loss), the Bureau is 

proposing in comment 102(s)–4 that this 

prong of the definition be defined to 

mean that one or more women must 

receive or be legally entitled to receive 

the net profits or losses or that one or 

more women must be legally required to 

recognize the net profits or losses. 

However, the Bureau shares some SERs’ 

concerns that the statutory definition of 

women-owned business might, in some 

cases, be difficult for applicants to 


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328SBREFA Outline at 22–23. 

329The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 24. 

understand, which could in turn 

jeopardize the accuracy of reported data. 

Thus, consistent with the SBREFA 

Panel’s recommendation, the Bureau 

seeks comment on the proposed 

definition of women-owned business 

and possible alternatives that may 

clarify the term in order to help ensure 

that small business applicants can 

determine whether they are a womenowned business for purposes of section 

1071 data collection. 

Section 1002.103 Covered 

Applications 

ECOA section 704B(b) requires that 

financial institutions collect, maintain, 

and report to the Bureau certain 

information regarding ‘‘any application 

to a financial institution for credit.’’ For 

covered financial institutions, the 

definition of ‘‘application’’ will trigger 

data collection and reporting obligations 

with respect to covered credit 

transactions. However, section 1071 

does not expressly define ‘‘application.’’ 

The Bureau is proposing § 1002.103 to 

define what is, and is not, a covered 

application for purposes of subpart B 

pursuant to its authority in ECOA 

section 704B(g)(1) to prescribe such 

rules and issue such guidance as may be 

necessary to carry out, enforce, and 

compile data pursuant to section 1071. 

Proposed § 1002.103(a) would provide a 

general definition of the term ‘‘covered 

application,’’ followed by a list of the 

circumstances that are not covered 

applications in proposed § 1002.103(b). 

103(a) Covered Application 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated it was considering defining an 

‘‘application’’ largely consistent with 

the definition of that term in existing 

§ 1002.2(f)—i.e., ‘‘an oral or written 

request for an extension of credit that is 

made in accordance with procedures 

used by a creditor for the type of credit 

requested.’’328 The Bureau considered 

possible alternative definitions of 

‘‘application,’’ including defining the 

term by using the definition of the term 

‘‘completed application’’ in existing 

§ 1002.2(f) (when ‘‘a creditor has 

received all the information that the 

creditor regularly obtains and considers 

in evaluating applications for the 

amount and type of credit requested 

. . . ’’). The Bureau also considered 

defining ‘‘application’’ as particular 

documents or specific data points that, 

if collected, would trigger a duty to 

collect and report data. 

SERs discussed their varied methods 

of defining what constitutes an 

‘‘application’’ within their 

institutions.329 Many SERs define an 

application as the point when there is 

enough information to make a credit 

decision. Several SERs define an 

application as meeting the requirements 

of a checklist, stating that obtaining all 

the information and satisfying due 

diligence can take a long time. Other 

SERs define an application as the 

submission of specific data or 

documents, or obtaining sufficient 

information about the borrower to pull 

a credit report. One SER explained that 

their in-person application process is 

iterative, not readily definable, and 

unique for each applicant. The SER also 

explained that a single underwriting 

process could be used at their financial 

institution for multiple loans requested 

throughout the year. 

Several SERs supported using the 

definition of ‘‘application’’ in existing 

§ 1002.2(f). One of these SERs 

emphasized the importance of capturing 

data that may indicate potential 

discouragement of minority-owned 

businesses, including discouragement 

that could occur in advance of an 

application being submitted for 

underwriting. Another SER stated that 

using the definition in existing 

§ 1002.2(f) would be helpful for training 

purposes, rather than creating a wholly 

new definition for purposes of 

implementing section 1071. Many SERs 

urged the Bureau in an eventual 1071 

rule to define an application as a 

completed application, that is, at the 

point when there is sufficient 

information to render a credit decision. 

One SER opposed using the definition 

of ‘‘completed application,’’ explaining 

that it would be too restrictive and less 

aligned with the purposes of section 

1071. Another SER opposed use of the 

definition of application in existing 

§ 1002.2(f), explaining that in a 

‘‘relationship lending’’ model, each 

small business application is unique. 

SERs expressed varying views on 

whether withdrawn and incomplete 

applications should be captured in the 

1071 data. Some SERs felt incomplete 

applications should be captured in the 

1071 data as a potential indicator of 

discouragement. One SER stated that 

small and unsophisticated businesses 

are more likely to leave an application 

incomplete. Another SER recommended 

not capturing incomplete applications, 

asserting that such data would not be 

informative or useful. Another SER 

expressed concern about whether 

incomplete or withdrawn applications 

would include sufficient data for 

reporting. 

Other stakeholders also provided 

feedback on the definition of 

‘‘application.’’ The overwhelming 

majority of commenters, including both 

community groups and industry 

representatives, supported use of the 

definition of an ‘‘application’’ in 

existing § 1002.2(f). Community groups, 

CDFIs, and a SER noted that use of the 

definition would further the purposes of 

1071 by capturing applicants dissuaded 

from completing an application, 

potentially due to unlawful 

discouragement or other discrimination. 

Commenters highlighted research that 

minority-owned and women-owned 

businesses are disproportionately 

discouraged from applying for credit 

and the frequency of discrimination 

during the pre-application stage. One 

commenter stated that the definition 

could better identify barriers to credit, 

consistent with the community 

development purpose of section 1071. 

Other commenters, including many 

industry commenters, stated that 

financial institutions are familiar with 

the definition in existing § 1002.2(f), 

and so use of this definition would 

reduce burden by minimizing the need 

for additional training or different 

procedures. Several commenters also 

stated that using the definition in 

existing § 1002.2(f) is appropriate given 

that section 1071 amends ECOA, which 

is implemented by existing Regulation 

B. One industry commenter also 

highlighted the flexibility provided by 

the definition in existing § 1002.2(f). 

Although supportive of using the 

definition in existing § 1002.2(f) for the 

1071 rule, several industry commenters 

sought further clarification or 

illustrations of the definition given 

considerable variations in practices 

among financial institutions. One 

commenter suggested a safe harbor that 

allows a financial institution to define 

what constitutes an ‘‘application.’’ One 

industry trade representative expressed 

that many of its members have no 

formal ‘‘application’’ and so attempts to 

leverage existing definitions or stages to 

define an application would be 

unfamiliar to their members and could 

create an inflexible process. 

Several industry commenters 

supported triggering section 1071 data 

collection and reporting based on the 

‘‘completed application’’ definition in 

existing § 1002.2(f) and stated that the 

Bureau should not require data 

collection on withdrawn and 

incomplete applications. These 

commenters stated that using a 


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330 12 CFR 1002.2(f). 

331SBREFA Panel Report at 45. 

332 Id. 

333 Id. 

334SBREFA Outline at 22–23. 

335Business creditors should be familiar with 

operationalizing this definition based on their 

experience providing adverse action notices under 

existing Regulation B, which can be triggered in 

relation to an incomplete application. See 

§ 1002.9(a)(1) and (c) (requiring notice within 30 

days after taking adverse action on an incomplete 

application or 30 days after receiving an incomplete 

application). Financial institutions may also be 

familiar with Regulation C’s definition of 

‘‘application,’’ which aligns with existing 

§ 1002.2(f)’s definition of the term. See § 1003.2(b) 

(generally defining an ‘‘application’’ as ‘‘an oral or 

written request for a covered loan that is made in 

accordance with procedures used by a financial 

institution for the type of credit requested’’); see 

also Regulation C comment 2(b)–1 (noting that 

Bureau interpretations that appear in the official 

commentary to Regulation B are generally 

applicable to the definition of application under 

Regulation C). 

‘‘completed application’’ definition 

would provide more complete and 

meaningful data, more uniformity across 

products and lenders, and conserve 

resources that would otherwise be 

required to gather missing data points 

on incomplete or withdrawn 

applications. One commenter stated that 

collection of data on incomplete 

applications would not further section 

1071’s purposes or reflect potential 

discrimination, but rather would merely 

represent borrower confusion in the 

application process. One commenter 

suggested using a defined set of criteria 

to define an ‘‘application.’’ 

Several SERs and other stakeholders 

also provided comments on applicant 

requests for more than one product at 

the same time. For example, in 

connection with the application/loan 

number data point (referred to in this 

proposal as the unique identifier data 

point), one SER stated that if an 

applicant requests more than one type 

of credit product, a separate 

application/loan number is assigned to 

each product request. In contrast, other 

SERs indicated they use a single 

application number even if multiple 

products are requested. Among other 

stakeholders, some commenters 

supported reporting separate 

applications in instances where the 

applicant requests multiple covered 

credit transactions at the same time, 

while others supported requiring 

reporting of only one application. One 

commenter suggested that the Bureau 

should accommodate both approaches. 

Another commenter remarked that if a 

business is applying for multiple 

products, the basic information is going 

to be the same, the only difference being 

that only one product is funded. This 

same commenter suggested that if these 

requests are reported as multiple 

applications, that will overinflate the 

data. 

Relatedly, two SERs discussed the 

issue of multiple extensions of credit 

resulting from a single application. One 

of these SERs explained that such 

multiple extensions of credit are 

assigned separate application/loan 

numbers at their financial institution. 

The other SER suggested that reporting 

in this situation will be complex, and 

that combining the separate loans that 

could result into a single reporting line 

would be extremely difficult. 

The SBREFA Panel recommended 

that, if the Bureau proposes using the 

Regulation B definition of the term 

‘‘application’’330 for 1071 data 

collection, the Bureau consider 

clarifying when a completed 

application—i.e., an application 

sufficient to make a credit decision— 

falls within the proposed definition of 

the term ‘‘application.’’ 331 The SBREFA 

Panel further recommended the Bureau 

seek comment on the benefits and costs 

of collecting 1071 data on incomplete or 

withdrawn applications.332 Finally, 

with respect to lines of credit, the 

SBREFA Panel recommended (in the 

context of the loan/credit type and loan/ 

credit purpose data points) that the 

Bureau seek comment on how financial 

institutions currently handle increases 

in lines of credit and how best to require 

reporting of multiple lines of credit 

within the same account.333

Proposed Rule 

The Bureau is proposing to define a 

covered application in § 1002.103(a) as 

an oral or written request for a covered 

credit transaction that is made in 

accordance with procedures used by a 

financial institution for the type of 

credit requested. This proposed 

definition of ‘‘covered application’’ is 

consistent with the definition of 

‘‘application’’ that the Bureau said it 

was considering proposing in the 

SBREFA Outline.334 As noted above, the 

term ‘‘application’’ is undefined in 

section 1071. The Bureau believes its 

proposed definition of the term is 

reasonable, particularly as it aligns with 

the definition of ‘‘application’’ in 

existing § 1002.2(f). The Bureau is also 

proposing commentary to accompany 

this definition. Circumstances that are 

not covered applications are addressed 

in the section-by-section analysis of 

proposed § 1002.103(b) below. Pursuant 

to ECOA section 704B(b)(1), an 

‘‘application’’ triggering data collection 

and reporting obligations occurs 

without regard to whether such 

application is received in person, by 

mail, by telephone, by electronic mail or 

other form of electronic transmission, or 

by any other means. 

Several SERs and a majority of other 

commenters supported use of this 

definition, noting that it best aligns with 

the purposes of section 1071 and is 

familiar to creditors. The Bureau agrees 

with certain SERs and other 

commenters that incomplete and 

withdrawn applications—which would 

generally be captured under proposed 

§ 1002.103(a)—are essential to the 

purposes of section 1071 as a tool to 

identify potential discrimination 

(including through discouragement) and 

to better understand the credit market. 

The definition of ‘‘covered application’’ 

in proposed § 1002.103(a), which is 

similar to the definition of 

‘‘application’’ in existing § 1002.2(f), is 

also familiar to creditors and provides 

flexibility to accommodate different 

application processes described by the 

SERs (including written and oral 

applications; online and relationship 

lending models; and use of standard 

forms, checklists, and other minimum 

requirements).335 Finally, the Bureau 

believes this approach strikes an 

appropriate balance by triggering 1071 

collection and reporting requirements 

only after there is a request for credit 

(using procedures defined by the 

financial institution), but still early 

enough in the process to capture most 

incomplete, withdrawn, and denied 

applications. 

The Bureau recognizes that the 

proposed definition of ‘‘covered 

application’’ in § 1002.103(a), while 

flexible, would mean that 1071 data 

collection and reporting may be 

triggered at different times for different 

financial institutions and different types 

of covered credit transactions. For 

example, for a financial institution that 

defines an application under its 

procedures as the submission of a 

standard form either online or inperson, a ‘‘covered application’’ would 

be triggered when an applicant submits 

the form. In contrast, another financial 

institution may not use a standard form 

and instead define an application as a 

request for credit and authorization to 

pull a credit check on the business and 

principal owners. In that circumstance, 

a ‘‘covered application’’ under proposed 

§ 1002.103(a) would not be triggered 

until that process is satisfied. Using the 

same example, if the financial 

institution orally collects certain 

information from a prospective 

applicant (such as gross annual revenue 

and business location) and discusses 

with the prospective applicant potential 

credit product options offered by the 


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financial institution, no ‘‘covered 

application’’ would be triggered until 

the prospective applicant indicates that 

it wants to proceed to apply for credit 

and authorizes the financial institution 

to pull a credit check. Similarly, if a 

prospective applicant merely expresses 

interest in obtaining credit—not yet 

focusing on any particular type of 

covered credit transaction and not 

submitting a ‘‘covered application’’—the 

interaction also would not be reportable. 

While the proposed definition of 

‘‘covered application’’ does not provide 

a bright-line rule, the Bureau believes 

the proposed definition would be 

familiar to financial institutions and 

provide consistency with existing 

Regulation B and Regulation C. 

During SBREFA, SERs asked the 

Bureau to clarify when an application 

sufficient to make a credit decision 

would align with an ‘‘application’’ 

triggering 1071 collection and reporting 

requirements. Accordingly, the Bureau 

notes that a ‘‘covered application’’ may 

align with the information necessary to 

make a credit decision or it may be 

possible to have a ‘‘covered application’’ 

before having information necessary to 

make a credit decision—it depends on 

each financial institution’s own 

procedures. For example, suppose a 

financial institution defines an 

application under its procedures as the 

point when an applicant, or someone on 

the applicant’s behalf, fills out certain 

key pieces of information on an 

application form. If the financial 

institution’s process is to immediately 

transmit the application to underwriting 

for a decision once the form is 

submitted, 1071 collection and 

reporting would likely be triggered at 

the same time there is sufficient 

information to make a credit decision. 

On the other hand, if the financial 

institution requires additional 

verification of documents and follow-up 

requests before submitting the loan file 

to underwriting, the financial institution 

would likely have a ‘‘covered 

application’’ before it has sufficient 

information to make a credit decision. 

Proposed comment 103(a)–1 would 

underscore that a financial institution 

has latitude to establish its own 

application process or procedure and to 

decide the type and amount of 

information it will require from 

applicants. Proposed comment 103(a)–2 

would explain that the term 

‘‘procedures’’ refers to the actual 

practices followed by a financial 

institution as well as its stated 

application procedures, and provides an 

example. Because the definition of 

‘‘covered application’’ is based on a 

financial institution’s actual practices, a 

financial institution should have little 

incentive to attempt to artificially define 

an ‘‘application’’ in its written 

procedures as occurring later in the 

process; for example, if a financial 

institution has near a 100 percent 

approval rate because all ‘‘applications’’ 

have already been vetted earlier in the 

process, the financial institution’s stated 

definition of an application likely does 

not reflect its actual practices. Proposed 

comment 103(a)–3 would provide that 

the commentary accompanying existing 

§§ 1002.2(f) and 1002.9 is generally 

applicable to the proposed definition of 

‘‘covered application,’’ except as 

provided otherwise in proposed 

§ 1002.103(b). 

Proposed comments 103(a)–4 through 

–6 would address how a financial 

institution reports multiple covered 

credit transaction requests at one time 

or a request for a credit transaction that 

results in the origination of multiple 

covered credit transactions. Proposed 

comment 103(a)–4 would provide that if 

an applicant makes a request for two or 

more covered credit transactions at one 

time, the financial institution reports 

each request for a covered credit 

transaction as a separate covered 

application. The Bureau believes the 

proposed approach would further the 

purposes of section 1071 by better 

capturing demand for credit, including 

demand for different covered credit 

transactions at the same time. The 

Bureau also believes that the simplicity 

of this approach would reduce data 

reporting errors compared to potential 

alternatives, for example, alternatives in 

which the financial institution may 

sometimes report such requests as a 

single covered application or, in other 

circumstances, as multiple covered 

applications. Finally, the Bureau 

believes that concerns about duplicative 

information requests would be mitigated 

by permitting financial institutions to 

reuse certain previously collected data, 

as set forth in proposed § 1002.107(c)(2). 

In response to SERs’ feedback, proposed 

comment 103(a)–5 would address the 

circumstance where an initial request 

for a single covered credit transaction 

results in the origination of multiple 

covered credit transactions. Similarly, 

in response to the SBREFA Panel’s 

recommendations, proposed comment 

103(a)–6 would address requests for 

multiple lines of credit at one time, 

proposing that such requests would be 

reported based on the procedures used 

by the financial institution for the type 

of credit account. 

Proposed comment 103(a)–7 would 

address how a financial institution 

would report applications where there 

is a change in whether the applicant is 

requesting a covered credit transaction. 

If the applicant initially requests a 

covered credit transaction, but during 

the application process is offered and 

accepts instead a product that is not 

reportable, the Bureau is proposing to 

designate this circumstance as not a 

covered application, due in part to 

concerns that reporting in this scenario 

could affect data quality. For example, 

reporting on product types that are not 

covered credit transactions (for 

example, leases) could raise data quality 

questions if there are not appropriate 

fields to capture the terms of those 

transactions. Despite these concerns, the 

Bureau is also considering whether 

capturing such transactions in the 1071 

data could be useful to identifying 

potential steering or other forms of 

discrimination, therefore furthering the 

purposes of section 1071. As noted 

below, the Bureau seeks comment on 

whether to require full or limited 

reporting in these circumstances. If an 

applicant initially requests a product 

that is not a covered credit transaction, 

but during the application process 

decides to seek instead a product that is 

a covered credit transaction, the 

application is a covered application and 

must be reported. 

The Bureau seeks comment on its 

proposed definition of a covered 

application in § 1002.103(a) and 

associated commentary. The Bureau 

also seeks comment on the advantages 

and disadvantages of collecting data on 

incomplete or withdrawn applications, 

as well as how collection would or 

would not further the purposes of 

section 1071. In addition, the Bureau 

seeks comment on reporting of multiple 

lines of credit on a single credit account, 

including how financial institutions 

internally consider multiple lines of a 

credit on a single account and the 

Bureau’s proposed approach in 

comment 103(a)–6. 

As noted above, the Bureau also seeks 

comment on how a financial institution 

should report applications where there 

is a change in whether the request for 

credit involves a covered credit 

transaction. Specifically, the Bureau 

seeks comment on the advantages and 

disadvantages of requiring full or 

limited reporting where an applicant 

initially seeks a product that is a 

covered credit transaction, but 

ultimately is offered and accepts a 

product that is not reportable. For 

example, whether in those 

circumstances the financial institution 

should report limited data points related 

to the transaction (such as whether the 

applicant is a small business; whether 

the applicant is a women-owned 

business or a minority-owned business; 


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336Although certain regulations define an 

‘‘application’’ as a set of specific data points (e.g., 

name, income, property address, estimated property 

value, etc.), many of the data points in those 

regulations are specific to the mortgage context and 

would not be applicable to small business lending. 

These regulations also do not relate to data 

collection. See, e.g., Regulation X § 1024.2(b) and 

Regulation Z § 1026.2(a)(3). 

337SBREFA Outline at 22–24. 

338The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 24–25. 

339 Id. at 45–46. 

340 Id. 

the principal owners’ race, sex, and 

ethnicity; number of principal owners; 

gross annual revenue; and loan type 

reported as ‘‘Non-reportable credit 

product’’ or something similar). The 

Bureau is particularly interested in 

receiving comments on the utility of 

such data to identify potential steering 

or other forms of discrimination, the 

effect on data quality, and other factors 

related to the purposes of section 1071. 

Alternatives Considered 

The Bureau considered several other 

options for defining ‘‘application.’’ First, 

the Bureau considered triggering 1071 

collection and reporting based on a 

‘‘completed application,’’ which is 

defined in existing § 1002.2(f) as an 

application in which the creditor has 

received ‘‘all the information that the 

creditor regularly obtains and 

considers’’ in evaluating similar 

products. The Bureau is not proposing 

to use the definition of ‘‘completed 

application’’ in existing § 1002.2(f) for 

its definition of covered application in 

subpart B, as doing so would exclude 

incomplete applications and many 

withdrawn applications that may reflect 

demand for credit and potential 

discrimination during the application 

process. While some commenters noted 

that use of this definition would provide 

uniformity in the data across financial 

institutions and product types, the 

Bureau is concerned about the loss of 

data on incomplete and withdrawn 

applications. Although some 

commenters suggested that the 

‘‘completed application’’ definition 

could result in more accurate and 

complete data because it is collected 

later in the application process, the 

Bureau believes that this benefit can 

largely be obtained under the current 

proposal by requiring financial 

institutions to report, where available, 

verified applicant-provided information, 

as set forth in proposed § 1002.107(b). 

Although some SERs and other 

stakeholders urged the Bureau to define 

an application based on when there is 

sufficient information to render a credit 

decision, as pointed out by another SER, 

such a definition may not be as effective 

in furthering the purposes of 1071. For 

example, it would capture few to no 

incomplete applications and a smaller 

share of withdrawn applications. 

Moreover, as discussed above, in certain 

situations—depending on a financial 

institution’s application procedures— 

the definition of a covered application 

in proposed § 1002.103(a) may align 

with the point where there is enough 

information to render a credit decision. 

The Bureau also considered defining 

‘‘covered application’’ as a set of 

specific data points that, if collected, 

would trigger a duty to collect and 

report 1071 data. The Bureau is not 

proposing this approach for a few 

reasons. First, this approach would 

introduce another regulatory definition 

of ‘‘application,’’ 336 which could cause 

confusion and hinder compliance. 

Second, this approach could require 

financial institutions to alter their 

existing practices, resulting in burden. 

Third, this approach could lead some 

financial institutions to intentionally 

delay the gathering of one or more data 

points until after a credit decision was 

made in order to avoid triggering 1071 

obligations. Last, this approach may be 

difficult to execute given that financial 

institutions use different data points in 

underwriting based on product type, 

lending model, exposure, and other 

factors. 

103(b) Circumstances That Are Not 

Covered Applications 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated it was considering clarifying 

circumstances that would not be 

reportable under section 1071, even if 

certain of those circumstances would 

otherwise be considered an 

‘‘application’’ under existing § 1002.2(f). 

Specifically, those circumstances were: 

(1) Inquiries/prequalifications; (2) 

reevaluation, extension, and renewal 

requests, except requests for additional 

credit amounts; and (3) solicitations and 

firm offers of credit.337

Reevaluation, extension, or renewal 

requests on an existing business credit 

account, unless the request seeks 

additional credit amounts. Several SERs 

supported the Bureau’s proposal under 

consideration to exclude renewals 

unless additional credit is requested; 

one SER also supported excluding 

solicitations.338 Several SERs urged the 

Bureau to exclude line increases as a 

distinct type of application, explaining 

that financial institutions may not 

require a new application for such 

requests and that underwriting a line 

increase request is substantively distinct 

from underwriting a request for new 

credit because a line increase 

extensively relies on past performance 

data and prior relationships. Due to 

these differences, one SER suggested 

that including line increases may skew 

1071 data, causing misinterpretations. 

The SBREFA Panel recommended the 

Bureau seek comment on whether to 

include line increases as a separate 

reportable application.339 The SBREFA 

Panel also recommended that the 

Bureau seek comment on how financial 

institutions currently handle increases 

in lines of credit.340

A number of other industry 

stakeholders also supported the 

Bureau’s proposal under consideration 

to exclude reevaluations, extensions, 

and renewal requests (except requests 

for additional credit amounts). The 

commenters stated that such collection 

would be duplicative since financial 

institutions would also be reporting data 

on the original application (perhaps in 

the same reporting year). The 

commenters also noted that extension 

requests are often short term and 

granted without a full application 

process, that requiring reporting could 

lead to fewer financial institutions 

offering extensions due to the added 

collection and reporting burden 

(particularly for open-ended credit), and 

that providing an exemption would be 

consistent with HMDA reporting. One 

commenter sought exclusion of rate 

adjustments. Community group 

commenters opposed exclusion of 

reevaluations, renewals, and extensions. 

Several industry commenters opposed 

1071 collection and reporting on 

reevaluations, extensions, or renewals 

that seek additional credit amounts. 

These commenters stated that 1071 

collection and reporting should focus on 

data collected at the time of origination, 

that collecting data repeatedly from the 

same borrowers would add burden, and 

that collecting data for line increases 

would make it difficult for financial 

institutions to provide timely approvals. 

One commenter suggested only 

reporting on additional credit amounts 

if the original note is replaced. Other 

industry commenters—while not 

explicitly opposing such collection— 

suggested the Bureau further consider 

whether increases or renewals with 

additional credit amounts should be an 

‘‘application’’ for purposes of the rule. 

The commenters noted that such 

increases/renewals are typically more 

streamlined than a standard application 

given the financial institution already 

has the applicant’s information in its 

possession, and that the Bureau should 

carefully balance burden (which could 


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341 Id. at 24–25. 342See Regulation C comment 2(d)–2. 

343See also Regulation C comment 2(b)–2 

(describing prequalification requests). In addition, a 

preapproval as described in existing comment 2(f)– 

5.i of Regulation B is an example of an application 

under existing Regulation B. Under that comment, 

a preapproval occurs when a creditor reviews a 

request under a program in which the creditor, after 

a comprehensive analysis of an applicant’s 

creditworthiness, issues a written commitment 

valid for a designated period of time to extend a 

loan up to a specified amount. If a creditor’s 

program does not provide for giving written 

commitments, requests for preapprovals are treated 

as prequalification requests. 

affect how such requests could be 

processed) with benefit (obtaining 

additional data on the same applicant). 

One industry representative supported 

collection on requests that include 

additional credit amounts. Another 

commenter sought clarification on what 

would be reported in such 

circumstances: The newly advanced 

funds or the entire outstanding amount. 

Inquiries and prequalification 

requests. Several SERs urged the Bureau 

not to require reporting on 

prequalifications or inquiries. These 

SERs explained that they encounter a 

high number of inquiries from rate 

shoppers asking about qualification 

requirements and potential rates, many 

of which are abandoned or otherwise do 

not progress to a completed 

application.341 A significant number of 

other industry commenters also 

supported the Bureau’s proposal under 

consideration to exclude inquiries and 

prequalifications. These commenters 

noted that such inquiries could include 

countless informal interactions that 

would be difficult to collect in a 

consistent manner and that may lead to 

misleading or erroneous data. The 

commenters also stated that collection 

would be duplicative and impose 

significant burden without 

countervailing benefits. Community 

group commenters expressed support 

for collecting data on inquiries and 

prequalifications to identify 

discrimination that occurs before an 

application is submitted. 

Solicitations and firm offers of credit. 

A number of industry commenters 

supported exclusion of solicitations and 

firm offers of credit. One commenter 

noted that excluding such data would 

avoid duplicative steps and be 

consistent with the purposes of section 

1071. 

Proposed Rule 

Proposed § 1002.103(b) would 

identify certain circumstances that are 

not covered applications—even if they 

otherwise would be considered an 

application under existing § 1002.2(f). 

Specifically, the Bureau is proposing 

that a covered application does not 

include (1) reevaluation, extension, or 

renewal requests on an existing business 

credit account, unless the request seeks 

additional credit amounts; and (2) 

inquiries and prequalification requests. 

As discussed below, solicitations and 

firm offers of credit would also not be 

‘‘covered applications’’ under the 

proposed definition. The Bureau is also 

proposing comments 103(b)–1 through 

–5 to provide additional guidance and 

examples of circumstances that do and 

do not trigger 1071 collection and 

reporting as a covered application. For 

example, proposed comment 103(b)–4 

clarifies that the term ‘‘covered 

application’’ does not include 

evaluations or reviews of existing 

accounts initiated by the financial 

institution. 

Reevaluation, extension, or renewal 

requests on an existing business credit 

account, unless the request seeks 

additional credit amounts. The Bureau 

is proposing to exclude from the 

definition of a ‘‘covered application’’ 

requests by borrowers to modify the 

terms or duration of an existing 

extension of credit, other than (as 

explained below) requests for additional 

credit amounts. The Bureau believes 

that requests to modify the terms or 

duration of an existing extension of 

credit, which occur with high frequency 

in the small business lending space, 

may add complexity and burden for 

financial institutions, while potentially 

providing limited additional 

information relevant to the purposes of 

section 1071. Moreover, broadly 

including requests to modify the terms 

or duration of existing extensions of 

credit might affect the quality of the 

data absent additional flags to 

distinguish the transactions from new 

originations. The Bureau is also 

concerned about the impact of adding 

1071 collection and reporting 

requirements to what are otherwise 

streamlined evaluations, particularly 

given the limited additional data that 

would be gained from such reporting. 

The Bureau also notes that Regulation C 

takes a similar approach by excluding 

reporting of loan modifications.342

In contrast, the Bureau is not 

proposing to exclude requests for 

additional credit amounts (such as line 

increases or new money on existing 

facilities). That is, reporting would be 

required for requests for additional 

credit amounts. The Bureau believes 

that capturing requests for additional 

credit amounts will further the purposes 

of section 1071, particularly the 

community development purpose, as it 

would more accurately capture demand 

for credit. Although several SERs and 

other commenters opposed reporting on 

new credit amounts—due to the 

potentially streamlined nature of such 

reviews (which may differ from 

underwriting of new applications) and 

concerns about duplicative reporting— 

the Bureau believes these factors do not 

outweigh the potential community 

development benefits of reporting and 

collection. Moreover, the Bureau 

believes that concerns about duplicative 

reporting would be mitigated by 

proposed § 1002.107(c)(2), which would 

permit a financial institution to reuse 

certain data points under certain 

circumstances. In addition, under 

proposed § 1002.107(a)(7) and (8), when 

reporting a covered application that 

seeks additional credit amounts on an 

existing account, the financial 

institution would only report the 

additional credit amount sought (and 

approved or originated, as applicable), 

and not the entire credit amount 

extended. A request to withdraw 

additional credit amounts at or below a 

previously approved credit limit 

amount on an existing open-end line of 

credit would not be a covered 

application as the request falls within 

the terms of a previously approved 

covered credit agreement. 

Inquiries and prequalification 

requests. Existing Regulation B 

recognizes that before a consumer or 

business requests credit in accordance 

with the procedures used by a creditor 

for the type of credit requested, a 

creditor may provide a prospective 

applicant with information about credit 

terms. Existing Regulation B comments 

2(f)–3 and 9–5 refer to these situations 

as inquiries and prequalification 

requests. Generally, an inquiry occurs 

when a consumer or business requests 

information about credit terms offered 

by a creditor; a prequalification request 

generally refers to a request by a 

consumer or business for a preliminary 

determination on whether the 

prospective applicant would likely 

qualify for credit under a creditor’s 

standards or for what amount.343 Under 

existing Regulation B comments 2(f)–3 

and 9–5, an inquiry or prequalification 

request may become an ‘‘application’’ 

that triggers adverse action notification 

requirements if the creditor evaluates 

information about the consumer or 

business, decides to decline the request, 

and communicates this to the consumer 

or business; otherwise, such inquiries 

and prequalification requests are 

generally not considered applications 

under existing Regulation B. As 

explained in existing comment 2(f)–3, 


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344See Regulation C comment 2(b)–2. 

whether the inquiry or prequalification 

request becomes an application depends 

on how the creditor responds to the 

consumer or business, not on what the 

consumer or business says or asks. 

Regulation C excludes all 

prequalification requests from HMDA 

reporting, even if the prequalification 

request becomes an application under 

existing Regulation B.344 Regulation C 

does not address reporting of inquiries 

more generally. 

The Bureau is proposing to exclude 

inquiries and prequalification requests 

as a ‘‘covered application,’’ even if the 

inquiry or prequalification request may 

become an ‘‘application’’ under existing 

§ 1002.2(f) that may trigger notification 

requirements. The Bureau agrees with 

SERs and other commenters that 

requiring data collection for all inquiries 

and prequalifications could create 

operational challenges given that such 

interactions may be voluminous and 

typically occur before a financial 

institution has the relevant data or 

processes in place for tracking requests 

for credit. The Bureau is likewise 

concerned that requiring the collection 

of 1071 data for these requests could 

pose data accuracy issues, given the 

often informal nature of these 

interactions, which may raise the risk of 

missing, unavailable, or erroneous data. 

In addition, reporting of inquiries and 

prequalifications could be duplicative if 

the applicant subsequently applies for 

credit in accordance with the 

procedures designated by the financial 

institution. 

The Bureau also has concerns about 

requiring reporting of inquiries and 

prequalification requests only in 

situations that would otherwise be 

treated as an ‘‘application’’ under 

existing Regulation B—i.e., when the 

financial institution evaluates 

information about the consumer or 

business, decides to decline the request, 

and communicates this to the consumer 

or business. The Bureau is concerned 

that the logistics of reporting an inquiry 

or prequalification only in certain 

circumstances—if the institution 

evaluates the information, declines the 

request, and communicates it to the 

business—would be operationally 

challenging for financial institutions 

and could lead to data distortion as only 

denials would be captured. In these 

circumstances, a financial institution 

may prefer reporting all inquiries and 

prequalifications, which could lead to 

some of the challenges identified above. 

The Bureau is also considering the 

market effects of requiring reporting 

only for certain inquiries and 

prequalification requests, including 

whether it would cause financial 

institutions to restrict such interactions 

or services. 

The Bureau, however, remains 

concerned about potential 

discrimination that may occur in these 

early interactions with a financial 

institution. In particular, the Bureau is 

concerned about excluding data on 

inquiries and prequalification requests 

when the financial institution evaluates 

information about a business and 

declines the request, which may be 

useful for identifying potential 

prohibited discouragement of or 

discrimination against applicants or 

prospective applicants. 

On balance, the Bureau believes it is 

appropriate to interpret ‘‘application’’ as 

used in section 1071 to exclude 

inquiries and prequalification requests 

given the considerations identified 

above, including the timing and often 

informal nature of such interactions, the 

operational challenges of implementing 

such a definition, and related concerns 

about the reliability of the data. 

Although the Bureau is proposing to 

exclude inquiries and prequalification 

requests from the definition of ‘‘covered 

application,’’ the Bureau notes that the 

relevant analysis of whether an inquiry 

or prequalification request is reportable 

focuses on how the financial institution 

structures, processes, and responds to 

such requests, not what they are called. 

For example, if a financial institution 

has a formalized process to screen 

businesses requesting credit and deny 

those it considers ineligible, a request 

for credit that goes through that process 

may be a ‘‘covered application,’’ even if 

the financial institution labels the 

review a ‘‘prequalification’’ request or 

an ‘‘inquiry.’’ 

The Bureau further notes that requests 

for credit that meet the proposed 

definition of ‘‘covered application’’ 

would be reportable, even if the 

application was preceded by an inquiry 

or prequalification request. For 

example, if a business initially seeks 

information about potential credit 

offerings, the financial institution 

responds, and then the business submits 

an application for a covered credit 

transaction following the financial 

institution’s procedures, the application 

would be reportable. If, on the other 

hand, the business asks about potential 

credit offerings, but then chooses not to 

submit an application, there is no 

covered application. 

Finally, the Bureau notes that 

inquiries and prequalification requests 

where the institution evaluates the 

information, declines the request, and 

communicates it to the business or 

consumer, are ‘‘applications’’ under 

existing Regulation B, and are thus 

subject to its requirements regarding 

‘‘applications,’’ including its adverse 

action notification requirements and 

nondiscrimination provisions. In no 

way are the exclusions in proposed 

§ 1002.103(b) intended to repeal, 

abrogate, annul, impair, change, or 

interfere with the scope of the term 

application in existing § 1002.2(f) as 

applicable to existing Regulation B. 

Solicitations and firm offers of credit. 

Proposed comment 103(b)–4 would 

clarify that the term covered application 

does not include solicitations and firm 

offers of credit; like other reviews or 

evaluations initiated by the financial 

institution, these communications do 

not involve an applicant requesting 

credit, and so are not ‘‘covered 

applications.’’ Excluding solicitations 

and firm offers of credit is also 

consistent with the language of ECOA 

section 704B(b)(1), which provides that 

an application in response to a 

solicitation by a financial institution 

could be an application under section 

1071, but the text is silent on 

solicitations without any applicant 

response. Thus, consistent with the 

statutory language, a solicitation or firm 

offer of credit may become a ‘‘covered 

application’’ under the proposed 

definition if an applicant responds to 

the solicitation or offer by requesting a 

covered credit transaction. 

In conclusion and for the reasons 

identified above, the Bureau believes its 

proposed exclusion of inquiries and 

prequalification requests is reasonable. 

Similarly, the Bureau believes its 

proposed exclusion of reevaluation, 

extension, or renewal requests on an 

existing business credit account, unless 

the request seeks additional credit 

amounts, is a reasonable interpretation 

of an ‘‘application’’ as used in section 

1071 for the reasons described above, 

including that the original extension of 

credit would be collected and reported 

and further reporting would yield 

limited additional data. The Bureau also 

believes its proposed treatment of 

solicitations and firm offers of credit is 

a reasonable interpretation of an 

‘‘application’’ as used in section 1071, 

as discussed above. 

The Bureau seeks comment on its 

proposed definition of a covered 

application in § 1002.103(b) and 

associated commentary. The Bureau 

also seeks comment on whether instead 

to define a ‘‘covered application,’’ 

consistent with existing Regulation B, to 

include inquiries or prequalification 

requests where the financial institution 

evaluates information about the 

business, decides to decline the request, 


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345See Regulation C comment 2(j)–5 (discussing 

when assumptions should be reported as home 

purchase loans). 

346 15 U.S.C. 1691a(d); see also § 1002.2(j). 347 12 CFR 1002.2(g). 348See White Paper at 21–22. 

349SBREFA Outline at 19–20. 

350 Id. at 20. 

351 Id. 

352 Id. 

353The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 22–23. 

and communicates this to the business. 

Related to this alternative approach, the 

Bureau further seeks comment on 

whether additional data fields may be 

necessary in order to distinguish 

prequalification requests and inquiries 

from other reported applications. In 

addition, if the Bureau were to require 

reporting of declined inquiries or 

prequalification requests (as described 

above), the Bureau seeks comment on 

whether financial institutions would 

want the option to report all 

prequalification requests and inquiries, 

to allow for a comparison with denials. 

In addition, the Bureau seeks 

comment on whether, alternatively, to 

define a ‘‘covered application’’ 

consistent with Regulation C, which (as 

discussed above) does not require a 

financial institution to report 

prequalification requests, even if those 

requests may constitute applications 

under existing Regulation B for 

purposes of adverse action notices, but 

does not address reporting of inquiries 

more generally. Related to this 

alternative approach, the Bureau also 

seeks comment on whether greater 

clarity could be achieved by defining, 

for purposes of proposed subpart B 

only, inquiries as requests for 

information about loan terms that do not 

become applications under existing 

Regulation B, and prequalification 

requests as requests that may become 

applications under existing Regulation 

B. In addition, the Bureau also seeks 

comment on the frequency with which 

financial institutions accept 

prequalification requests (as described 

in Regulation C comment 2(b)–2, but 

with respect to prospective business 

applicants) and what data are collected 

in connection with such 

prequalification requests, as well as 

potential effects on the market if some 

or all prequalification requests were 

reportable under section 1071. 

Consistent with the SBREFA Panel’s 

recommendation, the Bureau also seeks 

comment on whether to include line 

increase requests as a ‘‘covered 

application’’ and information on how 

financial institutions currently process 

requests for a line of credit increase. In 

addition to line increases, the Bureau 

also seeks comment on financial 

institution practices related to other 

types of requests for additional credit 

amounts, and whether such requests 

should be captured in 1071 data. 

Lastly, the Bureau notes that 

Regulation C requires the reporting of 

assumptions for HMDA,345 but the 

Bureau does not have information on 

whether assumptions are similarly used 

in the small business lending context. 

The Bureau seeks comment on this 

issue, including how an assumption in 

small business lending might be 

structured (for example, whether it is 

typically a modification of an existing 

extension of credit or a new extension 

of credit), the frequency of assumptions 

in the small business lending context, 

and whether reporting of assumptions 

for small business lending would 

further the purposes of section 1071. 

Section 1002.104 Covered Credit 

Transactions and Excluded Transactions 

104(a) Covered Credit Transaction 

ECOA section 704B(b) requires 

financial institutions to collect and 

report information regarding any 

application for ‘‘credit’’ made by 

women-owned, minority-owned, or 

small businesses. Although the term 

‘‘credit’’ is not specifically defined in 

section 1071, ECOA defines ‘‘credit’’ as 

‘‘the right granted by a creditor to a 

debtor to defer payment of debt or to 

incur debts and defer its payment or to 

purchase property or services and defer 

payment therefor.’’ 346 As noted above 

in the section-by-section analysis of 

§ 1002.102(d), existing Regulation B 

further defines ‘‘business credit’’ as 

‘‘extensions of credit primarily for 

business or commercial (including 

agricultural) purposes,’’ with some 

exclusions.347 As discussed in detail 

below, the Bureau is proposing to 

require that covered financial 

institutions report data for all 

applications for transactions that meet 

the definition of business credit unless 

otherwise excluded. Proposed 

§ 1002.104(a) would define the term 

‘‘covered credit transaction’’ as an 

extension of business credit that is not 

an excluded transaction under proposed 

§ 1002.104(b). Loans, lines of credit, 

credit cards, and MCAs (including such 

credit transactions for agricultural 

purposes and HMDA-reportable 

transactions) would all fall within the 

scope of this proposed rule, which 

would cover the majority of products 

that small businesses use to obtain 

financing.348 As such, the Bureau 

believes that the inclusion of these 

products in the Bureau’s 1071 rule is 

important to fulfilling the purposes of 

section 1071. Pursuant to this approach, 

the Bureau notes that the products 

discussed below do not constitute an 

exhaustive list of covered credit 

transactions; other types of business 

credit not specifically described below 

would nevertheless constitute covered 

credit transactions unless excluded by 

proposed § 1002.104(b). 

Proposed § 1002.104(b), in turn, 

would state that the requirements of 

subpart B do not apply to trade credit, 

public utilities credit, securities credit, 

and incidental credit. Associated 

commentary would make clear that the 

term ‘‘covered credit transaction’’ also 

does not cover factoring, leases, 

consumer-designated credit used for 

business purposes, or credit secured by 

certain investment properties. 

For the reasons set forth below, the 

Bureau is proposing § 1002.104 

pursuant to its authority under ECOA 

section 704B(g)(1) to prescribe such 

rules and issue such guidance as may be 

necessary to carry out, enforce, and 

compile data under section 1071. 

In the SBREFA Outline, the Bureau 

stated that it was considering proposing 

that a covered product under section 

1071 is one that meets the definition of 

‘‘credit’’ under ECOA and is not 

otherwise excluded from collection and 

reporting requirements.349 Specifically, 

the Bureau stated that it was 

considering proposing that covered 

products under section 1071 would 

include term loans, lines of credit, and 

credit cards. The Bureau stated that 

term loans, lines of credit, and credit 

cards meet the definition of ‘‘credit’’ 

under ECOA and these products 

collectively make up the majority of 

business financing products used by 

small businesses and are an essential 

source of financing for such 

businesses.350 The Bureau also proffered 

in the SBREFA Outline that the 

inclusion of these products in the 

Bureau’s 1071 rule is important to 

fulfilling the purposes of section 

1071.351 The Bureau also stated in 

SBREFA Outline that it was considering 

proposing that the following products 

not be covered by the 1071 rule: 

consumer credit used for business 

purposes; leases; trade credit; factoring; 

and MCAs.352

SERs and other stakeholders 

providing feedback on the SBREFA 

Outline generally supported the 

Bureau’s proposal under consideration 

to include term loans, lines of credit, 

and credit cards as covered products 

under section 1071.353 Many 

stakeholders (including roughly half the 

SERs) urged the Bureau to pursue 


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354See id. at 21 fig. 2. 

355As noted in the section-by-section analysis of 

proposed § 1002.107(a)(5) below, the Bureau 

distinguishes between secured and unsecured loans 

and lines of credit when financial institutions 

report the type of credit product being applied for. 

The Bureau does not believe that this distinction 

has relevance to whether these products constitute 

‘‘credit.’’ 

356This description is based on the Bureau’s 

review of a sample of MCA contracts that the 

Bureau believes fairly represent typical MCA 

contracts in the market. The Bureau’s review 

comports with observations made by industry and 

community groups regarding MCAs. 

357As stated below, the Bureau is not proposing 

to specifically define sales-based financing in the 

1071 rule because the Bureau believes these 

products are covered by the proposed definition of 

‘‘credit’’ in proposed § 1002.102(i). New York and 

California laws have recently sought to define salesbased financing. New York law, for example, 

defines ‘‘sales-based financing’’ as ‘‘a transaction 

that is repaid by the recipient to the provider, over 

time, as a percentage of sales or revenue, in which 

the payment amount may increase or decrease 

according to the volume of sales made or revenue 

received by the recipient.’’ N.Y. Fin. Serv. 801(j). 

New York’s definition of sales-based financing also 

encompasses a true-up mechanism where the 

financing is repaid as a fixed payment but provides 

for a reconciliation process that adjusts the payment 

to an amount that is a percentage of sales or 

revenue. Id. California law uses a similar definition. 

See 10 Cal. Code Reg. 2057(a)(22) (defining salesbased financing as ‘‘a commercial financing 

transaction that is repaid by a recipient to the 

financer as a percentage of sales or income, in 

which the payment amount increases and decreases 

according to the volume of sales made or income 

received by the recipient’’ and including ‘‘a true-up 

mechanism’’). 

358The new law does not go so far as to amend 

the CFL to require factors or MCA providers to be 

licensed, but it does impose first-in-the-nation 

disclosure requirements in connection with these 

products similar to those imposed under TILA. See 

Cal. S.B. 1235 (Sept. 30, 2018), https://leginfo.

legislature.ca.gov/faces/billTextClient.xhtml?bill_

id=201720180SB1235. The law will be 

implemented through regulations, which have not 

been finalized yet. See State of Cal. Dep’t of Bus. 

Oversight (DBO), Draft Regulations (July 26, 2019), 

https://dbo.ca.gov/wp-content/uploads/sites/296/ 

2019/07/SB-1235-Draft-Regulations-7-26-19.pdf. 

359N.Y. S.B. S5470B (Dec. 23, 2020), https://

legislation.nysenate.gov/pdf/bills/2019/S5470B. 

360See White Paper at 21 fig. 2, 22 fig. 3. 

361Fed. Reserve Banks, Small Business Credit 

Survey—2021 Report on Employer Firms, at 24 

(Feb. 3, 2021), https://www.fedsmallbusiness.org/ 

medialibrary/FedSmallBusiness/files/2021/2021- 

sbcs-employer-firms-report (2021 Small Business 

Credit Survey). Starting in 2017, the Federal 

Reserve Banks began to gather specific data on 

MCAs for its annual reports on small business 

financing for employer firms—in the 2017 report, 

the survey found that 7 percent of such businesses 

applied for and regularly used MCAs. Fed. Reserve 

Banks, Small Business Credit Survey—2017 Report 

on Employer Firms, at 9 (Apr. 11, 2017), https://

www.fedsmallbusiness.org/medialibrary/ 

fedsmallbusiness/files/2018/sbcs-employer-firmsreport.pdf (2017 Small Business Credit Survey). 

362Paul Sweeney, Gold Rush: Merchant Cash 

Advances Are Still Hot, deBanked (Aug. 18, 2019), 

https://debanked.com/2019/08/gold-rushmerchant-cash-advances-are-still-hot/. 

363See 2021 Small Business Credit Survey at 26 

(reporting that 84 percent of surveyed credit 

applicants were approved for an MCA, as compared 

to a 43 percent approval rate for personal loans). 

364See id. at 22 (noting that only 7 percent of 

‘‘high credit risk’’ applicants obtained all the 

financing sought). 

expansive product coverage in order to 

adequately capture small businesses’ 

experiences with obtaining financing, 

especially for women-owned and 

minority-owned small businesses. Many 

SERs and other stakeholders advocated 

for including MCAs within the scope of 

the eventual 1071 rule; some SERs and 

stakeholders also advocated for 

including factoring, and in some cases 

leases as well, in order to capture the 

full landscape of small business 

financing. Multiple stakeholders 

expressed concern that the exclusions 

under consideration for certain products 

(e.g., MCAs) would disproportionately 

burden traditional lenders who do not 

offer such products. 

As discussed below, the Bureau 

proposes that the 1071 rule cover loans, 

lines of credit, credit cards, and MCAs. 

The Bureau also explains below that 

‘‘covered credit transaction’’ would 

encompass agricultural-purpose credit 

and HMDA-reportable transactions. 

Loans, lines of credit, and credit 

cards. As noted above, stakeholders 

generally presume and support the 

coverage of loans, lines of credit, and 

credit cards. These products are 

commonly offered to small business 

applicants (making up almost 60 

percent of the aggregate dollar volume 

of various financial products used by 

small businesses).354 The Bureau is not 

proposing definitions for loans, lines of 

credit, and credit cards because the 

Bureau believes these products are 

generally and adequately covered by the 

proposed definition of ‘‘credit’’ in 

proposed § 1002.102(i).355

The Bureau seeks comment on its 

proposed approach to covered credit 

transactions and particularly on 

whether it should define loans, lines of 

credit, and credit cards, and, if so, how. 

Merchant cash advances. MCAs are a 

form of financing for small businesses 

that purport to be structured as a sale of 

potential future income. MCAs vary in 

form and substance, but under a typical 

MCA, a merchant receives a cash 

advance and promises to repay it plus 

some additional amount or multiple of 

the amount advanced (e.g., 1.2 or 1.5, 

the ‘‘payback’’ or ‘‘factor’’ ‘‘rate’’). The 

merchant promises to repay by either 

pledging a percentage of its future 

revenue, such as its daily credit and 

debit card receipts (the ‘‘holdback 

percentage’’), or agreeing to pay a fixed 

daily withdrawal amount to the MCA 

provider until the agreed upon payment 

amount is satisfied. MCA contracts often 

provide for repayment directly through 

the merchant’s card processor and/or 

via ACH withdrawals from the 

merchant’s bank account.356 MCAs 

constitute the primary product under an 

umbrella that the Bureau refers to as 

‘‘sales-based financing’’; generally, 

transactions wherein a financial 

institution extends funds to a business 

and repayment is based on the 

business’s anticipated sales, revenue, or 

invoices.357

The Bureau understands that the 

MCA market is generally dominated by 

nondepository lenders not subject to 

Federal safety and soundness 

supervision or reporting requirements. 

The Bureau also understands that MCA 

providers may not be required to obtain 

State lending licenses. As a result, 

information on MCA lending volume 

and practices is limited. The Bureau 

notes, however, that California recently 

enacted a law that brings providers of 

commercial financing options, 

including factoring and MCAs, into the 

California Financing Law (CFL), which 

will impose disclosure requirements.358

New York also enacted a law that would 

impose similar disclosure requirements 

upon certain New York commercial 

financing providers, including MCA 

providers.359

Although the Bureau’s 2017 White 

Paper estimated the MCA market 

constituted less than 1 percent of the 

aggregate dollar volume of various 

financial products used by small 

businesses in the U.S. in 2014,360 the 

Bureau finds that more recent evidence 

suggests the industry may now be much 

larger. For example, the 2020 Federal 

Reserve Banks’ survey of firms with 1– 

499 employees (‘‘employer firms’’) 

found that 8 percent of such businesses 

applied for and regularly used MCAs.361

Moreover, on August 18, 2019, the trade 

website deBanked reported that 

according to an investment bank’s 

projections, ‘‘the MCA industry will 

have more than doubled its small 

business funding to $19.2 billion by 

year-end 2019, up from $8.6 billion in 

2014.’’ 362

Based on stakeholder feedback and 

available data, the Bureau understands 

that MCAs are often used by merchants 

due to the speed and ease with which 

they can be obtained,363 particularly for 

merchants unable to obtain financing 

from more traditional sources.364

According to the 2020 Federal Reserve 

Banks’ report regarding firms owned by 

people of color (both small employer 

firms and non-employer firms), Blackowned firms, Hispanic-owned firms, 

and Asian-owned firms were more 

likely to have applied for MCAs (14 

percent, 10 percent, and 10 percent 


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Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56405 

365Small Business Credit Survey of Firms Owned 

by People of Color at 30. 

366Fed. Trade Comm’n, ‘Strictly Business’ Forum, 

Staff Perspective, at 6–8 (Feb. 2020), https://

www.ftc.gov/system/files/documents/reports/staffperspective-paper-ftcs-strictly-business-forum/ 

strictly_business_forum_staff_perspective.pdf. 

367See id. at 2. 

368Press Release, Fed. Trade Comm’n, New YorkBased Finance Companies Deceived Small 

Businesses, Non-Profits and Seized Their Personal 

and Business Assets (June 10, 2020), https://

www.ftc.gov/news-events/press-releases/2020/06/ 

new-york-based-finance-companies-deceived-smallbusinesses. See also Press Release, Fed. Trade 

Comm’n, FTC Alleges Merchant Cash Advance 

Provider Overcharged Small Businesses Millions 

(Aug. 3, 2020), https://www.ftc.gov/news-events/ 

press-releases/2020/08/ftc-alleges-merchant-cashadvance-provider-overcharged-small. 

369Press Release, Fed. Trade Comm’n, Cash 

Advance Firm to Pay $9.8M to Settle FTC 

Complaint It Overcharged Small Businesses (Apr. 

22, 2021), https://www.ftc.gov/news-events/pressreleases/2021/04/cash-advance-firm-pay-98msettle-ftc-complaint-it-overcharged. 

370 Kevin Voigt, It’s the Wild West Out There: 

NerdWallet Special Report, NerdWallet (Oct. 13, 

2016), https://www.nerdwallet.com/blog/smallbusiness-special-report-mca/. 

371See Bd. of Governors of the Fed. Reserve Sys., 

Browsing to Borrow: ‘‘Mom & Pop’’ Small Business 

Perspectives on Online Lenders, at 9 (June 2018), 

https://www.federalreserve.gov/publications/files/ 

2018-small-business-lending.pdf (Board Small 

Business Perspectives) (noting that when asked 

‘‘about the toughest part of running their 

businesses, most participants cited the challenges of 

managing their cash flow’’); id. at 5 (noting that 

‘‘[s]ome observers have argued that the owner’s loss 

of control over cash flow puts some small 

businesses at risk’’). The Bureau also notes that 

many MCA providers believe that they are not 

subject to State usury laws. 

372See Opportunity Fund, Unaffordable and 

Unsustainable: The New Business Lending, at 3 

(May 2016), https://www.leg.state.nv.us/App/ 

InterimCommittee/REL/Document/13129 (stating 

that ‘‘[m]ore than a quarter of the businesses in our 

dataset had loans outstanding with multiple 

alternative lenders’’). 

373Board Small Business Perspectives at 6. 

374 Gretchen Morgenson, FTC official: Legal ‘loan 

sharks’ may be exploiting coronavirus to squeeze 

small businesses, NBC News (Apr. 3 2020), https:// 

www.nbcnews.com/business/economy/ftc-officiallegal-loan-sharks-may-be-exploiting-coronavirussqueeze-n1173346. 

375See 2021 Small Business Credit Survey at 26. 

376Compare id. at 22 (noting that only 7 percent 

of ‘‘high credit risk’’ applicants obtained all the 

financing sought), with Fed. Reserve Banks, Small 

Business Credit Survey—2020 Report on Employer 

Firms, at 12 (Apr. 7, 2020), https://www.fedsmall

business.org/medialibrary/FedSmallBusiness/files/ 

2020/2020-sbcs-employer-firms-report (reporting 

that 23 percent of ‘‘high credit risk’’ applicants 

obtained all the financing sought) (2020 Small 

Business Credit Survey). 

377SBREFA Outline at 22. 

378For instance, of the substantive responses to 

the 2017 RFI, comments authored or co-authored by 

dozens of stakeholders (including community and 

business groups, industry, and trade associations) 

expressed explicit support for requiring the 

reporting of MCAs (and additional letters expressed 

support for covering ‘‘fintech’’ or ‘‘alternative 

online’’ products more generally). 

respectively) than white-owned firms (7 

percent).365 The Bureau believes that 

this report supports stakeholders’ 

assertions that minority-owned 

businesses are more likely to use MCAs. 

The Bureau believes that the higher 

frequency of MCA use among minorityowned businesses coupled with reports 

of problematic provider practices lends 

credence to many stakeholders’ claims 

that MCAs may raise fair lending 

concerns. The FTC released a Staff 

Perspective in February 2020 discussing 

its concerns with the MCA industry 366

and noting the industry’s tendency to 

‘‘cater to higher-risk businesses or 

owners with low credit scores— 

typically offering them higher-cost 

products.’’ 367 The FTC has also filed 

enforcement actions against MCA 

providers and their principals, in one 

case alleging that they misrepresented 

the terms of MCAs that they provided, 

and then used ‘‘unfair collection 

practices, including sometimes 

threatening physical violence, to compel 

consumers to pay.’’ 368 The FTC recently 

obtained a settlement that requires an 

MCA provider to pay more than $9.8 

million to settle charges that it took 

money from businesses’ bank accounts 

without permission and deceived them 

about the amount of financing business 

owners would receive and other features 

of its financing products.369 Moreover, 

the Bureau understands that the default 

rate amongst small businesses that use 

MCAs is relatively high—5 to 15 percent 

according to one estimate (compared 

with a 2 percent default rate on SBA 

loans).370 The Bureau believes this high 

default rate may be explained by the fact 

that the typical MCA holdback 

percentage—10 to 20 percent of gross 

receipts or revenues—may be onerous 

for already cash-strapped small 

businesses.371 The Bureau also 

understands that it is not uncommon for 

small businesses that use MCAs to 

obtain new MCAs from other MCA 

providers (more than a quarter of such 

businesses, by one account); 372 they 

also may use one MCA to pay off 

another. Firms that take on added debt 

loads in this way (a process known as 

‘‘stacking’’) ‘‘may not fully recognize the 

costs involved, which could potentially 

jeopardize the financial health of their 

businesses.’’ 373

As small businesses struggle with the 

COVID–19 pandemic, the Bureau is 

seeing more reports of MCA providers 

employing aggressive collection 

practices, such as ‘‘pursuing legal 

claims against owners that freeze their 

bank accounts and . . . pressing their 

family members, neighbors, insurers, 

distributors—even their customers.’’ 374

Given the fact that 84 percent of the 

credit applicants surveyed by the 

Federal Reserve Banks were approved 

for an MCA 375 and the fact that it 

appears significantly more difficult to 

obtain credit as a ‘‘high credit risk’’ 

applicant during the COVID–19 

pandemic,376 the Bureau believes that 

vulnerable small businesses are 

increasingly seeking MCAs to support 

their pandemic recovery. 

In its SBREFA Outline, the Bureau 

stated that it was considering proposing 

that MCAs not be a covered product 

under section 1071 since including 

them may add additional complexity or 

reporting burden given the unique 

structure of the transactions.377

During and following the SBREFA 

Panel meetings, many SERs advocated 

for including MCAs within the scope of 

the 1071 rule due, in part, to their 

widespread use by small businesses in 

the same way as traditional loans. In 

response to the SBREFA Outline, many 

other stakeholders, including 

community groups and industry 

representatives, urged the inclusion of 

MCAs for one or more of the following 

reasons: 

• MCAs are widely used by small 

businesses and have a rapidly growing 

market share. 

• MCAs are often advertised as loans 

even though MCA providers have been 

strongly opposed to labeling their 

products as loans. 

• The complexity of MCAs is not a 

good reason to exclude them from 

coverage. 

• Minority-owned small businesses 

disproportionately use MCAs. 

• Excluding the largely unregulated 

MCA industry would create unequal 

regulatory burdens for entities that may 

compete for the same small business 

clients. 

• MCAs should be considered 

‘‘credit’’ for the purposes of section 

1071. 

• Small businesses do not distinguish 

these products from other forms of 

financing. 

• Some MCA providers engage in 

harmful practices and should be subject 

to oversight. 

The Bureau observes that, throughout 

the development of the 1071 rule, MCAs 

have been the focus of significant 

attention and a unique source of nearconsensus among a diverse array of 

stakeholders—almost all of whom 

advocated for covering MCAs in the 

1071 rule.378 The only commenters that 

have supported the exclusion of MCAs 

from the 1071 rule were MCA providers 

or trade associations representing MCA 

providers. These stakeholders argue that 

MCAs do not meet the definition of 


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56406 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

379 85 FR 46600 (Aug. 3, 2020). 

380Existing comment 9(a)(3)–3. 

381ECOA section 704B(a). 

382ECOA section 704B(h)(2) (defining a small 

business as having the same meaning as the term 

‘‘small business concern’’ in section 3 of the Small 

Business Act (15 U.S.C. 632)’’). Section 704B(h)(2) 

defines small business by reference to the Small 

Business Act definition of a small business concern, 

which includes independently owned and operated 

‘‘enterprises that are engaged in the business of 

production of food and fiber, ranching and raising 

of livestock, aquaculture, and all other farming and 

agricultural related industries.’’ 15 U.S.C. 632(a)(1). 

383SBREFA Panel Report at 44. 

384The U.S. Department of Agriculture (USDA) 

defines SDFRs as members of certain racial and 

ethnic minority groups and women. According to 

the GAO, USDA regulations further define SDFRs 

as belonging to the following groups: American 

Indians or Alaskan Natives, Asians, Blacks or 

African Americans, Native Hawaiians or other 

Pacific Islanders, Hispanics, and women. See Gov’t 

Accountability Off., Agricultural Lending: 

Information on Credit and Outreach to Socially 

Disadvantaged Farmers and Ranchers is Limited, at 

2 (2019), https://www.gao.gov/assets/710/ 

700218.pdf (GAO Report). The Bureau notes that 

those five categories align with the Bureau’s 

proposed categories used in the definition of 

‘‘minority individual’’ in proposed § 1002.102(l). 

385 GAO Report at 16. 

credit under ECOA or State law and are 

instead much like traditional factoring 

arrangements, which are generally 

understood not to be credit. 

Potential coverage of MCAs under the 

1071 rule has also drawn the attention 

of government entities seeking to 

regulate the industry. For example, in 

response to the SBREFA Outline, the 

California Department of Financial 

Protection and Innovation submitted a 

comment letter stating that ‘‘nearly all 

the data points would be just as easy for 

an MCA company to report as any other 

financial institution.’’ In addition, FTC 

staff submitted a comment letter in 

response to the Bureau’s Request for 

Information on the Equal Credit 

Opportunity Act and Regulation B379

noting that the FTC has brought many 

actions protecting small businesses but 

that detecting illegal conduct in this 

space can be challenging, particularly 

with regard to MCAs. The FTC comment 

letter urges the Bureau to remind small 

business lenders that whether a 

particular law applies depends on 

actual facts and circumstances and not 

solely on how one party chooses to 

characterize the transaction. FTC staff 

also recommends the Bureau help small 

businesses through data collection, 

collecting complaints, and education. 

Upon further consideration and in 

light of stakeholder feedback provided 

during the SBREFA process, the Bureau 

is proposing to cover MCAs as 

reportable under 1071. The Bureau 

believes that the statutory term ‘‘credit’’ 

in ECOA is ambiguous as to whether it 

covers sales-based financing products 

like MCAs, and existing Regulation B 

offers no further clarity except to note 

in commentary that factoring, as ‘‘a 

purchase of accounts receivable,’’ is not 

covered by ECOA or Regulation B.380

Based on its review of typical MCA 

arrangements and its expertise with 

respect to the nature of credit 

transactions, the Bureau believes that 

the better reading of the term ‘‘credit’’ 

is that it encompasses MCAs and other 

types of sales-based financing. As noted 

above, ECOA defines ‘‘credit’’ to mean 

‘‘the right granted by a creditor to a 

debtor to defer payment of debt or to 

incur debts and defer its payment or to 

purchase property or services and defer 

payment therefor.’’ The Bureau is thus 

not proposing to specifically define 

MCAs or other sales-based financing in 

the 1071 rule because the Bureau 

believes these products are covered by 

the proposed definition of ‘‘credit’’ in 

§ 1002.102(i). Nor does the Bureau 

believe that MCAs should be excluded 

from the rule as a species of factoring (as 

defined in proposed comment 104(a)–2), 

because MCAs are not based on 

accounts receivable from ‘‘goods that 

the recipient has supplied or services 

that the recipient has rendered.’’ 

As an initial matter, the Bureau 

believes that MCAs do not constitute 

factoring within the meaning of the 

existing commentary to Regulation B or 

the definition in proposed comment 

104(b)–1, discussed in greater detail 

below. In factoring transactions, entities 

receiving financing sell their legal right 

to payment from a third party for goods 

supplied or services rendered, and that 

right exists at the time of the transaction 

itself; the provider of funds seeks 

payment directly from the third party, 

and the transaction between the 

recipient and the provider of funds is 

complete at the time of the sale. In other 

words, the recipient of the financing has 

no remaining payment obligation, 

meaning that no payment is deferred. In 

contrast, at the time of the advance in 

an MCA, the recipient of the financing 

has no existing rights to payment that it 

can transfer. The transaction thus 

constitutes only a promise by the 

‘‘seller’’ to transfer funds to the ‘‘buyer’’ 

once they materialize at a later date. The 

Bureau believes that the ECOA 

definition of credit, by referring to the 

right to ‘‘defer’’ payments, necessarily 

invokes this temporal consideration. 

Furthermore, the Bureau interprets 

ECOA’s definition of credit as making 

dispositive whether one party has 

granted another the right to repay at 

some time subsequent to the initial 

transaction, without consideration of 

factors such as the existence of recourse 

or analysis of who bears the risk of loss. 

MCA providers grant such a right: They 

advance funds to small businesses and 

grant them the right to defer repayment 

by allowing them to repay over time. 

Additionally, as a practical matter, the 

Bureau understands that MCAs are 

underwritten and function like a typical 

loan (i.e., underwriting of the recipient 

of the funds; repayment that 

functionally comes from the recipient’s 

own accounts rather than from a third 

party; repayment of the advance itself 

plus additional amounts akin to interest; 

and, at least for some subset of MCAs, 

repayment in regular intervals over a 

predictable period of time). 

Finally, the Bureau believes that the 

inclusion of MCAs in the Bureau’s 1071 

rule is important to fulfilling both the 

fair lending and the business and 

community development purposes of 

section 1071.381 The Bureau also 

believes that including MCAs would 

create a more level playing field across 

financial institutions that provide cash 

flow financing to small businesses as 

well as create a data set that better 

reflects demand for such financing by 

the smallest and most vulnerable 

businesses. 

The Bureau seeks comment on its 

proposed approach to covered credit 

transactions, and in particular, on 

whether it should define MCAs and/or 

other sales-based financing transactions, 

and if so, how. 

Agricultural-purpose credit. In the 

SBREFA Outline, the Bureau did not 

expressly address credit used for 

agricultural purposes, although such 

credit is generally covered by the broad 

definition of credit under ECOA and 

agricultural businesses are included in 

section 1071’s definition of small 

business.382 Based on questions from 

SERs about the Bureau’s intended 

approach, however, the SBREFA Panel 

recommended that the Bureau address 

in the proposed rule whether it intends 

to cover agricultural loans in the 

eventual 1071 rule.383 Moreover, in a 

July 2019 report, the U.S. Government 

Accountability Office (GAO) discussed 

its finding that information on the 

amount and types of agricultural credit 

to socially disadvantaged farmers and 

ranchers (SDFRs) 384 is limited, and 

suggested that the 1071 rulemaking may 

be a way to engage in ‘‘additional data 

collection and reporting for 

nonmortgage loans.’’ 385


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386The Census of Agriculture is conducted by the 

USDA every five years and provides a detailed 

picture of farms and the people who operate them. 

See generally U.S. Dep’t of Agric., 2017 Census of 

Agriculture (Apr. 2019), https://www.nass.

usda.gov/Publications/AgCensus/2017/Full_Report/ 

Volume_1,_Chapter_1_US/usv1.pdf. 

387Econ. Research Serv., U.S. Dep’t of Agric., 

Farming and Farm Income (updated May 10, 2021), 

https://www.ers.usda.gov/data-products/ag-andfood-statistics-charting-the-essentials/farming-andfarm-income/. 

388 Id. 

389Farm Credit Admin., 2019 Annual Report of 

the Farm Credit Administration, at 18 (2019), 

https://www.fca.gov/template-fca/about/ 

2019AnnualReport.pdf. 

390 Id. 

391 GAO Report at 16. ‘‘The primary producer is 

the individual on a farm who is responsible for the 

most decisions. Each farm has only one primary 

producer.’’ Id. at 5. 

392 Id. at 2. 

393 ‘‘Producers’’ are individuals involved in farm 

decision-making. A single farm may have more than 

one producer. 

394See GAO Report at 7. 

395 In 1910, approximately 893,370 Black farmers 

operated approximately 41.1 million acres of 

farmland, representing approximately 14 percent of 

farmers. U.S. Census Bureau, 1910 Census: Volume 

5 (Agriculture), Statistics of Farms, Classified by 

Race, Nativity, and Sex of Farmers, at 298 (1910), 

https://www2.census.gov/library/publications/ 

decennial/1920/volume-5/06229676v5ch04.pdf. In 

2017, of the country’s 3.4 million total producers, 

only 45,508 of them (1.3 percent) are Black and they 

farm on only 4.1 million acres (0.5 percent of total 

farmland); by comparison, 95 percent of U.S. 

producers are white and own 94 percent of 

farmland. U.S. Dep’t of Agric., 2017 Census of 

Agriculture, at 62, 72 (Apr. 2019), https://www.nass.

usda.gov/Publications/AgCensus/2017/Full_Report/ 

Volume_1,_Chapter_1_US/usv1.pdf. 

396 In 1910, women farmers represented 

approximately 4 percent of farm workers. See U.S. 

Census Bureau, 1910 Census: Volume 5 

(Agriculture), Statistics of Farms, Classified by 

Race, Nativity, and Sex of Farmers, at 340 (1910), 

https://www2.census.gov/library/publications/ 

decennial/1920/volume-5/06229676v5ch04.pdf. As 

of 2017, women account for approximately 36 

percent of farmers. See U.S. Dep’t of Agric., 2017 

Census of Agriculture, at 62 (Apr. 2019), https://

www.nass.usda.gov/Publications/AgCensus/2017/ 

Full_Report/Volume_1,_Chapter_1_US/usv1.pdf. 

397See, e.g., Order, In re Black Farmers 

Discrimination Litig., No. 08–mc–0511 (D.D.C. filed 

Aug. 8, 2008), https://blackfarmercase.com/ 

Documents/2008.08.08%20- 

%20PLF%20Consolidation%20Order_0.pdf; Pigford 

v. Glickman, 206 F.3d 1212 (D.C. Cir. 2000). See 

also Garcia v. Vilsack, 563 F.3d 519 (D.C. Cir. 

2009); Love v. Connor, 525 F. Supp. 2d 155 (D.D.C. 

2007); Keepseagle v. Veneman, No. 99–CIV–03119, 

2001 U.S. Dist. LEXIS 25220 (D.D.C. Dec. 12, 2001). 

398 GAO Report at introductory highlights. 

Additionally, the GAO cited these sources as noting 

that some SDFRs may not be fully aware of credit 

options and lending requirements, especially if they 

are recent immigrants or new to agriculture. Id. 399 Id. 

According to the 2017 Census of 

Agriculture,386 there are about 3.4 

million farmers and ranchers 

(‘‘producers’’) working on 2 million 

farming and ranching operations 

(‘‘farms’’) in the United States. The U.S. 

Department of Agriculture (USDA) 

Economic Research Service found that 

family farms (where the majority of the 

business is owned by the operator and 

individuals related to the operator) of 

various types together accounted for 

nearly 98 percent of U.S. farms in 

2019.387 Small family farms (less than 

$350,000 in gross cash farm income 

(GCFI)) accounted for 90 percent of all 

U.S. farms and large-scale family farms 

($1 million or more in GCFI) make up 

about 3 percent of farms but 44 percent 

of the value of production.388

According to the 2019 Annual Report 

of the Farm Credit Administration, most 

agricultural lending (approximately 83 

percent) is done by either commercial 

banks or the Farm Credit System (FCS), 

a network of government-sponsored 

entities (GSEs) regulated by the Farm 

Credit Administration, an independent 

government agency.389 The USDA’s 

Farm Service Agency accounts for a 

small share (3 percent) of agricultural 

credit through direct loans and 

guarantees of loans made by private 

lenders.390

The GAO found that, using 2015– 

2017 USDA survey data, SDFRs 

represented an estimated 17 percent of 

primary producers in the survey, but 

accounted for only an estimated 8 

percent of total outstanding agricultural 

debt.391 Loans to purchase agricultural 

real estate accounted for most of SDFRs’ 

outstanding debt (67 percent).392 Farms 

with minority or women primary 

producers 393 are, on average, smaller 

and bring in less revenue than farms 

with a non-SDFR primary producer (i.e., 

a white male)—while SDFRs 

represented 30 percent of all farms, they 

operated 21 percent of total farm land 

and accounted for 13 percent of the 

market value of agricultural products 

sold in 2017.394

The share of minority representation 

in farming, particularly that of Black 

farmers, has declined sharply over the 

last 100 years.395 The number of female 

producers has increased significantly 

over the last 100 years but remains 

relatively small compared to male farm 

producers.396 Based on the disposition 

of numerous lawsuits alleging 

discrimination against minority 

farmers,397 the Bureau believes that 

credit discrimination may play a role in 

this decline. The GAO cites SDFR 

advocacy groups, which have said some 

SDFRs face actual or perceived unfair 

treatment in lending or may be 

dissuaded from applying for credit 

because of past instances of alleged 

discrimination.398 In addition, the GAO 

cites SDFR advocacy groups, lending 

industry representatives, and Federal 

officials in stating that SDFRs are more 

likely to operate smaller, lower-revenue 

farms, have weaker credit histories, or 

lack clear title to their agricultural land, 

which can make it difficult for them to 

qualify for loans.399 The Bureau 

understands that determining the 

‘‘creditworthiness’’ of a farmer is often 

a judgmental process in which lending 

decisions are de-centralized and involve 

weighing many discretionary factors, 

the Bureau believes that there are 

heightened fair lending risks in 

agricultural lending. 

In light of the above, the Bureau 

believes that covering agricultural credit 

in its 1071 rule is important for both of 

section 1071’s statutory purposes, and is 

not proposing to define covered credit 

in a way that would exclude agricultural 

credit from the rule. The Bureau seeks 

comment on the potential costs and 

complexities associated with covering 

such credit. 

HMDA-reportable transactions. By 

adopting Regulation C’s definition of 

dwelling and its commentary regarding 

investment properties, the Bureau seeks 

to ensure consistency and minimize 

compliance burdens for financial 

institutions that must also report credit 

transactions covered by HMDA (that is, 

HMDA-reportable transactions). Based 

on Bureau calculations using the 2019 

HMDA data, the Bureau found that close 

to 2,000 lenders and around 530,000 

applications indicated a ‘‘business or 

commercial purpose’’ and around 

500,000 applications were used for an 

‘‘investment’’ (as defined by the 

occupancy code) purpose. Of those 

applications, around 50,000 were for 5+ 

unit properties. The overall number of 

applications the Bureau expects to be 

reported annually under the proposed 

rule is around 26 million. Thus, the 

Bureau anticipates a relatively small but 

not insignificant overlap regarding real 

estate investment loans between HMDA 

and 1071. 

The Bureau has considered excluding 

all transactions that were also reportable 

under HMDA, but believes such an 

exclusion would add complexity to data 

analysis. The Bureau understands that 

requiring lenders to find and delete 

from databases that supply their 1071 

submission only those transactions that 

also appear in HMDA may require a 

separate scrub of the data and create 

additional compliance burden, as well 

as compliance risk if HMDA-reportable 

transactions are not deleted from a 1071 

submission. For example, if the Bureau 

were to exclude HMDA reportable 

transactions from 1071 and a small 

business wants to purchase a 5+ 

dwelling unit property (that the 

financial institution would need to 

know is HMDA reportable), the 


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56408 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

400See Cal. S.B. 1235 (Sept. 30, 2018), https://

leginfo.legislature.ca.gov/faces/billTextClient.

xhtml?bill_id=201720180SB1235; N.Y. S.B. S5470B 

(July 23, 2020), https://legislation.nysenate.gov/pdf/ 

bills/2019/S5470B. 

401White Paper at 21 fig. 2, 22 fig. 3. 

402 2020 Small Business Credit Survey; 2017 

Small Business Credit Survey. 

403See 2021 Small Business Credit Survey at 24. 

404SBREFA Outline at 22. 

financial institution would have to 

make sure it is not collecting protected 

demographic information on principal 

owners, even though that information 

must be collected for every other type of 

loan that same business might apply for. 

The Bureau also believes that it may not 

be possible to identify loans in the 

HMDA data that, but for this exclusion, 

would be reported under 1071 because 

the financial institution would need to 

know which HMDA applications are for 

small businesses versus large 

businesses. Moreover, excluding 

HMDA-reportable applications could 

mean that a financial institution that is 

below the HMDA reporting threshold 

would not report these loans at all. 

Further, in addition to not being able 

to distinguish which applications are 

from small and not large businesses, the 

Bureau believes that excluding all 

transactions that were also reportable 

under HMDA may be at odds with the 

statutory purposes of section 1071. The 

following information will not be 

collected for applications only reported 

under HMDA: (1) The principal owner’s 

race, sex, or ethnicity where the 

applicant is not a natural person; (2) 

minority-owned and women-owned 

business status; (3) gross annual 

revenue; and (4) other 1071 data points 

such as pricing, NAICS code, and 

number of workers. The Bureau is 

concerned that not collecting this 

information would run contrary to 

section 1071’s fair lending and business 

and community development purposes. 

For applications that would be 

reported under both HMDA and 1071 

(generally, business credit secured by 

dwellings, with the exception of credit 

secured by 1–4 individual dwelling 

units that the applicant or one or more 

of the applicant’s principal owners does 

not, or will not, occupy), the Bureau 

seeks comment on whether it should 

require such applications to be flagged 

as such when reported under subpart B. 

The Bureau believes that for data 

integrity and analysis purposes, it may 

be helpful to know if a loan is in both 

datasets and a dual reporting flag may 

help ensure any data analysis is not 

double-counting certain applications. 

104(b) Excluded Transactions 

Proposed § 1002.104(b) would 

provide that the requirements of subpart 

B do not apply to trade credit, public 

utilities credit, securities credit, and 

incidental credit. Proposed comments 

104(b)–1 and –2 would make clear that 

the term covered credit transaction also 

does not cover factoring and leases. The 

proposed treatment of each of these 

types of transactions is discussed in 

detail below. Proposed comments 

104(b)–3 and –4 would clarify that the 

term covered credit transaction does not 

include consumer-designated credit or 

credit secured by certain investment 

properties because, as discussed in 

detail below, such transactions are not 

business credit. The Bureau also 

discusses its proposed treatment of 

extensions of credit made to 

governments or governmental 

subdivisions, agencies, or 

instrumentalities and certain purchases 

of covered credit transactions. Finally, 

the Bureau discusses its proposed 

exclusions for trade credit, public 

utilities credit, securities credit, and 

incidental credit. 

The Bureau seeks comment on 

whether it should permit financial 

institutions to voluntarily collect 

applicants’ protected demographic 

information (that is, the applicant’s 

minority-owned business status and 

women-owned business status, and the 

ethnicity, race, and sex of the 

applicant’s principal owners) for 

applications for some or all of the types 

of transactions that the Bureau is 

proposing not to cover, and to report 

those applications to the Bureau 

pursuant to proposed § 1002.109. 

Factoring. In traditional factoring 

arrangements, a business in need of 

financing sells all or a portion of its 

accounts receivable (existing but unpaid 

invoices) to another business, known as 

a ‘‘factor.’’ The factor then receives 

payments on the accounts receivable 

from the business’s debtors or customers 

directly, and not from the business that 

had entered into the factoring 

transaction. If the business has sold only 

a portion of its invoices, then once the 

account debtors pay their invoices to the 

factor, the factor remits the remainder of 

the balance to the business after 

deducting a fee (specifically, a discount 

applied to the sold accounts receivable 

usually stated on a percentage basis). 

The Bureau understands that like the 

market for MCAs, the factoring market 

is generally dominated by 

nondepository lenders not subject to 

Federal safety and soundness 

supervision or reporting requirements. 

The Bureau also understands that 

generally, factors may not be required to 

obtain State lending licenses. As a 

result, information on factoring volume 

and practices is limited. The Bureau 

notes, however, that the California and 

New York disclosure laws mentioned 

above cover factoring.400

The Bureau’s 2017 White Paper 

estimated the factoring market as 

constituting around 8 percent of the 

number of accounts used by small 

businesses in the U.S. in 2014.401 Based 

on more recent evidence, the Bureau 

believes the industry has not 

significantly grown. For example, the 

2017 and 2020 Federal Reserve Banks’ 

surveys of firms with 1–499 employees 

(‘‘employer firms’’) found that 4 percent 

of such businesses applied for and 

regularly used factoring.402 In the 2020 

Small Business Credit Survey of 

Employer Firms, this figure dropped to 

3 percent of employer firms.403

In the SBREFA Outline, the Bureau 

stated that it was considering excluding 

factoring from coverage under the 1071 

rule.404 As a general matter, the Bureau 

received fewer comments from 

stakeholders regarding factoring 

compared to some other products, 

though some SERs did advocate for 

including factoring. Moreover, several 

stakeholders (representing both 

community group and industry 

perspectives) argued that factoring 

should be covered under section 1071: 

First, factoring is widely used by small 

businesses, particularly very small 

businesses, who are more likely to face 

heightened challenges accessing 

business credit; second, both New York 

and California have passed disclosure 

laws covering factoring and exclusion 

would potentially lead to a regulatory 

advantage for lenders offering highercost, less-transparent credit products. 

A community group commenter 

stated that the Bureau should require 

the reporting of these agreements 

regardless of whether there is a credit 

agreement incident to the factoring 

agreement under Regulation B (this 

concept is discussed in more detail 

below). A few commenters that 

supported the proposed exclusion under 

consideration of factoring did so on the 

basis that factoring is not ‘‘credit’’ under 

ECOA. Commenters did not raise fair 

lending concerns or concerns about 

predatory practices related to factoring. 

An existing comment in Regulation B 

(comment 9(a)(3)–3) provides that 

‘‘[f]actoring refers to a purchase of 

accounts receivable, and thus is not 

subject to [ECOA or Regulation B].’’ 

Existing Regulation B does not offer a 

definition for ‘‘accounts receivable.’’ 

However, if there is a ‘‘credit extension 

incident to the factoring arrangement,’’ 


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405See existing § 1002.9(a)(3)(ii) (requiring a 

creditor to notify an applicant, within a reasonable 

time (as opposed to within 30 days for credit sought 

by consumers and businesses with gross revenues 

of $1 million or less in preceding fiscal year), orally 

or in writing, of the action taken). 

406Comment 9(a)(3)–3. 

407Public Law 100–533, 102 Stat. 2689 (1988). 

408 54 FR 29734, 29736 (July 14, 1989); see also 

134 Cong. Rec. H9282–89 (daily ed. Oct 3, 1988) 

(explaining that the committee recognizes that some 

forms of commercial loan transactions and 

extensions of credit may ‘‘require specialized 

rules,’’ and that, for example, the committee 

believes that loans and credit extensions incidental 

to trade credit, factoring arrangements, and 

sophisticated asset-based loans should continue to 

be exempted from the record retention and 

automatic notification requirements). 

409See Cal. S.B. 1235 (Sept. 30, 2018), https://

leginfo.legislature.ca.gov/faces/ 

billTextClient.xhtml?bill_id=201720180SB1235; 

N.Y. S.B. S5470B (July 23, 2020), https://legislation.

nysenate.gov/pdf/bills/2019/S5470B. 

410See UCC Art. 2A–103(1)(j) (defining a ‘‘lease’’). 

411 724 F.2d 789 (9th Cir. 1984). 

412 50 FR 48018, 48020 (Nov. 20, 1985). 

413 Id. 

414 Id. Since then, courts have gone both ways on 

the issue. Compare Ferguson v. Park City Mobile 

Homes, No. 89–CIV–1909, 1989 WL 111916, at *5 

(N.D. Ill. Sept. 18, 1989) (leases are ‘‘credit’’ under 

ECOA), with Laramore v. Ritchie Realty Mgmt. Co., 

397 F.3d 544, 547 (7th Cir. 2005) (leases are not 

‘‘credit’’ under ECOA). 

415The Bureau notes that the UCC separately 

defines a ‘‘consumer lease.’’ See UCC 2A–103(1)(e). 

The Bureau’s analysis regarding leases does not 

apply to leases primarily for a personal, family, or 

household purpose. 

Regulation B’s notification rules 405

apply, as do other relevant sections of 

ECOA and Regulation B.406 The Bureau 

understands that the Board’s treatment 

of credit extensions incident to factoring 

arrangements—as a type of credit but 

one entitled to exemptions from certain 

requirements—was motivated by its 

reading of congressional intent related 

to the Women’s Business Ownership 

Act of 1988,407 which amended ECOA 

to extend notification and record 

retention requirements to business 

credit. In its proposed rule on this issue, 

the Board explained that it was treating 

credit extensions incident to factoring 

arrangements differently from other 

forms of business credit based on 

‘‘evidence of congressional intent that 

the amendments should not apply to 

. . . certain types of business credit 

(such as applications for trade credit 

and credit incident to factoring 

arrangements).’’ 408 Based on the 

Bureau’s work to date and conversations 

with industry stakeholders, the Bureau 

understands that purported factoring 

arrangements may take various forms, 

including longer-term or revolving 

transactions that appear to have credit 

or credit-like features, and the Bureau 

believes that a subset of such 

arrangements may constitute credit 

incident to the factoring arrangement, 

particularly if they involve goods or 

services that have not been supplied or 

rendered. 

The Bureau is proposing to not cover 

factoring under the 1071 rule. Modeled 

on the definitions set forth in the New 

York and California commercial 

financing disclosure laws,409 proposed 

comment 104(b)–1 would provide that 

factoring is an accounts receivable 

purchase transaction between 

businesses that includes an agreement 

to purchase, transfer, or sell a legally 

enforceable claim for payment for goods 

that the recipient has supplied or 

services that the recipient has rendered 

but for which payment has not yet been 

made. Proposed comment 104(b)–1 

would also clarify that an extension of 

business credit incident to a factoring 

arrangement is a covered credit 

transaction and that a financial 

institution shall report such a 

transaction as an ‘‘Other sales-based 

financing transaction’’ under proposed 

§ 1002.107(a)(5). 

The Bureau believes that, as discussed 

with respect to MCAs above, a 

traditional factoring agreement, as 

described in proposed comment 104(b)– 

1, is not credit under ECOA because the 

provider of the funds does not grant the 

recipient the right to defer payment. 

Instead, the provider of funds seeks 

payment directly from a third party, and 

the transaction between the recipient 

and the provider of funds is complete at 

the time of the sale. The Bureau also 

believes that treating factoring as credit 

under the 1071 rule could create 

inconsistencies and compliance 

concerns related to existing Regulation 

B, which currently states that factoring 

(as a purchase of accounts receivable) is 

not subject to ECOA. Moreover, while a 

few commenters did suggest covering 

factoring as part of a broader effort to 

adequately capture small businesses’ 

experiences with obtaining financing, 

the Bureau notes that commenters did 

not raise particular fair lending 

concerns related to factoring. The 

Bureau is proposing a more detailed 

description of what constitutes factoring 

in proposed comment 104(b)–1 because 

it is concerned that the existing 

Regulation B commentary regarding 

factoring may not provide sufficient 

clarity for purposes of collecting and 

reporting data under section 1071 as it 

does not offer a definition for ‘‘accounts 

receivable.’’ Proposed comment 104(b)– 

1 would state that it is not intended to 

repeal, abrogate, annul, impair, or 

interfere with any existing 

interpretations, orders, agreements, 

ordinances, rules, or regulations 

adopted or issued pursuant to existing 

comment 9(a)(3)–3. 

The Bureau seeks comment on its 

proposed approach to factoring. The 

Bureau also seeks comment on how the 

subset of purported factoring 

arrangements that may in fact be credit 

(i.e., those that are revolving in nature 

or that cover anticipated receivables) 

should be reported under the 1071 rule. 

Specifically, the Bureau seeks comment 

on whether such arrangements should 

be reported as credit extensions incident 

to factoring (and thus reported ‘‘other 

sales-based financing’’) or as MCAs. 

Leases. A leasing transaction 

generally refers to an agreement in 

which a lessor transfers the right of 

possession and use of a good or asset to 

a lessee in return for consideration.410

Under a ‘‘true’’ or ‘‘operating’’ lease, a 

lessee (the user) makes regular 

payments to a lessor (the owner) in 

exchange for the right to use an asset 

(such as equipment, buildings, motor 

vehicles, etc.). 

Leases are not expressly addressed in 

ECOA or Regulation B. The Bureau has 

never opined on whether ECOA and 

Regulation B apply to leases, and the 

Board made only one statement about 

the applicability of ECOA and 

Regulation B to leases, in the preamble 

to a final rule under ECOA. In that 1985 

statement, the Board responded to the 

Ninth Circuit’s opinion in Brothers v. 

First Leasing,411 which concluded that 

consumer leasing falls under ECOA.412

The Board stated that it believes that 

‘‘Congress did not intend the ECOA, 

which on its face applies only to credit 

transactions, to cover lease transactions 

unless the transaction results in a ‘credit 

sale’ as defined in the Truth in Lending 

Act and Regulation Z.’’ 413 The Board 

then noted that it would continue to 

monitor leasing transactions and take 

further action as appropriate.414 The 

Bureau is unaware of any such further 

actions taken by the Board. 

The Bureau understands that many 

financial institutions (such as 

equipment finance companies) offer 

both loans and leases to their small 

business customers and some financial 

institutions comply with Regulation B 

for their leases as well as their loans as 

a matter of course. Lessor stakeholders 

have told Bureau staff that from their 

perspective, as well as that of their 

customers, loans and leases are 

indistinguishable. The Bureau 

understands that this is particularly true 

of ‘‘financial’’ or ‘‘capital’’ leases, as 

defined under article 2A of the UCC,415

which closely resemble (and according 

to some stakeholders, in some cases are 

indistinguishable from) term loans. The 

Bureau understands that financial leases 


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416SBREFA Outline at 21. 

417See Regulation Z § 1026.2(16). 

418UCC 2A–103(1)(j) (‘‘ ‘Lease’ means a transfer of 

the right to possession and use of goods for a term 

in return for consideration, but a sale, including a 

sale on approval or a sale or return, or retention or 

creation of a security interest is not a lease. Unless 

the context clearly indicates otherwise, the term 

includes a sublease.’’). 

419See Cal. S.B. 1235 (Sept. 30, 2018), https://

leginfo.legislature.ca.gov/faces/billTextClient.

xhtml?bill_id=201720180SB1235; N.Y. S.B. S5470B 

(July 23, 2020), https://legislation.nysenate.gov/pdf/ 

bills/2019/S5470B. 

420See Regulation Z § 1026.2(a)(12) (defining 

‘‘consumer credit’’ as ‘‘credit offered or extended to 

a consumer primarily for personal, family, or 

household purposes’’) and 1026.3(a)(1) (excluding 

extensions of credit ‘‘primarily for a business, 

commercial or agricultural purpose’’). 

421 Id. 

422UCC 2A–103(1)(g). 

423See Fin. Acct. Standards Bd., Accounting 

Standards Update: Leases (Topic 842), No. 2016– 

02 (Feb. 2016), https://www.fasb.org/jsp/FASB/ 

Document_C/DocumentPage?cid=

1176167901010&acceptedDisclaimer=true. 

424See Ala. Code 7–2A–101 et seq.; Alaska Stat. 

45.12.101 et seq.; Ariz. Rev. Stat. 47–2A101 et seq.; 

Ark. Code Ann. 4–2A–101 et seq.; Cal. Com. Code 

10101 et seq.; Choctaw Tribal Code 26–2A–101 et 

seq.; Colo. Rev. Stat. 4–2.5–101 et seq.; Conn. Gen. 

Stat. 42a–2A–101 et seq.; DC Code 28:2A–101 et 

seq.; Del. Code Ann. tit. 6, 2A–101 et seq.; Fla. Stat. 

680.1011 et seq.; Ga. Code Ann. 11–2A–101 et seq.; 

Haw. Rev. Stat. 490:2A–101 et seq.; Idaho Code 28– 

12–101 et seq.; 810 Ill. Comp. Stat. 5/2A–101 et 

seq.; Ind. Code 26–1–2.1–101 et seq.; Iowa Code 

554.13101 et seq.; Kan. Stat. Ann. 84–2a–101 et 

seq.; Ky. Rev. Stat. Ann. 355.2A–101 et seq.; Mass. 

Gen. Laws ch. 106, 2A–101 et seq.; Md. Code Ann., 

Com. Law 2A–101 et seq.; Me. Stat. tit. 11, 2–1101 

et seq.; Mich. Comp. Laws 440.2801 et seq.; Minn. 

Stat. 336.2A–101 et seq.; Miss. Code Ann. 75–2A– 

101 et seq.; Mo. Rev. Stat. 400.2A–101 et seq.; Mont. 

Code Ann. 30–2A–101 et seq.; N.C. Gen. Stat. 25– 

2A–101 et seq.; N.D. Cent. Code 41–02.1–01 et seq.; 

N.H. Rev. Stat. Ann. 382–A:2A–101 et seq.; N.J. 

Stat. Ann. 12A:2A–101 et seq.; N.M. Stat. Ann. 55– 

2A–101 et seq.; N.Y. UCC Law 2–A–101 et seq.; 

Neb. Rev. Stat. UCC 2A–101 et seq.; Nev. Rev. Stat. 

104A.2101 et seq.; Ohio Rev. Code Ann. 1310.01 et 

seq.; Okla. Stat. tit. 12A, 2A–101 et seq.; Or. Rev. 

Stat. 72A.1010 et seq.; Pa. Cons. Stat. 2A101 et seq.; 

R.I. Gen. Laws 6A–2.1–101 et seq.; S.C. Code Ann. 

36–2A–101 et seq.; S.D. Codified Laws 57A–2A–101 

et seq.; Tenn. Code Ann. 47–2A–101 et seq.; Tex. 

Bus. & Com. Code Ann. 2A.101 et seq.; Utah Code 

Ann. 70A–2a–101 et seq.; V.I. Code Ann. tit. 11A, 

2A–101 et seq.; Va. Code Ann. 8.2A–101 et seq.; Vt. 

Stat. Ann. tit. 9A, 2A–101 et seq.; W. Va. Code 46– 

2A–101 et seq.; Wash. Rev. Code 62A.2A–101 et 

seq.; Wisc. Stat. 411.101 et seq.; Wyo. Stat. Ann. 

34.1–2.A–101 et seq. 

are treated like assets on buyers’ balance 

sheets, whereas operating leases are 

treated as expenses that remain off the 

balance sheet. The Bureau understands 

that the ownership characteristics of a 

financial lease also resemble those of a 

loan—the financial lease term is the 

substantial economic life of the asset (as 

evidenced by a one dollar purchase 

option at the end of the lease term and/ 

or lack of residual financial obligations 

at the end of the lease term) and the 

lessee claims both interest and 

depreciation on their taxes. The Bureau 

understands that for some financial 

institutions, reporting loans but not 

leases may require added cost and effort 

to separate them in databases. The 

Bureau also understands that because 

depository institutions currently report 

both loan and lease activity to other 

regulators in their Call Reports, they 

may prefer to maintain a consistent 

approach for section 1071. 

In its SBREFA Outline, the Bureau 

stated that it was considering proposing 

that leases not be a covered product 

under section 1071 unless the product 

is a credit sale.416 The Bureau stated 

that for purposes of section 1071, it was 

considering proposing a definition of 

‘‘credit sale’’ similar to the Regulation Z 

definition of that term as a transaction 

in which the lessor is a creditor and the 

lessee (i) agrees to pay as compensation 

for use a sum substantially equivalent 

to, or in excess of, the total value of the 

property and services involved; and (ii) 

will become (or has the option to 

become), for no additional consideration 

or for nominal consideration, the owner 

of the property upon compliance with 

the agreement.417

In response to the SBREFA Outline, 

several stakeholders argued that leases 

should be covered in an eventual 1071 

rule, one noting that leasing products 

make up 13 percent of the small 

business financing market share in 

dollar terms. A few other stakeholders 

stated that leases should not be covered. 

For example, a trade association stated 

that (1) given the unique structure of the 

transactions, including leases would 

add unnecessary, additional complexity 

and reporting burdens, and that (2) 

unlike credit, in a lease, the lessee does 

not have an ownership interest in the 

leased property and that this difference 

could lead to data integrity issues. 

The Bureau is proposing to not cover 

leases under the 1071 rule. Drawing 

from the UCC definition of ‘‘lease,’’ 418

which was adopted by the New York 

and California commercial financing 

disclosure laws,419 proposed comment 

104(b)–2 would provide that the term 

covered credit transaction does not 

cover leases, and that a lease, for 

purposes of proposed subpart B, is a 

transfer from one business to another of 

the right to possession and use of goods 

for a term, and for primarily business or 

commercial (including agricultural) 

purposes, in return for consideration. It 

would further state that a lease does not 

include a sale, including a sale on 

approval or a sale or return, or a 

transaction resulting in the retention or 

creation of a security interest. 

The Bureau considered several other 

approaches to covering leasing, 

including referring to Regulation Z’s 

definition of ‘‘credit sale.’’ The Bureau 

understands that financial institutions 

focused on offering leases and loans for 

business purposes are generally not 

familiar with the Regulation Z 

definition of ‘‘credit sale,’’ given that 

Regulation Z applies only to consumer 

credit.420 The Bureau thus believes that 

referring to the Regulation Z definition 

of ‘‘credit sale’’ could create confusion 

and would not align with current 

industry practices. The Bureau 

understands that such financial 

institutions offering leases primarily for 

business or commercial (including 

agricultural) purposes are more 

accustomed to applying the UCC 

definitions of ‘‘lease’’ 421 and ‘‘finance 

lease,’’ 422 and/or the generally accepted 

accounting principles (GAAP) rules 

issued by the Financial Accounting 

Standards Board (FASB) governing 

‘‘operating,’’ ‘‘capital,’’ and ‘‘finance’’ 

leases.423 The Bureau believes that 

drawing from the UCC definition of 

lease will lead to more consistency with 

financial institutions’ current practices. 

Nearly all U.S. jurisdictions have 

adopted Article 2A of the UCC,424 and 

the Bureau understands that virtually 

every form of lease used by major 

leasing companies provides that it is 

governed by the laws of one of the 

jurisdictions that has adopted Article 

2A. 

Based on its review of businesspurpose leases and its expertise with 

respect to the meaning of ‘‘credit,’’ the 

Bureau believes that the better reading 

of the term ‘‘credit’’ is that it does not 

encompass such leases. In the businesspurpose context, the Bureau 

understands that in a true lease, the 

lessor retains title and will receive the 

property back after the conclusion of the 

lease term, without any expectation by 

either party that, for example, 

ownership of the property will be 

transferred or that payments made 

pursuant to the lease agreement 

constitute anything other than payments 

in exchange for the temporary use of the 

property. As a result, the Bureau does 

not believe that in the business-purpose 

context a true lease transaction involves 

the right to incur debt and defer its 

payment, defer payment of a debt, or 

defer payment for goods or services. 

The Bureau is aware that there are 

other types of leases with characteristics 

that bear some resemblance to forms of 

credit like credit sales, such as a 

contemplated transfer of ownership at 

the end of the lease term. The Bureau 

is not proposing at this time to parse 

whether different types of leases might 


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425SBREFA Outline at 20–21. 

426SBREFA Panel Report at 44. 

427 Id. at 45. 428 Id. at 44–45. 

constitute ‘‘credit’’ but notes that 

proposed comment 104(b)–2’s definition 

of lease would not include a sale, 

including a sale on approval or a sale or 

return, or a transaction resulting in the 

retention or creation of a security 

interest. The Bureau seeks comment on 

whether there are types of leases, or 

leases with certain characteristics, that 

should be excluded from proposed 

comment 104(b)–2 and thus treated as 

reportable under 1071. Based on the 

practical difficulty cited by some 

stakeholders of distinguishing leases 

from loans, the Bureau also seeks 

comment on whether financial 

institutions should be permitted to 

voluntarily report lease transactions. 

Consumer-designated credit. In the 

SBREFA Outline, the Bureau stated that 

it was considering proposing that the 

1071 rule not cover products designated 

by the creditor as consumer purpose 

products.425 In response, several SERs 

asserted that consumer-designated 

credit is often an important source of 

financing for small businesses 

(particularly for women-owned and 

minority-owned small businesses, and 

sole proprietorships), and ideally 

should be included within the scope of 

the eventual 1071 rule. One SER stated 

that consumer-designated credit used 

for business purposes should be 

included in an eventual 1071 rule if 

trends show increasing usage. However, 

these SERs acknowledged the potential 

complexity and burden of trying to 

identify the intended use of consumerdesignated credit, such as whether a 

consumer’s home equity line of credit 

will be used for a business purpose. 

Several SERs supported excluding 

consumer-designated credit. One SER 

asserted that including consumer credit 

would not support the purposes of 

section 1071. Another SER stated that 

including consumer-designated credit 

used for business purposes would 

double their cost of complying with an 

eventual 1071 rule. The SBREFA Panel 

recommended that the Bureau continue 

to explore the potential costs to 

financial institutions associated with 

reporting consumer-designated credit 

used for business purposes in the 1071 

rule as well as the implications of 

including such credit in a small 

business lending data set.426 The Panel 

also recommended that the Bureau seek 

comment in the proposed rule on how 

best to define consumer-designated 

credit in the event the Bureau 

determines that an exclusion for such 

products is appropriate.427

Many non-SER stakeholders 

supported the proposed exclusion under 

consideration of consumer-designated 

credit from section 1071 for one or more 

of the following reasons: First, that 

financial institutions should be able to 

rely on the applicant’s stated purpose 

for the use of funds and institutions 

would not know, nor should they be 

expected to know, if a borrower instead 

starts or invests in a business using the 

proceeds of a personal loan. Second, 

that this approach would greatly 

simplify the regulatory effort necessary 

to define and identify business uses of 

consumer products. Third, that 

inclusion of consumer credit could 

vastly expand the scope of the data 

collected beyond usefulness and also 

greatly increase the costs of compliance. 

One credit union trade association 

stakeholder stated that the Bureau 

should adopt a clearer definition of 

consumer-designated credit and that it 

should clarify that it will not challenge 

a credit union’s judgment when 

designating a consumer or business 

purpose for credit. 

The Bureau is proposing that the 1071 

rule not cover products designated by 

the creditor as consumer purpose 

products (consumer-designated credit). 

Proposed comment 104(b)–3 would 

make clear that the term covered credit 

transaction does not include consumerdesignated credit used for business 

purposes, because such transactions are 

not business credit. Proposed comment 

104(b)–3 would provide that a 

transaction qualifies as consumerdesignated credit if the financial 

institution offers or extends the credit 

primarily for personal, family, or 

household purposes. For example, an 

open-end credit account used for both 

personal and business purposes is not 

business credit for the purpose of 

proposed subpart B unless the financial 

institution designated or intended for 

the primary purpose of the account to be 

business-related. 

The Bureau understands that some 

small business owners may use 

consumer-designated credit in order to 

finance their small businesses—such as 

taking out a home equity line of credit 

or charging business expenses on their 

personal credit cards. Nonetheless, the 

Bureau believes it is appropriate to 

interpret section 1071 as not applying to 

this type of credit. Most notably, ECOA 

section 704B(b) directs financial 

institutions to collect data in the case of 

an application ‘‘for credit for womenowned, minority-owned, or small 

business’’ (emphasis added). The statute 

thus applies only to applications for 

credit for a business; at the time of an 

application for consumer-designated 

credit, however, the application is not 

for a business. Several policy reasons 

also support this approach. First, the 

Bureau is concerned about financial 

institutions’ ability to consistently 

identify when consumer-designated 

credit is being used for business 

purposes. Inconsistent reporting across 

financial institutions could lead to data 

quality concerns. Credit sought by 

consumers for both personal and 

business purposes could be particularly 

difficult to separate into reportable and 

non-reportable portions. The Bureau 

believes the proposal to define business 

credit to exclude consumer-designated 

credit will simplify compliance by 

obviating the need for financial 

institutions to identify and distinguish 

business uses of consumer-purpose 

credit products. Second, not including 

consumer-designated credit used for 

business purposes within the scope of 

this rulemaking would make it clear that 

the applications reported will all be 

seeking credit to use for business 

purposes, which supports 1071’s 

directive to collect and report data in 

the case of an application for credit for 

a business. Third, not covering 

consumer-designated credit used for 

business purposes would provide 

certainty to financial institutions that 

offer only consumer-designated credit 

that they would not be subject to this 

proposal’s data collection and reporting 

requirements. 

As recommended by the SBREFA 

Panel, the Bureau seeks comment on 

this proposed interpretation, including 

how the Bureau has defined the scope 

of consumer-designated credit. The 

Bureau also seeks comment on whether 

it should permit financial institutions to 

voluntarily report consumer-designated 

credit when they have reason to believe 

the credit might be used for business 

purposes. 

Credit secured by certain investment 

properties. In the SBREFA Outline, the 

Bureau did not expressly discuss 

treatment of real estate-secured loans 

used for investment purposes. Based on 

questions from SERs about the Bureau’s 

intended approach, however, the 

SBREFA Panel recommended that the 

Bureau address in the proposed rule 

whether it intends to cover real estatesecured investment loans in the 1071 

rule.428 One SER had asked that the 

Bureau clarify whether loans covering 

1–4 family properties used for 

investment purposes are business loans 

under section 1071, and several SERs 

recommended that the Bureau cover real 

estate investment loans (for both nonowner occupied residential property 


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429As explained in existing comment 3–1, under 

§ 1002.3, procedural requirements of Regulation B 

do not apply to certain types of credit. The 

comment further states that all classes of 

transactions remain subject to § 1002.4(a) (the 

general rule barring discrimination on a prohibited 

basis) and to any other provision not specifically 

excepted. 

430 Government entities are not ‘‘organized for 

profit’’ and are thus not a ‘‘business concern’’ under 

proposed § 1002.106(a). 

and commercial property) under section 

1071. Several other SERs sought to 

distinguish certain types of real estate 

investment loans; one SER remarked, for 

example, that owning a single nonowner occupied residential property as 

an investment may be more of a 

‘‘hobby’’ but owning multiple properties 

could be considered a business. 

A number of other stakeholders 

suggested that the Bureau should 

exclude at least some real estate 

investment loans under section 1071. A 

few stakeholders stated that the Bureau 

should consider an exemption for loans 

that are reported under another 

regulatory framework, such as HMDA 

and/or CRA because the effort of 

collecting and reporting information 

regarding such real estate loans would 

not be worth the added burden given 

the availability of alternative data 

sources. A few stakeholders argued that 

Congress did not intend to include real 

estate investment loans within the scope 

of section 1071. One such stakeholder 

stated that this intention is evident 

because many of the proposed loan 

purpose categories reflect a desire to 

collect data regarding credit offered to 

businesses which offer a product or 

service. One stakeholder seeking 

exclusion of certain real estate loans 

explained that most commercial real 

estate loans are made to borrowers as 

investments and not for operating their 

business. A few stakeholders suggested 

that the Bureau should only treat as 

reportable loans secured by owneroccupied commercial real estate where 

the primary source of repayment is the 

cash flow from the ongoing business 

operations. One stakeholder noted that 

because commercial real estate loans 

made to investors are typically made to 

business entities with complex 

ownership structures, their inclusion 

under 1071 would create additional 

hurdles for lenders seeking to determine 

the principal owners. 

Based on this feedback as well as its 

general knowledge regarding both 

consumer and commercial real estate 

lending, the Bureau understands that 

many financial institutions use their 

consumer mortgage lending channels to 

process credit applications secured by 

1–4 family residential property and 

used for investment purposes, while 

applications for credit secured by 5+ 

unit multifamily properties or rental 

portfolio loans secured by more than 

four 1–4 unit residential properties are 

generally processed through commercial 

mortgage lending channels. The Bureau 

also understands that loans made 

through consumer mortgage lending 

channels are often made pursuant to the 

guidelines of Fannie Mae, Freddie Mac, 

the Federal Housing Administration 

(FHA), and the Department of Veterans 

Affairs (VA), and are likely already 

reported under HMDA. 

In light of the feedback received and 

the Panel’s recommendation, the Bureau 

is proposing that the 1071 rule not cover 

credit secured by certain investment 

properties, because such credit may not 

always be primarily for business or 

commercial purposes. Specifically, 

proposed comment 104(b)–4 would 

explain that a covered credit transaction 

does not include an extension of credit 

that is secured by 1–4 individual 

dwelling units that the applicant or one 

or more of the applicant’s principal 

owners does not, or will not, occupy. 

The Bureau is not proposing to exclude 

credit secured by owner-occupied 

dwellings; for example, those secured 

by a dwelling occupied by a business’s 

sole proprietor/principal owner. The 

Bureau is thus proposing to exclude real 

estate investment loans only in certain 

limited circumstances (such as when 

credit is secured by non-owner 

occupied 1–4 dwelling units and not 5+ 

dwelling units). As discussed above in 

the section-by-section analysis of 

proposed § 1002.102(j), the Bureau is 

proposing to define ‘‘dwelling’’ to have 

the same meaning as Regulation C 

§ 1003.2(f). Similarly, proposed 

comment 104(b)–4, which would 

address what does and does not 

constitute an investment property, is 

modeled on Regulation C’s comment 

4(a)(6)–4. 

The Bureau is proposing a definition 

of ‘‘covered credit transaction’’ that does 

not cover certain real estate investment 

loans in the scope of a ‘‘covered credit 

transaction’’ pursuant to its authority 

under ECOA section 704B(g)(1) to 

prescribe such rules and issue such 

guidance as may be necessary to carry 

out, enforce, and compile data under 

section 1071. The Bureau believes that 

its exclusion of credit secured by certain 

investment properties will better 

capture lending to true small businesses 

(as opposed to consumers seeking to 

diversify their investments) and will 

also better align with financial 

institution lending practices. The 

Bureau understands that it may not 

always be easy for financial institutions 

to distinguish between businesspurpose real estate investment loans 

and consumer-purpose real estate 

investment loans; however, covering all 

such loans would likely include some 

percentage of consumer-purpose loans 

in the 1071 rule, which could be 

contrary to section 1071’s business and 

community development purpose. 

The Bureau seeks comment on its 

proposed approach for credit secured by 

certain investment properties, including 

whether it is appropriate to consider 

credit not to be business credit when it 

is secured by 1–4 individual dwelling 

units that the applicant or one or more 

of the applicant’s principal owners does 

not, or will not, occupy; and, if not, 

whether a different number of dwelling 

units in the property securing the credit 

would be an appropriate way to make a 

distinction between business and 

consumer-designated credit. The Bureau 

also solicits comment on whether to 

permit financial institutions to 

voluntarily report real estate investment 

loan transactions that are secured by 

non-owner occupied 1–4 dwelling units. 

Government credit. The existing 

definition of business credit in 

§ 1002.2(g) excludes public utilities 

credit, securities credit, incidental 

credit, and government credit (that is, 

extensions of credit made to 

governments or governmental 

subdivisions, agencies, or 

instrumentalities—not extensions of 

credit made by governments), as defined 

in existing § 1002.3(a) through (d), from 

certain aspects of existing Regulation 

B.429 For the purpose of proposed 

subpart B, the Bureau is proposing 

complete exclusions for public utilities 

credit, securities credit, and incidental 

credit from the definition of a covered 

credit transaction in proposed 

§ 1002.104(b), as discussed below. 

However, the Bureau is not proposing 

to exclude government credit, as 

defined in existing § 1002.3(d)(1) to 

mean ‘‘extensions of credit made to 

governments or governmental 

subdivisions, agencies, or 

instrumentalities.’’ The Bureau believes 

that an express exclusion for extensions 

of credit made to governments or 

governmental subdivisions, agencies, or 

instrumentalities is not necessary 

because such governmental entities 

would not constitute small businesses 

under the proposed rule.430 The Bureau 

seeks comment on its approach to 

government credit. 

Certain purchases of covered credit 

transactions. In the SBREFA Outline, 

the Bureau did not expressly discuss 

treatment of loan purchases, but the 

Bureau sought feedback on any products 

that should or should not be covered by 


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431SBREFA Outline at 19–20. 432See Regulation C § 1003.4(a) (stating that a 

financial institution ‘‘shall collect data regarding 

. . . covered loans that it purchases for each 

calendar year’’). 433See 12 U.S.C. 2803(a)(1) (stating that 

institutions ‘‘shall compile and make available . . . 

the number and total dollar amount of mortgage 

loans which were (A) originated (or for which the 

institution received completed applications), or (B) 

purchased by that institution’’). 

434SBREFA Outline at 19–20. 

435See Regulation C § 1003.4(a) (stating that a 

financial institution ‘‘shall collect data regarding 

. . . covered loans that it purchases for each 

calendar year’’). 

436See 12 U.S.C. 2803(a)(1) (stating that 

depository institutions ‘‘shall compile and make 

available . . . the number and total dollar amount 

of mortgage loans which were (A) originated (or for 

which the institution received completed 

applications), or (B) purchased by that institution’’). 

437 12 CFR 1003.3(c)(4). 

the Bureau’s eventual 1071 rule.431

Several SERs voiced support for 

generally aligning small business 

lending reporting requirements for 

financial institutions with the approach 

taken for HMDA reporting in the 

Bureau’s Regulation C. One SER 

stressed that imposing section 1071 

requirements for loan buyers, who play 

an important role in assisting CDFIs but 

do not make credit decisions, might risk 

their continued participation. Feedback 

from other stakeholders was limited, 

although a few stakeholders suggested 

that the Bureau should generally 

exclude purchased loans. The Panel did 

not provide a specific recommendation 

on this topic. 

The Bureau believes that this 

feedback may be based in part on the 

requirements that apply to HMDA, 

where Regulation C requires financial 

institutions to report purchases of 

covered loans under HMDA.432 This 

requirement is based on statutory 

language that contemplates data 

collection for loan purchases.433 As 

discussed in the section-by-section 

analysis of proposed § 1002.103, ECOA 

section 704B(b) requires that financial 

institutions collect, maintain, and report 

to the Bureau certain information 

regarding ‘‘any application to a financial 

institution for credit.’’ For covered 

financial institutions, the definition of 

‘‘application’’ will trigger data 

collection and reporting obligations 

with respect to covered credit 

transactions. Under proposed subpart B, 

purchasing a loan does not, in itself, 

generate an obligation for a covered 

financial institution to report small 

business lending data. Rather, a 

reporting obligation may arise on the 

basis of making a final credit decision 

on an application. (See the section-bysection analysis of proposed 

§ 1002.109(a)(3) for additional 

information.) The Bureau also notes the 

corollary point that selling a covered 

loan would not, in itself, obviate an 

existing obligation of a covered financial 

institution to report small business 

lending data for that application, 

pursuant to proposed comment 107(a)– 

1.i. 

Because under this proposal 

purchasing a loan does not, in itself, 

generate an obligation for a covered 

financial institution to report small 

business lending data regarding the 

underlying application, the Bureau is 

not proposing a specific exclusion for 

these purchases. 

The Bureau seeks comment on its 

proposal not to expressly exclude the 

purchase of covered credit transactions 

in the proposed rule’s regulatory text or 

commentary. 

Certain purchases of covered credit 

transactions—pooled loans. In the 

SBREFA Outline, the Bureau did not 

expressly discuss treatment of pooled 

loan purchases, but the Bureau sought 

feedback on any products that should or 

should not be covered by the Bureau’s 

eventual 1071 rule.434 A CDFI SER that 

occasionally participates in pooled loan 

purchases recommended that the 

Bureau ensure that reporting obligations 

for such pooled loans are clear. 

The Panel did not provide a specific 

recommendation on this topic. The 

Bureau believes that this feedback may 

be based in part on the requirements 

that apply to HMDA, where Regulation 

C requires financial institutions to 

report purchases of covered loans under 

HMDA.435 This requirement is based on 

statutory language that contemplates 

data collection for loan purchases.436

However, Regulation C exempts from 

these general reporting requirements 

‘‘[t]he purchase of an interest in a pool 

of closed-end mortgage loans or openend lines of credit’’ 437 As discussed in 

the section-by-section analysis of 

proposed § 1002.103 above, ECOA 

section 704B(b) requires that financial 

institutions collect, maintain, and report 

to the Bureau certain information 

regarding ‘‘any application to a financial 

institution for credit.’’ For covered 

financial institutions, the definition of 

‘‘application’’ (or, as used in this 

proposed rule, ‘‘covered application’’) 

will trigger data collection and reporting 

obligations with respect to covered 

credit transactions. Under this proposed 

subpart, the purchase of an interest in 

a pool of loans does not, in itself, 

generate an obligation for a covered 

financial institution to report small 

business lending data. There is thus no 

need to propose a similar exclusion in 

this proposed subpart. 

The Bureau believes that requiring 

covered financial institutions to collect 

and maintain data related to the 

purchase of an interest in a pool of 

covered credit transactions would do 

little to further the purposes of section 

1071. The Bureau generally believes that 

a pooled loan purchase would arise after 

a final credit decision on the relevant 

loans has already been made (e.g., after 

the loans were originated) and therefore 

the Bureau believes that the purchaser 

of an interest in a pool of loans would 

understand that there would be no 

section 1071 obligation. Section 1071 

would already capture the lending 

information of the loans in this pool, as 

the application for each origination in 

the pool would already be reported 

(assuming it was originated by a covered 

financial institution and otherwise 

satisfies the requirements of proposed 

subpart B). For clarity, however, the 

Bureau is stating here that no reporting 

obligations arise from purchasing an 

interest in a pool of covered credit 

transactions, including credit-backed 

securities or real estate investment 

conduits. The Bureau believes that this 

clarification, similar to Regulation C 

comment 3(c)(4)–1, will assist covered 

financial institutions in understanding 

the scope of their obligations. 

The Bureau seeks comment on its 

proposal not to expressly exclude the 

purchase of an interest in a pool of 

covered credit transactions in the 

proposed rule’s regulatory text or 

commentary. 

Certain purchases of covered credit 

transactions—partial interests in a 

covered credit transaction. In the 

SBREFA Outline, the Bureau did not 

specifically solicit feedback on a 

financial institution’s obligation to 

report the purchase of a partial interest 

in a covered credit transaction (such as 

through participation loans, where 

multiple financial institutions fund a 

single origination); however, the Bureau 

did receive some feedback on this issue. 

One SER noted that there was some 

uncertainty with respect to how the 

Bureau intended to treat loan 

participations. This SER urged the 

Bureau not to discourage smaller credit 

unions in rural markets, who the SER 

stated may be likely to take part in loan 

participations, from helping their 

communities. The Panel did not provide 

a specific recommendation on this 

topic. Several other stakeholders also 

requested that the Bureau exempt 

participation loans. 

The Bureau believes that this 

feedback may be based in part on the 

requirements that apply to HMDA, 

where Regulation C requires financial 

institutions to report purchases of 


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438See Regulation B § 1003.4(a) (stating that a 

financial institution ‘‘shall collect data regarding 

. . . covered loans that it purchases for each 

calendar year’’). 

439See 12 U.S.C. 2803(a)(1) (stating that 

depository institutions ‘‘shall compile and make 

available . . . the number and total dollar amount 

of mortgage loans which were (A) originated (or for 

which the institution received completed 

applications), or (B) purchased by that institution’’). 

440 12 CFR 1003.3(c)(8). 

441See, e.g., 12 CFR 228.21(f) (stating that when 

assessing the record of a nonminority-owned and 

nonwomen-owned bank, the Board considers loan 

participation as a factor). 

442Comment 9(a)(3)–2. 

443See § 1002.9(a)(3)(ii). 

444See comment 9(a)(3)–2. 

445White Paper at 21 fig. 2. 

446SBREFA Outline at 21. 

447See id. 

covered loans under HMDA.438 This 

requirement is based on statutory 

language that contemplates data 

collection for loan purchases.439

However, Regulation C exempts from 

these general reporting requirements 

‘‘[t]he purchase of a partial interest in a 

closed-end mortgage loan or open-end 

line of credit’’ 440 As discussed in the 

section-by-section analysis of proposed 

§ 1002.103 above, ECOA section 704B(b) 

requires that financial institutions 

collect, maintain, and report to the 

Bureau certain information regarding 

‘‘any application to a financial 

institution for credit.’’ For covered 

financial institutions, the definition of 

‘‘application’’ (or, as used in this 

proposed rule, ‘‘covered application’’) 

will trigger data collection and reporting 

obligations with respect to covered 

credit transactions. Under this subpart, 

a partial purchase of a loan does not, in 

itself, generate an obligation for a 

covered financial institution to report 

small business lending data. There is 

thus no need to propose a similar 

exclusion in this subpart. 

The Bureau believes that this 

approach, combined with proposed 

§ 1002.109(a)(3), provides sufficient 

clarity for financial institutions that 

choose to take part in loan 

participations. For example, Financial 

Institution A receives an application for 

a covered credit transaction and 

approves the loan, and then Financial 

Institution A elects to organize a loan 

participation agreement where Financial 

Institutions B and C agree to purchase 

a partial interest. This is a covered 

credit transaction for Financial 

Institution A, but it is not a covered 

credit transaction for Financial 

Institutions B and C. The Bureau 

believes that this approach differs from 

how loan participations are reported by 

banks and savings associations under 

the CRA. That is, under the CRA, if the 

loan originated by Financial Institution 

A met the definition of a small business 

loan, then if any (or all) of the financial 

institutions were CRA loan reporters the 

loans may be reported under the 

CRA.441

The Bureau believes that the purposes 

of section 1071 counsel towards the 

broad collection of small business 

lending by financial institutions. The 

Bureau is further unaware of any reason 

why data with respect to such lending 

should not be collected because more 

than one financial institution holds an 

interest in a covered product. 

Conversely, the Bureau does not believe 

that requiring reporting by each 

financial institution with a partial 

interest in a covered credit transaction 

would further section 1071’s purposes, 

and is concerned that having a single 

loan reported by multiple financial 

institutions could compromise the 

quality of the section 1071 dataset. Read 

in conjunction with proposed 

§ 1002.109(a)(3), however, the Bureau 

believes that the covered credit 

transactions at issue here will 

nonetheless generally be reported by 

one covered financial institution, the 

financial institution that sold portions 

of the loan to other participants. 

The Bureau seeks comment on its 

proposal not to expressly exclude the 

purchase of a partial interest in a 

covered credit transaction in the 

proposed rule’s regulatory text or 

commentary. In particular, the Bureau 

solicits comment on how this proposed 

exclusion may differ from reporting 

obligations under the CRA, and if the 

Bureau adopted another approach, how 

overlapping reporters or data might be 

flagged to avoid double-counting certain 

information. 

Trade credit. Under existing 

Regulation B, trade credit refers to a 

‘‘financing arrangement that involves a 

buyer and a seller—such as a supplier 

who finances the sale of equipment, 

supplies, or inventory; it does not apply 

to an extension of credit by a bank or 

other financial institution for the 

financing of such items.’’ 442 Thus, trade 

credit typically involves a transaction in 

which a seller allows a business to 

purchase its own goods without 

requiring immediate payment, and the 

seller is not otherwise in the financial 

services business. Businesses offering 

trade credit generally do so as a means 

to facilitate the sale of their own goods 

and not as a stand-alone financing 

product. 

Most of the notification requirements 

of existing Regulation B do not apply to 

trade credit transactions.443 In a typical 

trade credit transaction, the seller is not 

otherwise in the financial services 

business.444 The Bureau’s White Paper 

estimated that trade credit represents 

approximately 21 percent of the 

aggregate dollar volume of various 

financial products used by small 

businesses.445 The Bureau understands 

that there are tens of thousands of 

merchants and wholesalers that extend 

credit to small businesses solely in 

connection with sale of goods and 

services by these trade creditors. 

In its SBREFA Outline, the Bureau 

stated that it was considering proposing 

that trade credit not be a covered 

product under section 1071.446 The 

Bureau stated that trade credit can be 

offered by entities that are themselves 

very small businesses and that the 

Bureau was concerned that these 

entities, in particular, may incur large 

costs relative to their size to collect and 

report 1071 data in an accurate and 

consistent manner.447

The Bureau only received a few 

comments regarding its proposal under 

consideration to exclude trade credit. A 

few stakeholders suggested that trade 

credit should be covered. One 

commenter noted that trade credit is 

used for a significant number of 

agricultural finance transactions 

(equipment financing and input 

financing for row crop farmers) and 

suggested that the Bureau should 

monitor this sector of the agricultural 

finance industry. A trade association 

stated that the exclusion of trade credit 

should apply not only to the seller of 

inventory and businesses facilitating the 

sale of inventory, but also its affiliates 

and facilitators because these entities 

generally provide financing only for the 

seller’s products and not for competing 

or unrelated products. The trade 

association cautioned that the collection 

and publication of data, if applied to 

such an affiliate, could significantly 

impact the seller’s ability to maintain 

trade secrets, as these data would 

provide competitors a comprehensive 

insight into the seller’s distribution and 

wholesale strategies, and it would also 

create a substantial risk to the 

applicants themselves due to privacy 

concerns. 

The Bureau is proposing to not cover 

trade credit in its 1071 rule. Proposed 

§ 1002.104(b)(1) would define trade 

credit as a financing arrangement 

wherein a business acquires goods or 

services from another business without 

making immediate payment to the 

business providing the goods or 

services. Proposed comment 104(b)(1)–1 

would provide that an example of trade 

credit is one that involves a supplier 

that finances the sale of equipment, 


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448See Leora Klapper et al., The Review of 

Financial Studies, Trade Credit Contracts, at 838– 

67 (vol. 25, issue 3, 2012), https://academic.

oup.com/rfs/article/25/3/838/1616515, and Justin 

Murfin & Ken Njoroge, The Review of Financial 

Studies, The Implicit Costs of Trade Credit 

Borrowing by Large Firms, at 112–45 (vol. 28, issue 

1, 2015), https://academic.oup.com/rfs/article/28/1/ 

112/1681329. 

449See § 1002.3(a). 

450 40 FR 49298, 49305 (Oct. 22, 1975). 

supplies, or inventory. Proposed 

comment 104(b)(1)–1 would provide 

that an extension of business credit by 

a financial institution other than the 

supplier for the financing of such items 

is not trade credit. Proposed comment 

104(b)(1)–2 would clarify that the 

definition of trade credit under existing 

comment 9(a)(3)–2 applies to relevant 

provisions under existing Regulation B, 

and that proposed § 1002.104(b)(1) is 

not intended to repeal, abrogate, annul, 

impair, or interfere with any existing 

interpretations, orders, agreements, 

ordinances, rules, or regulations 

adopted or issued pursuant to existing 

comment 9(a)(3)–2. 

The Bureau is proposing a definition 

of ‘‘covered credit transaction’’ that 

excludes trade credit pursuant to its 

authority under ECOA section 

704B(g)(1) to prescribe such rules and 

issue such guidance as may be 

necessary to carry out, enforce, and 

compile data under section 1071. While 

trade credit constitutes ‘‘credit’’ within 

the meaning of proposed § 1002.102(k), 

the Bureau believes that trade credit is 

categorically different from products 

like loans, lines of credit, credit cards, 

and MCAs and that there are several 

reasons to exclude it from coverage. 

Trade credit is not a general-use 

business lending product—that is, trade 

creditors generally extend credit as a 

means to facilitate the sale of their own 

goods, rather than offering it as a standalone financial product. The Bureau 

believes that while trade creditors might 

meet the definition in section 1071 of a 

financial institution, they are not 

financial services providers that manage 

compliance with regulatory 

requirements associated with making 

extensions of credit. The Bureau 

understands that trade credit can be 

offered by entities that are themselves 

very small businesses; the Bureau 

continues to be concerned that these 

entities, in particular, may incur large 

costs relative to their size to collect and 

report 1071 data in an accurate and 

consistent manner.448 Taken together, 

the Bureau is concerned that requiring 

trade credit to be reported under 

proposed subpart B may lead to 

significant data quality issues. The 

Bureau is also concerned that the fixed 

costs of coming into compliance with its 

1071 rule could lead these businesses to 

reduce or cease offering trade credit to 

their small business customers, which 

would run contrary to the community 

development purpose of section 1071. 

The Bureau notes that its proposed 

definition of trade credit in 

§ 1002.104(b)(1) is focused on the 

business providing the goods or services 

being financed. It thus does not extend 

to affiliates and facilitators of trade 

creditors that provide financing, even if 

only for the trade creditor’s products 

and not for competing or unrelated 

products. Provided that they otherwise 

meet the definition of a covered 

financial institution in proposed 

§ 1002.105(b), such affiliates and 

facilitators must collect and report data 

under the 1071 rule. The Bureau 

believes that, unlike trade creditors 

themselves, such affiliates and 

facilitators offer stand-alone credit 

products in the same way as other 

financial institutions. As such, the 

Bureau does not have the same concerns 

about data quality or market exit by 

affiliates and facilitators that it does 

about trade creditors themselves. 

The Bureau seeks comment on its 

proposal to exclude trade credit from 

the 1071 rule and on its proposed 

definition of trade credit. 

Public utilities credit. As noted above, 

the existing definition of business credit 

in § 1002.2(g) excludes public utilities 

credit, securities credit, incidental 

credit, and government credit, as 

defined in existing § 1002.3(a) through 

(d), from certain procedural 

requirements of existing Regulation B. 

For the purpose of proposed subpart B, 

the Bureau is proposing complete 

exclusions for public utilities credit 

from the definition of a covered credit 

transaction in proposed § 1002.104(b). 

In the SBREFA Outline, the Bureau 

did not expressly discuss treatment of 

public utilities credit transactions. 

However, the Bureau sought feedback 

on any products that should or should 

not be covered by the Bureau’s eventual 

1071 rule, and did not receive any 

feedback specific to public utilities 

credit. 

Proposed § 1002.104(b)(2) would 

exclude public utilities credit, as 

defined in existing § 1002.3(a)(1). 

Existing § 1002.3(a)(1) states that the 

term public utilities credit refers to 

extensions of credit that involve public 

utility services provided through pipe, 

wire, or other connected facilities, or 

radio or similar transmission (including 

extensions of such facilities), if the 

charges for service, delayed payment, 

and any discount for prompt payment 

are filed with or regulated by a 

government unit. Several existing 

Regulation B requirements do not apply 

to public utilities credit transactions.449

Existing comment 3(a)–1 explains that 

the definition applies only to credit for 

the purchase of a utility service, such as 

electricity, gas, or telephone service. 

Credit provided or offered by a public 

utility for some other purpose—such as 

for financing the purchase of a gas 

dryer, telephone equipment, or other 

durable goods, or for insultation or other 

home improvements—would not be 

excepted under proposed 

§ 1002.104(b)(2) but may be excepted if 

it constitutes trade credit under 

proposed § 1002.104(b)(1), or in the case 

of financing for certain home 

improvements, for example, if it does 

not constitute an extension of business 

credit under proposed § 1002.104(a). 

Existing comment 3(a)–2 states in part 

that a utility company is a creditor 

when it supplies utility service and bills 

the user after the service has been 

provided. 

The Bureau is proposing a definition 

of ‘‘covered credit transaction’’ that 

excludes public utilities credit pursuant 

to its authority under ECOA section 

704B(g)(1) to prescribe such rules and 

issue such guidance as may be 

necessary to carry out, enforce, and 

compile data under section 1071. The 

Bureau believes that excluding public 

utilities credit from the 1071 rule is 

reasonable for the same reasons as the 

Board enumerated when it adopted 

exemptions from certain procedural 

requirements under subpart A. 

Specifically, the Bureau is concerned 

that covering public utilities credit 

under 1071 could require ‘‘substantial 

changes in the forms and procedures of 

public utilities companies. Costs 

associated with such changes would, in 

all likelihood, be passed along to [small 

business owners].’’ 450 The Bureau notes 

that many of the policies and 

procedures of public utilities companies 

are separately regulated at the State and 

Municipal levels by public service 

commissions, and at the Federal level 

by the Federal Energy Regulatory 

Commission. The Bureau also believes 

that public utilities credit is akin to 

trade credit and thus is proposing to 

exclude it from coverage under subpart 

B for the same reasons. 

The Bureau seeks comment on its 

proposal to exclude public utilities 

credit. 

Securities credit. As noted above, the 

existing definition of business credit in 

§ 1002.2(g) excludes public utilities 

credit, securities credit, incidental 

credit, and government credit, as 

defined in existing § 1002.3(a) through 


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451See § 1002.3(b). 

452See § 1002.3(c). 

453 40 FR 49298, 49304 (Oct. 22, 1975). 

454 Id. 

455 Id. 

(d), from certain procedural 

requirements of existing Regulation B. 

For the purpose of proposed subpart B, 

the Bureau is proposing complete 

exclusions for securities credit from the 

definition of a covered credit 

transaction in proposed § 1002.104(b). 

In the SBREFA Outline, the Bureau 

did not expressly discuss treatment of 

securities credit transactions, but the 

Bureau sought feedback on any products 

that should or should not be covered by 

the Bureau’s eventual 1071 rule. The 

Bureau did not receive any feedback 

specific to securities credit. 

Proposed § 1002.104(b)(3) would 

exclude securities credit, as defined in 

existing § 1002.3(b)(1). Existing 

§ 1002.3(b)(1) states that the term 

securities credit refers to extensions of 

credit subject to regulation under 

section 7 of the Securities Exchange Act 

of 1934 or extensions of credit by a 

broker or dealer subject to regulation as 

a broker or dealer under the Securities 

Exchange Act of 1934. Several existing 

Regulation B requirements do not apply 

to securities credit transactions.451

The Bureau is proposing a definition 

of ‘‘covered credit transaction’’ that 

excludes securities credit pursuant to its 

authority under ECOA section 

704B(g)(1) to prescribe such rules and 

issue such guidance as may be 

necessary to carry out, enforce, and 

compile data under section 1071. The 

Bureau is proposing to exclude 

securities credit to foster consistency 

with existing Regulation B. 

The Bureau seeks comment on its 

proposal to exclude securities credit. 

Incidental credit. As noted above, the 

existing definition of business credit in 

§ 1002.2(g) excludes public utilities 

credit, securities credit, incidental 

credit, and government credit, as 

defined in existing § 1002.3(a) through 

(d), from certain procedural 

requirements of existing Regulation B. 

For the purpose of proposed subpart B, 

the Bureau is proposing complete 

exclusions for incidental credit from the 

definition of a covered credit 

transaction in proposed § 1002.104(b). 

In the SBREFA Outline, the Bureau 

did not expressly discuss treatment of 

incidental credit transactions, but the 

Bureau sought feedback on any products 

that should or should not be covered by 

the Bureau’s eventual 1071 rule. The 

Bureau did not receive any feedback 

specific to incidental credit. 

Proposed § 1002.104(b)(4) would 

exclude incidental credit, as defined in 

existing § 1002.3(c)(1), but without 

regard to whether the credit is consumer 

credit, as defined in existing § 1002.2(h). 

Existing § 1002.3(c)(1) states that 

incidental credit refers to extensions of 

consumer credit other than the types 

described in § 1002(a) and (b): (i) That 

are not made pursuant to the terms of 

a credit card account; (ii) that are not 

subject to a finance charge (as defined 

in Regulation Z § 1026.4); and (iii) that 

are not payable by agreement in more 

than four installments. A number of 

existing Regulation B requirements do 

not apply to ‘‘incidental credit’’ 

(referring to extensions of consumer 

credit).452 Existing comment 3(c)–1 

explains that if a service provider (such 

as a hospital, doctor, lawyer, or 

merchant) allows the client or customer 

to defer the payment of a bill, this 

deferral of debt is credit for purposes of 

the regulation, even though there is no 

finance charge and no agreement for 

payment in installments. Because of the 

exceptions provided by existing 

§ 1002.3, however, these particular 

credit extensions are excepted from 

compliance with certain procedural 

requirements as specified in § 1002.3(c). 

The Bureau is proposing a definition 

of ‘‘covered credit transaction’’ that 

excludes incidental credit pursuant to 

its authority under ECOA section 

704B(g)(1) to prescribe such rules and 

issue such guidance as may be 

necessary to carry out, enforce, and 

compile data under section 1071. The 

Bureau believes that the Board’s 

reasoning with respect to incidental 

credit’s limited exception under existing 

Regulation B is equally applicable and 

relevant here. The Board sought to 

minimize burdens on businesses that 

‘‘permit their customers to defer 

payment of debt as a convenience and 

are not in the business of extending 

credit.’’ 453 The Board cited the example 

of doctors and dentists that permit their 

patients to defer payment of fees and 

who are extending credit as incidental 

to their principal activity of health 

care.454 The Board also noted that 

‘‘[s]mall neighborhood businesses such 

as drugstores and grocery stores 

frequently permit their customers to 

postpone payment on an informal basis 

not associated with a formal credit 

plan.’’ 455 The Bureau believes that 

incidental credit, as described above, is 

akin to trade credit and thus is 

proposing to exclude it from coverage 

under subpart B for the same reasons. 

The Bureau seeks comment on its 

proposal to exclude incidental credit. 

Section 1002.105 Covered Financial 

Institutions and Exempt Institutions 

ECOA section 704B(h)(1) defines the 

term ‘‘financial institution’’ as ‘‘any 

partnership, company, corporation, 

association (incorporated or 

unincorporated), trust, estate, 

cooperative organization, or other entity 

that engages in any financial activity.’’ 

The Bureau is proposing to define a 

financial institution in § 1002.105(a) 

consistent with that statutory language. 

The Bureau is proposing to define a 

covered financial institution in 

§ 1002.105(b) as a financial institution 

that originated at least 25 covered credit 

transactions from small businesses in 

each of the two preceding calendar 

years. Only those financial institutions 

that meet this loan-volume threshold in 

the definition of a covered financial 

institution would be required to collect 

and report small business lending data 

pursuant to proposed subpart B. 

The Bureau’s proposed definitions 

reflect the broad nature of the data 

collection specified in section 1071, 

while recognizing the risks that 

financial institutions with the lowest 

volume of small business lending might 

reduce or cease their small business 

lending activity because of the fixed 

costs of coming into compliance with 

this rule. 

The Bureau is proposing § 1002.105 to 

implement ECOA section 704B(h)(1) 

and pursuant to its authority under 

704B(g)(1) to prescribe such rules and 

issue such guidance as may be 

necessary to carry out, enforce, and 

compile data pursuant to section 1071. 

The Bureau is also proposing 

§ 1002.105(b) pursuant to its authority 

under 704B(g)(2) to conditionally or 

unconditionally exempt any financial 

institution or class of financial 

institutions from the statute’s 

requirements, as the Bureau deems 

necessary or appropriate to carry out the 

purposes of section 1071. The Bureau is 

proposing these provisions and 

proposing to use its exemption authority 

under 704B(g)(2) for the reasons set 

forth below. 

105(a) Financial Institution 

Background 

ECOA section 704B(h)(1) defines the 

term ‘‘financial institution’’ as ‘‘any 

partnership, company, corporation, 

association (incorporated or 

unincorporated), trust, estate, 

cooperative organization, or other entity 

that engages in any financial activity.’’ 


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456SBREFA Outline at 10. 

457The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 18–20. 

458SBREFA Outline at 10. 

459For purposes of this notice of proposed 

rulemaking, the Bureau is using the term depository 

institution to mean any bank or savings association 

defined by the Federal Deposit Insurance Act, 12 

U.S.C. 1813(c)(1), or credit union defined pursuant 

to the Federal Credit Union Act, as implemented by 

12 CFR 700.2. The Bureau notes that the DoddFrank Act defines a depository institution to mean 

any bank or savings association defined by the 

Federal Deposit Insurance Act; there, that term does 

not encompass credit unions. 12 U.S.C. 

5301(18)(A), 1813(c)(1). To facilitate analysis and 

discussion, the Bureau is referring to banks and 

savings associations together with credit unions as 

depository institutions throughout this notice, 

unless otherwise specified. 

460SBREFA Outline at 11–13. 

461The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 18–20. 

SBREFA Proposals Under Consideration 

and Feedback Received 

At SBREFA, the Bureau stated it was 

considering proposing a general 

definition of ‘‘financial institution’’ 

consistent with the section 1071 

definition.456 The Bureau noted that 

Regulation B, which implements ECOA, 

has not otherwise defined this term. 

SERs generally did not express 

concern regarding the general definition 

of a ‘‘financial institution’’ under 

consideration, although one SER 

expressed concern at the broad reach of 

what might be considered a financial 

activity.457 The SBREFA Panel did not 

provide any recommendations on the 

definition of a financial institution. 

Feedback on the definition of ‘‘financial 

institution’’ from other stakeholders was 

likewise nearly universally positive, 

with most opining that a definition that 

encompasses all small business lenders 

would be appropriate. 

Proposed Rule 

Proposed § 1002.105(a) would define 

a financial institution as any 

partnership, company, corporation, 

association (incorporated or 

unincorporated), trust, estate, 

cooperative organization, or other entity 

that engages in any financial activity. 

This proposed definition restates the 

statute and is the same definition that 

the Bureau stated it was considering 

proposing in the SBREFA Outline.458

The Bureau believes that this definition 

reflects the broad nature of small 

business lending data collection 

specified in section 1071. Under such a 

definition, the rule’s data collection and 

reporting requirements would apply to 

a variety of entities that engage in small 

business lending, including depository 

institutions (i.e., banks, savings 

associations, and credit unions),459

online lenders, platform lenders, CDFIs, 

lenders involved in equipment and 

vehicle financing (captive financing 

companies and independent financing 

companies), commercial finance 

companies, governmental lending 

entities, and nonprofit, nondepository 

lenders. 

As noted above, one SER expressed 

concern at the broad reach of this 

definition. But the broad scope of what 

may be considered a ‘‘financial activity’’ 

in the proposed definition of financial 

institution is not the principal 

determinative factor as to whether small 

business lending data collection and 

reporting is required; the proposed 

definition of a covered financial 

institution, the proposed definition of a 

covered application, and the proposed 

definition of a covered credit 

transaction, among others, all would 

impose limits on what entities could be 

subject to this proposed rule’s data 

collection and reporting requirements. 

Proposed comment 105(a)–1 would 

provide a non-exhaustive list of 

examples of entities that may fit within 

the definition of a financial institution. 

This proposed comment would make 

clear that nonprofit and governmental 

entities, governmental subdivisions, or 

governmental agencies, among others, 

who conduct financial activity fit within 

the definition of a financial institution. 

The definition of the term ‘‘financial 

institution’’ in ECOA section 704B(h)(1) 

includes the phrase ‘‘or other entity.’’ 

That term readily encompasses 

governments and government entities. 

Even if the term were ambiguous, the 

Bureau believes—based on its expertise 

and experience—that interpreting it to 

encompass governments and 

government entities would promote the 

purposes of section 1071. For example, 

the Bureau believes that it will be 

helpful to identify the business and 

community development needs of 

women-owned, minority-owned, and 

small businesses by collecting lending 

data from both a county-run assistance 

program for establishing new businesses 

and financial institutions that operate 

nationwide, like online lenders. The 

Bureau also believes that the terms 

‘‘companies’’ or ‘‘corporations’’ under 

the definition of ‘‘person,’’ on their face, 

cover all companies and corporations, 

including government-owned or 

-affiliated companies and corporations. 

And even if those terms were 

ambiguous, the Bureau believes—based 

on its expertise and experience—that 

interpreting them to cover governmentowned or -companies and corporations 

would promote the purposes of section 

1071. The Bureau emphasizes that the 

list of examples of entities in proposed 

comment 105(a)–1 is not exhaustive and 

that other entities not specifically 

described would nonetheless fit within 

the definition of a financial institution 

under proposed § 1002.105(a). For 

example, the Bureau believes that an 

organization offering insurance 

premium financing, where the 

organization provides short-term loans 

to businesses to pay for property and 

casualty insurance, is included within 

the definition of proposed § 1002.105(a), 

even though this specific business 

model is not described in proposed 

comment 105(a)–1. 

Proposed comment 105(a)–2 would 

refer to proposed § 1002.101(a) to 

reiterate the statutory exclusion for 

motor vehicle dealers. 

The Bureau seeks comment on this 

proposed definition of a financial 

institution, and generally requests 

comment on whether additional 

clarification is needed. 

105(b) Covered Financial Institution 

Background 

The Bureau has received requests to 

adopt exemptions from section 1071 

collection and reporting requirements 

for financial institutions that do not 

frequently engage in small business 

lending. Reasons cited have included 

encouraging market entry, ensuring data 

quality, alleged lack of materiality of 

data from smaller lenders that rarely 

make small business loans, and lack of 

capacity by the lenders sufficient to 

justify small business lending as a line 

of business in light of the cost of 

complying with an eventual 1071 rule. 

SBREFA Proposals Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated that it was considering, in light of 

section 1071’s statutory purposes, 

proposing to exempt financial 

institutions from any collection and 

reporting requirements based on either 

or both a size-based and/or activitybased threshold. In the SBREFA 

Outline, the Bureau set forth several 

alternative thresholds under 

consideration for such an exemption.460

There was a diversity of perspectives 

with respect to the Bureau’s approaches 

under consideration regarding potential 

exemptions.461 While some SERs 

stressed the need for expansive lender 

coverage to fulfill section 1071’s 

purposes, others suggested that such 

purposes could be fulfilled by the 

Bureau collecting and reporting data 

from only the largest lenders. SERs also 

offered varying opinions regarding the 

exemption metrics and thresholds under 


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56418 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

462 Id. at 43. 

463 Id. 

464SBREFA Outline at 12–13. 465 Id. at 11–12. 

consideration, with some SERs favoring 

activity-based exemptions and others 

preferring an asset-based approach. 

SERs uniformly supported clear, 

predictable collection and reporting 

exemption thresholds. 

The SBREFA Panel recommended 

that the Bureau continue to explore 

whether either or both a size-based or 

activity-based test might be appropriate 

to determine whether a financial 

institution must collect and report 1071 

data or should be exempt, given section 

1071’s statutory purposes.462 The 

SBREFA Panel also recommended that 

the Bureau continue to explore whether 

the fixed costs of coming into 

compliance with an eventual 1071 rule 

might cause certain financial 

institutions to reduce or cease lending 

to small businesses, as it considers the 

possible exemptions for financial 

institutions based on size and/or 

activity, along with any alternative 

approaches.463

Feedback from other stakeholders 

generally was in support of exempting 

certain financial institutions from 1071 

collection and reporting obligations. 

Most feedback in support of pursuing 

exemptions focused on the potential 

burden of a new regulatory regime, with 

some stakeholders cautioning that 

collection and reporting obligations 

could lead to an increase in the cost of 

credit. A few stakeholders connected 

these potential costs with section 1071’s 

purpose to identify community 

development needs and opportunities 

(chiefly arguing that costs might lead to 

higher costs of lending or lower lending 

volume), or otherwise expressed a 

general belief that some exemptions 

were consistent with statutory purposes. 

Several stakeholders, mostly community 

groups, urged caution with respect to 

the extent of any such exemptions, 

arguing that significant data limitations 

would run contrary to the general 

purposes of section 1071. 

Activity-based exemption. In the 

SBREFA Outline, the Bureau stated that 

it was considering whether only 

financial institutions that engage in a 

certain amount of small business 

lending activity should be required to 

collect and report 1071 data.464 The 

Bureau explained that in light of 1071’s 

potentially broad application to 

financial institutions, an activity-based 

test to determine reporting 

responsibility might be appropriate. In 

particular, the Bureau expressed 

concern that financial institutions with 

the lowest volume of small business 

lending might reduce or cease their 

small business lending activity because 

of the fixed costs of coming into 

compliance with an eventual 1071 rule. 

The Bureau stated that this result could 

be contrary to the community 

development purpose of section 1071. 

The Bureau specifically mentioned 

three possible activity-based threshold 

levels, each defined by a financial 

institution’s annual number of small 

business loans originated or the 

financial institution’s annual total dollar 

value of small business loans originated. 

(That is, if either measurement is 

exceeded, then the financial institution 

must collect and report 1071 data.) 

Those three possible activity-based 

threshold levels were: Originations of at 

least 25 loans or $2.5 million (Option 1 

Exemption Threshold); originations of at 

least 50 loans or $5 million (Option 2 

Exemption Threshold); and originations 

of at least 100 loans or $10 million 

(Option 3 Exemption Threshold). These 

possible activity-based thresholds could 

be based on the financial institution’s 

lending as of the end of the last calendar 

year, or the end of each of the last two 

calendar years. An activity-based 

exemption could apply to depository 

and nondepository institutions alike. 

Some SERs advocated for an activitybased exemption. Several of these SERs 

preferred an annual 25-loan threshold 

(with at least one expressing support 

specifically for the Option 1 Exemption 

Threshold). One SER preferred the 

Option 2 Exemption Threshold, while 

another preferred the Bureau’s Option 3 

Exemption Threshold. Another SER 

recommended setting a threshold of 

more than 100 small business 

applications (rather than originations) 

for two consecutive years. These SERs 

emphasized a general need for thorough 

data reporting from a wide variety of 

lenders, and cautioned that in many 

smaller and rural markets, larger 

exemptions might result in little or no 

data collection given that many lenders 

in those markets make very few small 

business loans annually. 

One SER suggested setting an activitybased threshold based on loan portfolio 

size rather than annual originations. 

Another SER suggested that the Bureau 

consider exempting certain financial 

institutions using a location test similar 

or identical to what is used for HMDA, 

which does not apply to institutions 

that do not have a home or branch office 

in a Metropolitan Statistical Area. 

There was no uniformity in the 

feedback from other stakeholders with 

respect to an activity-based exemption 

and its potential level. Many 

commenters, including lenders, trade 

associations, and community groups, 

expressed support for the Option 1 

Exemption Threshold, although most 

explicitly supported only the 25-loan 

threshold. On the other hand, a few 

comments advocated for versions of the 

Option 3 Exemption Threshold and 

many comments urged the Bureau to 

adopt a threshold higher than the 

Option 3 Exemption Threshold. 

Commenters who advocated for higher 

thresholds consisted of lenders and 

trade associations. 

Size-based exemption. In the SBREFA 

Outline, the Bureau stated that it was 

concerned that the smallest financial 

institutions might reduce or cease their 

small business lending activity because 

of the fixed costs of coming into 

compliance with an eventual 1071 rule, 

which could be contrary to the 

community development purpose of 

section 1071.465 Specifically, the Bureau 

considered whether depository 

institutions with assets under a given 

threshold should be exempt from 

collecting and reporting small business 

lending data. 

The Bureau stated that it was 

considering proposing to exempt 

depository institutions with assets 

under a given threshold from section 

1071’s data collection and reporting 

requirements. The Bureau postulated 

that this size-based approach could 

provide a straightforward exemption for 

very small depository institutions and 

avoid the need for those entities to 

measure or monitor their small business 

lending activity in order to determine 

whether they would be exempt from the 

Bureau’s 1071 rule. In particular, the 

Bureau considered possible asset-based 

exemption threshold levels of $100 

million (Option A Exemption Level) and 

$200 million (Option B Exemption 

Level). For purposes of this exemption, 

the Bureau considered proposing that a 

depository institution measure assets as 

of the end of the last calendar year, or 

the end of both of the last two calendar 

years. The Bureau asked SERs whether 

there were alternative approaches to a 

size-based exemption that the Bureau 

should consider. 

SERs did not suggest size-based 

exemptions other than an asset-based 

metric that would apply to depository 

institutions. A few SERs advocated that 

the Bureau should consider initially 

exempting lenders other than ‘‘large’’ 

financial institutions (which, one SER 

suggested, might be defined for 

depository institutions as those having 

more than $1 billion in assets). These 

SERs stated that this approach would 

capture the vast majority of small 

business loans while avoiding imposing 


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Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56419 

466 Id. at 13. 467Public Law 116–136, 134 Stat. 281 (2020). 

468Native CDFIs are organizations certified as 

community development financial institutions that 

primarily serve a Native Community and are 

therefore eligible for Financial Assistance and 

Technical Assistance awards provided by the 

Native American CDFI Assistance Program. CDFI 

Fund, Fostering Economic Self-Determination for 

Your Native Community, https://www.cdfifund.gov/ 

sites/cdfi/files/documents/cdfi7205_fs_ni_

updatedfeb20.pdf (last visited Aug. 12, 2021). 

469SBREFA Panel Report at 43. 

undue regulatory burden on smaller 

lenders, who might be less capable of 

absorbing such costs. They suggested 

that the Bureau might later consider 

whether to expand section 1071 data 

collection and reporting requirements to 

smaller financial institutions after first 

analyzing the available data. Several 

SERs cautioned that some financial 

institutions, particularly small 

nondepository lenders, might cease 

lending to small businesses if the 

eventual 1071 rule’s one-time costs are 

too high. 

One SER stated that a $200 million 

asset-based exemption would be helpful 

to small depository lenders, and others 

suggested that a threshold of $600 

million was appropriate. Another SER 

countered, however, that they were 

unaware of data to support an assetbased exemption larger than $100 

million. Some SERs expressly opposed 

an asset-based exemption; one SER 

cautioned that an exemption based 

solely on asset size would be 

inadvisable because many lenders do 

not hold their loans on their balance 

sheet. Another SER stated that adopting 

an asset-based exemption would risk 

excluding the collection of nearly all 

small business lending data in certain 

regions. 

Input from other stakeholders was 

split. Many stakeholders supported a 

size-based exemption (typically an 

asset-based exemption), contending that 

small depository institutions faced 

substantial compliance costs and 

presented a lower likelihood of fair 

lending violations. Small depository 

institutions were also particularly 

concerned about data security issues. 

However, a number of other 

stakeholders counseled against a sizebased exemption, arguing that 

exemptions should be based instead on 

lending activity, and that size-based 

exemptions risked under-reporting in 

important markets. In addition, some 

stakeholders noted that because there 

was no ready equivalent size-based 

measurement for nondepository 

institutions, including an asset-based 

exemption in the 1071 rule would put 

other small financial institutions at a 

cost disadvantage. 

Combined exemption. The Bureau 

stated that it was exploring whether to 

combine the size- and activity-based 

approaches.466 Under a combined 

approach, a financial institution would 

be required to collect and report 1071 

data if it exceeds either: (1) A given 

annual number of small business loans 

originated; or (2) annual total small 

business lending, measured in dollars. 

However, depository institutions with 

assets under a given asset threshold 

would be exempt from reporting, 

regardless of the number or dollar value 

of small business loans they originated 

during the relevant time period. 

At least one SER supported a 

combined size-based and activity-based 

exemption. Some SERs also suggested 

other possible bases for setting 

exemption thresholds. For example, 

several SERs suggested that the Bureau 

focus on the number of small business 

loans that would be covered or 

excluded, rather than the number of 

financial institutions, in setting an 

exemption threshold. One SER 

suggested setting a threshold based on 

loan portfolio size rather than annual 

originations. As discussed above, 

another SER suggested that the Bureau 

consider exempting certain financial 

institutions using a location test similar 

or identical to what is used for HMDA, 

which does not apply to institutions 

that do not have a home or branch office 

in a Metropolitan Statistical Area. 

Alternative exemptions. The Bureau 

did not express that it was considering 

other collection and reporting 

exemptions. However, the Bureau did 

request feedback on alternative 

approaches. In particular, the Bureau 

asked whether there were certain types 

of financial institutions, such as 

governmental lending entities or 

nonprofit nondepository lenders, that 

the Bureau should consider not 

including within 1071’s data collection 

and reporting requirements. 

One credit union SER requested that 

the Bureau exempt all credit unions 

from section 1071 data collection and 

reporting requirements, asserting that 

credit unions had not displayed what 

they characterized as a ‘‘pattern of 

unfair lending.’’ In contrast, another 

SER cautioned against providing 

exemptions for particular types of 

financial institutions, noting the risk of 

missing important lending data. A few 

SERs, particularly CDFIs, strongly 

preferred that all lenders, including 

nonprofit and government lenders, be 

subject to section 1071 data collection 

and reporting requirements. One SER 

asserted that disparities exist in many 

forms of small business lending, 

including the SBA’s 7(a) Loan Program, 

State lending programs, and funds 

distributed through the recent 

Coronavirus Aid, Relief, and Economic 

Security Act (CARES Act).467 Another 

SER stated that in certain parts of the 

country, such as the Midwest, Farm 

Credit System loans are available to 

small businesses, and thus Farm Credit 

institutions are in competition with 

other lenders and should be covered 

entities. One SER stated that the Bureau 

should consider exempting 

nondepository, nonprofit Native CDFIs 

because section 1071 data collection 

and reporting requirements might 

impose significant compliance costs and 

privacy concerns.468 The SBREFA Panel 

recommendations did not directly 

address this topic, although the Panel 

did recommend that the Bureau 

continue to consider alternative 

approaches to exemptions.469

Feedback from other stakeholders 

included a variety of suggestions for 

other types of financial institutions that 

the Bureau should consider exempting. 

These suggestions were made by 

financial institutions (or their trade 

associations) to describe either 

themselves or portions of their 

membership. The Bureau received this 

feedback pertaining to CDFIs, credit 

unions, minority depository 

institutions, financial institutions in 

rural areas or low- and moderate-income 

areas, financial institutions that would 

themselves be small businesses under 

the rule, and motor vehicle dealers. 

Conversely, some stakeholders 

encouraged the Bureau not to provide 

any such categorical exemptions. One 

stakeholder also urged the Bureau not to 

exempt government or nonprofit 

lenders, arguing that they were an 

important element of achieving broad 

coverage in 1071 data. 

Proposed Rule—Activity-Based 

Exemption 

Proposed § 1002.105(b) would define 

a covered financial institution as a 

financial institution that originated at 

least 25 covered credit transactions for 

small businesses in each of the two 

preceding calendar years. This proposed 

definition adopts the portion of the 

Option 1 Exemption Threshold based on 

number of originations discussed at 

SBREFA, using the two consecutive year 

approach that was also described at 

SBREFA. The Bureau believes this 

definition will facilitate compliance by 

describing which financial institutions 

are required to collect and report small 

business data. The Bureau is also 

proposing commentary to accompany 

proposed § 1002.105(b). The Bureau’s 


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56420 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

470ECOA section 704B(a). 471SBREFA Outline at 12. 

rationale for proposing this exemption, 

and for not proposing any others, is 

discussed in detail below. 

In general, the Bureau believes that 

fulfilling the purposes of section 1071 

necessitates collecting small business 

lending data from all sizes and types of 

financial institutions (other than those 

with a low volume of lending activity), 

particularly given the variety of entities 

identified in ECOA section 704B(h)(1). 

The Bureau is proposing to exempt 

certain financial institutions from its 

small business lending data collection 

rule because it remains concerned that 

financial institutions with the lowest 

volume of small business lending might 

reduce or cease their small business 

lending activity due to the fixed costs of 

coming into compliance with the 1071 

rule. A reduction in access to credit 

would run contrary to the community 

development purpose of section 1071. 

Section 1071 describes its community 

development purpose as ‘‘enabl[ing] 

communities, governmental entities, 

and creditors to identify business and 

community development needs and 

opportunities of women-owned, 

minority-owned, and small 

businesses.’’ 470 In the Bureau’s view, 

such business and community 

development opportunities cannot be 

appropriately identified if the 1071 rule 

unduly eliminates those opportunities 

by reducing access to credit, which, as 

explained below, supports the Bureau’s 

use of its exemption authority under 

704B(g)(2) here. Feedback from SBREFA 

showed that a broad array of financial 

institutions, trade associations, 

community groups, and others share the 

Bureau’s concern about the risk of 

reducing access to small business credit, 

particularly with respect to financial 

institutions that infrequently lend to 

small businesses. 

The Bureau is proposing § 1002.105(b) 

pursuant to its authority under ECOA 

section 704B(g)(1) to prescribe such 

rules and issue such guidance as may be 

necessary to carry out, enforce, and 

compile data pursuant to section 1071 

and its authority under 704B(g)(2) to 

adopt exceptions to any requirement of 

section 1071 and, conditionally or 

unconditionally, exempt any financial 

institution or class of financial 

institutions from the requirements of 

section 1071, as the Bureau deems 

necessary or appropriate to carry out the 

purposes of section 1071. 

The Bureau believes that an activitybased threshold would provide a simple 

basis for financial institutions that 

infrequently lend to small businesses to 

determine whether they have conducted 

sufficient lending activity as to be 

required to collect and report data under 

proposed subpart B. With respect to 

setting an activity-based threshold, 

feedback favored using only 

originations. SERs uniformly supported 

clear, predictable collection and 

reporting exemption thresholds. With 

respect to feedback from other 

stakeholders, nearly all of the comments 

that expressed support for the Option 1 

Exemption Threshold provided support 

only for the 25-loan metric, and not the 

total lending metric (and several 

comments explicitly urged the Bureau 

not to adopt the $2.5 million lending 

threshold). The Bureau believes that 

furnishing a dual activity-based 

threshold, under which infrequent 

lenders must ascertain both 

measurements to determine whether 

reporting may be required, would cut 

against the goal of simplifying the rule 

as lenders would then have to track two 

metrics, not one. The Bureau believes 

that a dual threshold would create more 

regulatory complexity as, among other 

things, the resulting rule would have to 

address issues such as how lines of 

credit and credit cards are meant to be 

counted towards the dollar volume 

threshold. (For example, should the rule 

use the maximum amount that could be 

extended or something else, like an 

average of the amount actually 

outstanding? If the former, how should 

changes in the limit be treated?) In 

contrast, tracking total annual small 

business originations does not entail 

such complexity. 

In particular, the Bureau believes that 

a primary advantage of an activity-based 

threshold—ease of compliance—would 

be undermined if the Bureau were to 

implement a complex, dual threshold 

eligibility test. The Bureau wishes to 

ensure that infrequent lenders are not 

incurring significant undue compliance 

costs, particularly while not reporting 

data. In general, tracking two thresholds 

is more complex than tracking one. And 

of these two thresholds, the Bureau 

believes that tracking total originations 

is simpler than tracking total lending. 

The Bureau believes it is also more 

likely that financial institutions are 

already tracking total originations. The 

Bureau believes that proposing an 

activity-based threshold that employs 

data already generally collected by 

financial institutions could mitigate the 

risk that section 1071, when 

implemented, would result in reduced 

access to credit. 

The Bureau is thus proposing to set 

the loan-volume threshold at 25 covered 

credit transactions from small 

businesses in each of the past two years. 

This proposal is based, in part, on 

feedback received at SBREFA. As 

mentioned above, several SERs 

recommended an annual 25-loan 

threshold and many comments, 

including those from lenders, trade 

associations, and community groups, 

expressed support for the Option 1 

Exemption Threshold, with most 

explicitly supporting just the 25-loan 

threshold and not total lending. 

The Bureau continues to consider 

whether this loan-volume threshold 

should be set at a different level, such 

as 50 or 100 originations, as described 

in the SBREFA Outline.471 The Bureau 

notes that there was also substantial 

support for a much higher loan-volume 

threshold than 25 originations. In 

addition to the SER feedback discussed 

above, several stakeholders advocated 

for 100 loans and many others 

advocated for an even higher threshold. 

However, at least to this point, the 

Bureau is not convinced, based on the 

feedback from SERs and other 

stakeholders, that higher thresholds 

would be more necessary or appropriate 

to carry out the purposes of section 

1071. Rather, such advocacy focused 

either on concerns that lower thresholds 

would not exempt a particular financial 

institution or type of financial 

institution, such as community banks, 

or that higher thresholds would not 

substantially diminish overall data 

collection. 

Supporters of the 25-loan threshold 

and supporters of the 100-loan 

threshold each argued that such a 

threshold would be similar to that used 

in HMDA. The Bureau’s 2015 HMDA 

Rule set the closed-end loan threshold 


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472See 80 FR 66127 (Oct. 28, 2015). The Bureau 

also provided a higher threshold of 100 for openend lines of credit. Id. 473See 85 FR 28364 (May 12, 2020). 

474On the bank Call Report and in the 

Community Reinvestment Act data, for small bank 

and small farm loans, banks report on business 

loans with original amounts of $1 million or less 

and farm loans with original amounts of $500,000 

or less. For lines of credit or loan commitments, 

banks report the size of the line of credit or 

commitment when it was most recently approved. 

Banks include loans guaranteed by the SBA and 

other government entities in their small loans to 

businesses. Banks do not report loans to nonprofit 

organizations in this category. Thus, these data 

collections would include loans made to purchase, 

for example, individual vehicles and pieces of 

equipment for the nation’s largest businesses. 

475This document is available at https://

www.consumerfinance.gov/data-research/researchreports/supplemental-estimation-methodologiessmall-business-lending-data-collection-nprm/. 

at 25 originated loans for each of the 

two preceding calendar years.472

However, in 2020, the Bureau increased 

the threshold to 100 closed-end loans, 

effective the same year.473 The Bureau 

set the HMDA threshold pursuant to its 

authority to provide adjustments or 

exceptions that it judges as necessary 

and proper to effectuate the purposes of 

HMDA or to facilitate compliance with 

HMDA. In the present case, with respect 

to institutional coverage thresholds, the 

Bureau does not believe a direct 

comparison with HMDA is instructive 

because of differences in the relevant 

statutory authorities and between home 

mortgages and small business loans. 

The Bureau also considered how its 

proposed threshold of 25 covered credit 

transactions for small businesses (and 

the other thresholds under 

consideration at SBREFA) might affect 

overall collection and reporting of 1071 

data from banks and credit unions, 

based on data as of 2019. Table 1 below 

provides the Bureau’s estimated share of 

depository institutions, estimated share 

of small business loans from those 

institutions (measured in total number 

of loans), and estimated share of small 

business credit from those institutions 

(measured in dollars) that would be 

covered by a loan-volume threshold of 

25, 50, or 100 small business loans. The 

Bureau estimates that a depository 

institution is covered for a particular 

loan-volume threshold as of 2019 if the 

estimated number of originations for 

that institution exceeded the threshold 

in both 2017 and 2018. Given the 

limitations of the source data, the 

Bureau cautions that these estimates are 

not intended to provide a complete 

sense of the possible consequences of 

adopting each particular threshold. 

Nonetheless, the Bureau is providing 

estimates based on these data because it 

is the best information currently 

available to the Bureau. Moreover, the 

Bureau emphasizes that these estimates 

apply only to depository institutions. 

This information is based on FFIEC and 

Credit Union Call Reports, as well as 

Community Reinvestment Act 

submissions.474 Under these data 

collections, banks report small loans 

made to businesses and farms 

(regardless of the borrower’s size). 

Credit unions report commercial loans 

over $50,000 made to members (also, 

regardless of the borrower’s size). The 

Bureau is unable to determine the 

degree to which these data provide an 

adequate proxy for the applications 

from small businesses that would be 

subject to 1071 reporting. The 

methodologies and assumptions used to 

produce these estimates are further 

documented in part VII.D below and in 

more detail in its Supplemental 

estimation methodology for institutional 

coverage and market-level cost 

estimates in the small business lending 

data collection notice of proposed 

rulemaking released concurrently with 

this proposal.475


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476There were 10,525 depository institutions as 

of December 31, 2019, including 112 credit unions 

that are not federally insured. 

477Based on FFIEC Call Report data, there were 

5,177 banks and savings associations as of 

December 31, 2019. 

478Based on the 2019 NCUA Call Report data, 

there were 5,348 credit unions as of December 31, 

2019, including 112 credit unions that are not 

federally insured. 

Table 1 above shows that as the loanvolume threshold rises, the estimated 

share of depository institutions subject 

to section 1071 decreases substantially. 

Likewise, the estimated share of small 

business loans and small business credit 

captured by the rule would also 

decrease, although those decreases are 

less pronounced. The Bureau has no 

information for nondepository 

institutions such that the Bureau could 

provide similar estimates for comment. 

The Bureau requests in response to this 

proposal such information and data that 

might bear on any activity-based 

exemption for nondepository 

institutions.476 477 478

The Bureau notes that the above 

estimates represent small business 

lending data prior to the COVID–19 

pandemic and ensuing policy responses. 

The Bureau is keenly aware that many 

financial institutions, including those 

that may not have historically 

participated actively in small business 

lending, served their communities by 

becoming participating lenders in the 

SBA’s Paycheck Protection Program. 

This program ended on May 31, 2021. 

The Bureau expects that by the time its 

1071 rule is finalized and implemented, 

lending activity conducted pursuant to 

the SBA’s Paycheck Protection Program 

will not be determinative of whether a 

given financial institution qualifies as a 

covered financial institution under the 

1071 rule. The Bureau will continue to 

monitor the market and consider what 

other adjustments, if any, may be 

needed to ensure that, to the best of the 

Bureau’s ability, the 1071 rulemaking is 

informed by up-to-date and accurate 

information about the small business 

lending market. 

The Bureau seeks comment on its 

proposed 25 originations threshold 

incorporated into the definition of a 

covered financial institution. The 

Bureau also solicits comment on 

whether this threshold should 

alternatively be set at 50 or 100 covered 

credit transactions. 

The Bureau is proposing to define a 

covered financial institution using a 

loan-volume threshold that must be 

achieved in each of the two preceding 

calendar years. SERs provided relatively 

little feedback directly on the 

measurement period, but broadly 

expressed a desire for clear, predictable 

collection and reporting thresholds. The 

Bureau received substantial feedback 

advocating for a two-year approach, but 

little feedback asking for a one-year 

threshold period. A few stakeholders 

also expressed interest in a 

measurement period longer than two 

years. 

The Bureau acknowledges that a loanvolume threshold based on a two-year 

period could create some operational 

complexity for some financial 

institutions. To be sure that it was not 

a covered financial institution, a 

financial institution would need to 

maintain records sufficient to show total 

small business originations for both 

years of the threshold period. The 

Bureau believes that two years is not a 

prohibitively long time, although it is 

possible that infrequent lenders may 

have smaller staff or fewer resources to 

reliably track such information for 1071 

purposes. The Bureau believes that a 

two-year threshold period is advisable 

to eliminate uncertainty surrounding 

data collection responsibilities. Under 

this proposal, a financial institution that 

may not frequently lend to small 

businesses, but that experiences an 

unusual and unexpectedly high lending 

volume in a single year would not be a 

covered financial institution. As 

discussed in part VII below, in order to 

comply with the Bureau’s proposed 

1071 rule, a financial institution may 

need to undertake substantial one-time 

costs that include operational changes, 

such as staff training, information 

technology changes, and develop 

policies and procedures. Therefore, the 

Bureau believes that it is appropriate to 

propose a two-year threshold period to 

provide more stability around reporting 

responsibilities. Regulations that 

implement HMDA and the Community 

Reinvestment Act provide similar 

periods to determine coverage. 

The Bureau notes that employing a 

two-year approach would delay 

reporting for new, potentially active 

entrants. For example, under this 

proposal a large lender that enters the 

market and originates hundreds or even 

thousands of small business loans in its 

first two calendar years of lending 

would not report its covered 

applications. That is, under the Bureau’s 

proposal, this financial institution 

would not be required to collect and 

report 1071 data on its covered 

applications for small businesses in 

those first two years, although the 

institution could choose to voluntarily 

collect and report data. The Bureau has 

concerns, however, about triggering data 

collection and reporting requirement 

based on lenders’ estimates of their 

projected future volume. 

The proposed two-year threshold 

period may pose other considerations 

for financial institutions that conduct 

small business lending activity near the 

proposed 25 small business originations 

threshold. See the section-by-section 

analysis of proposed § 1002.5(a)(4) 

above for a discussion of proposed 

§ 1002.5(a)(4)(viii), which would allow a 

financial institution to collect ethnicity, 

race, and sex information pursuant to 

proposed subpart B for a covered 

application under certain circumstances 

during the second year of the threshold 

period. See the section-by-section 

analysis of proposed § 1002.114(c) 

below for discussion of additional 

flexibility that the Bureau is proposing 

regarding measuring lending activity 

prior to the rule’s compliance date. 

The Bureau is proposing to set the 

activity-based threshold based on small 

business originations, rather than 

applications. The statutory language of 

1071 generally applies to applications; 

however, the Bureau believes that using 

small business originations for purposes 

of defining a covered financial 

institution is the better approach. The 

Bureau expects that financial 

institutions track their small business 

application volumes in various ways, 

but whether an origination resulted is a 

clear and readily identifiable metric. 

The Bureau is concerned that 

attempting to use an exemption metric 

based on applications would impose 

new obligations on financial institutions 

solely for purposes of determining 

whether or not they are subject to this 

rule. As discussed above, the Bureau 

believes that proposing an activitybased threshold that employs data 

already generally collected by financial 

institutions could mitigate the risk that 

section 1071, when implemented, 

would result in reduced access to credit. 

In addition, even those financial 

institutions that track total applications 

now may not do so in a way that fully 

aligns with how the Bureau is proposing 

to define covered applications for 

purposes of proposed subpart B. Using 

originations is also consistent with the 

Bureau’s Regulation C. In addition, the 

Bureau received limited feedback 

advocating for the use of applications to 

set the activity-based threshold. 

Proposed comment 105(b)–1 would 

clarify the meaning of a preceding 

calendar year for purposes of the 

proposed activity-based exemption. See 

the section-by-section analysis of 

proposed § 1002.114(c)(2) below for 

additional discussion regarding 

measuring lending activity prior to the 

rule’s compliance date. Proposed 


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479See Regulation C comments 2(g)–3 and –4. 

480Small Business Credit Survey of Firms Owned 

by People of Color at 14. 

481 12 U.S.C. 5511(a). 

comment 105(b)–2 would emphasize 

that a financial institution qualifies as a 

covered financial institution based on 

total covered credit transactions 

originated for small businesses, rather 

than covered applications received from 

small businesses. Proposed comment 

105(b)–3 would explain that whether a 

financial institution is a covered 

financial institution depends on its 

particular small business lending 

activity in the two preceding calendar 

years, and that the obligations of a 

covered financial institution is an 

annual consideration for each year that 

data may be compiled and maintained 

under proposed § 1002.107(a). 

The Bureau is proposing to clarify in 

§ 1002.105(b) that for purposes of 

defining a covered financial institution, 

if more than one financial institution 

was involved in the origination of a 

covered credit transaction, only the 

financial institution that made the final 

credit decision approving the 

application shall count the origination. 

The Bureau believes that providing this 

clarifying language would assist 

financial institutions in understanding 

which transactions count towards the 

loan-volume threshold. This approach is 

consistent with the Bureau’s proposed 

§ 1002.109(a)(3). 

Proposed comments 105(b)–4 and –5 

would explain when a financial 

institution is a covered financial 

institution following a merger or 

acquisition. These proposed comments 

are largely consistent with the Bureau’s 

approach to reporting obligations 

surrounding a merger under Regulation 

C,479 with modifications to reflect the 

nature of the small business lending 

market and to provide additional 

clarifications. 

Proposed comment 105(b)–6 would 

clarify that Regulation B (including 

proposed subpart B) generally does not 

apply to lending activities that occur 

outside the United States. 

Finally, proposed comment 105(b)–7 

would address financial institutions that 

do not qualify as covered financial 

institutions but may nonetheless wish to 

voluntarily collect and report small 

business lending data. This proposed 

comment would reiterate that proposed 

§ 1002.5(a)(4)(vii) through (ix) permits a 

creditor that is not a covered financial 

institution under proposed 

§ 1002.105(b) to voluntarily collect and 

report information regarding covered 

applications in certain circumstances. If 

a creditor is voluntarily collecting 

applicants’ protected demographic 

information for covered applications, it 

shall do so in compliance with 

proposed §§ 1002.107, 1002.108, 

1002.111, 1002.112, and 1002.114 as 

though it were a covered financial 

institution. Proposed comment 105(b)–7 

would further state that if a creditor is 

voluntarily reporting those covered 

applications to the Bureau, it shall do so 

in compliance with proposed 

§§ 1002.109 and 1002.110 as though it 

were a covered financial institution. 

The Bureau seeks comment on its 

proposed definition of a covered 

financial institution, which uses a loanvolume threshold of 25 covered credit 

transactions from small businesses. The 

Bureau continues to consider whether 

this loan-volume threshold should be 

changed to a different threshold, such as 

50 or 100 originations from small 

businesses, and seeks feedback and data 

related to any of these three potential 

thresholds. In addition, the Bureau 

seeks comment on whether an activitybased threshold should be based on the 

total number of small business 

applications, rather than originations. 

The Bureau also requests comment on 

whether additional clarification is 

needed for this proposed definition. 

Alternatives Considered—Size-Based 

Exemption and Combined Exemptions 

The Bureau is not proposing to define 

a covered financial institution on the 

basis of the size of the financial 

institution, as measured by total assets 

for depository institutions or some other 

metric. Likewise, the Bureau is not 

proposing to define a covered financial 

institution with reference to the 

financial institution’s size in 

combination with its small business 

lending activity. 

For the reasons discussed above, the 

Bureau believes that proposing an 

exemption based on a financial 

institution’s recent small business 

lending activity would be appropriate to 

carry out the purposes of section 1071. 

The Bureau believes that in comparison 

to a size-based exemption, an activitybased exemption is a more compelling 

basis for exempting certain financial 

institutions from coverage in light of 

section 1071’s community development 

purpose. As previously stated, the 

Bureau is concerned that certain 

financial institutions might reduce or 

cease their small business lending 

activity because of the fixed costs of 

coming into compliance with this rule, 

and that a reduction in access to credit 

would run contrary to the community 

development purpose of section 1071. 

However, the Bureau is persuaded that 

small business lending activity holds a 

more direct relationship to a given 

financial institution’s role in the small 

business lending market than a more 

general measurement of the financial 

institution’s size as measured in total 

assets. Using a size-based metric would 

present a much rougher proxy for the 

risk that a financial institution may 

reduce or eliminate its small business 

lending activities as a result of the onetime costs of coming into compliance 

with this rule. 

The Bureau also believes that 

proposing an activity-based exemption 

is a superior approach to proposing a 

size-based exemption because an 

exemption based on asset size would 

apply only to depository institutions. 

The Bureau is unaware of a similar size 

metric for nondepository institutions, 

and SERs and other stakeholders who 

provided feedback on the SBREFA 

Outline were not able to offer one. A 

size-based exemption approach might 

therefore risk distorting the collected 

data and create an uneven playing field. 

As noted above, other stakeholders 

explained that because there was no 

readily available equivalent size-based 

measurement for nondepository 

institutions, including an asset-based 

exemption might risk presenting a cost 

disadvantage for other small financial 

institutions. Moreover, exempting 

proportionately more depository 

institutions than nondepository 

institutions may present demographic 

data collection concerns. A recent small 

business credit survey revealed racial 

disparities in applications under the 

SBA’s Paycheck Protection Program: the 

data showed white-owned firms were 

most likely to apply for a loan through 

a small bank (defined as under $10 

billion in assets), while Black-owned 

firms were three times as likely as 

white-owned firms to apply for a loan 

through an online lender.480 The Bureau 

is concerned that collecting data under 

different standards for depository 

institutions versus nondepository 

institutions would run contrary to the 

purposes of section 1071 and 

undermine the utility of the data, as 

well as the purposes of the Bureau, 

which are, in part, ‘‘to implement and, 

where applicable, enforce . . . 

consistently’’ Federal laws including 

ECOA.481

The Bureau also considered whether 

proposing a size-based exemption, on 

the basis of total assets for depository 

institutions, would be appropriate in 

combination with the above-discussed 

activity-based exemption. The Bureau is 

not persuaded that proposing such an 

additional exemption would be 

necessary or appropriate to carry out the 


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482For the purposes of this analysis, the Bureau 

assumes that the alternative proposal would have 

been that a depository institution would be required 

to report its small business lending activity for 2019 

if it had more originations than the loan-volume 

threshold in 2017 and 2018 and had assets over the 

asset-based threshold on December 31, 2018. The 

Bureau further assumes that if two institutions 

merged in 2019 then the resulting institution would 

be required to report if the sum of the separate 

institutions’ assets on December 31, 2018 exceeded 

the asset-based threshold. Of the 10,525 depository 

institutions that existed at the end of 2019, 6,687 

either didn’t exist at the end of 2018 or had merger 

adjusted assets below $200 million. 

483However, it is possible that these credit unions 

have originated loans to small businesses with 

values below $50,000. Credit unions report 

commercial loans over $50,000 made to members 

(regardless of the borrower’s size). 

purposes of section 1071. In particular, 

the Bureau considered two types of 

depository institutions that might be 

exempt by virtue of a size-based 

exemption: 

• An Active Small Depository 

Institution (ASDI), meaning any 

depository institution smaller than a 

particular asset size that lends at or 

above a given activity-based threshold, 

and 

• An Inactive Small Depository 

Institution (ISDI), meaning any 

depository institution smaller than a 

particular asset size that lends below a 

given activity-based threshold. 

In examining the case for ASDIs and 

ISDIs, the Bureau believes that an 

additional, asset-based exemption may 

provide a slightly less costly means of 

ascertaining exemption status for a 

small number of ISDIs, but such an 

exemption would eliminate small 

business lending data from a moderate 

share of ASDIs that would otherwise 

provide valuable data in fulfilling both 

of section 1071’s purposes. 

Using the same data that were 

compiled for the activity-based 

exemption analysis, the Bureau 

estimates that under its proposed 25 

originations threshold approximately 

6,300 to 6,500 depository institutions 

would not be covered financial 

institutions, and therefore would be 

exempt from collection and reporting. 

The Bureau further estimates that 

proposing an asset-based exemption of 

$200 million would result in 

approximately 1,300 to 1,500 additional 

depository institutions not reporting (all 

of which, by definition, are ASDIs), 

while 5,200 to 5,400 depository 

institutions would already have been 

exempt, but have a somewhat lower-cost 

method of ascertaining this information 

(e.g., ISDIs).482

Table 2 below indicates the estimated 

number of ASDIs that would report 

under various loan-volume thresholds, 

by asset size. As shown in Table 2, if the 

Bureau proposed an asset-based 

exemption of $100 million in addition 

to the proposed activity-based 

exemption of 25 originated covered 

credit transactions for small businesses, 

500 to 592 more depository institutions 

would not be covered financial 

institutions, although these institutions 

originated more than 25 covered credit 

transactions for small businesses in each 

of the previous two years. Likewise, if 

the Bureau proposed an asset-based 

exemption of $200 million in addition 

to the proposed 25-originations activitybased exemption, 1,299 to 1,466 more 

depository institutions would not be 

covered financial institutions, although 

these institutions originated more than 

25 covered credit transactions for small 

businesses in each of the previous two 

years. 

Of the estimated 5,200 to 5,400 ISDIs, 

as defined by a 25 originations 

threshold and $200 million asset 

threshold, about 4,200 are credit unions 

and about 1,000 or 1,200 are banks. 

Furthermore, the vast majority of these 

ISDI credit unions (88 percent) had 

either no small business originations in 

2017 and 2018 or fewer than 10 small 

business originations in 2017 and 2018 

(97 percent).483 The Bureau believes 

that it is likely that these institutions 

would be able to determine that they do 

not meet a loan-volume threshold 

almost as easily as they can determine 

that they do not meet an asset-based 

threshold. Only 34 credit unions with 

assets below $200 million had between 

10 and 25 small business originations in 

both 2017 and 2018. The Bureau 

estimates that as many as 1,200 banks 

and 34 credit unions would benefit from 

a simpler method of determining 

exemption status. However, as stated 

above, the Bureau believes that such 

cost savings likely would still be 

minimal. 

The Bureau therefore believes that 

providing an additional, asset-based 

exemption might provide a somewhat 

less costly means of ascertaining 

exemption status for some ISDIs, 

although this number may be relatively 

modest. However, the tradeoff of 

providing a simpler exemption for some 

depository institutions is that a $200 

million asset-based exemption would 

increase the overall percent of exempt 

depository institutions by some 13 

percentage points by also extending to 

ASDIs. The Bureau estimates that these 

ASDIs accounted for between 171,000 

and 226,000 originations in 2019, or 

about 2 percent of total covered 

originations under the 25 originations 

threshold. Exempting additional 

depository institutions by adding an 

asset-based exemption would curtail 


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484 15 U.S.C. 632. 

485 15 U.S.C. 632(a)(2)(C). 

both the volume of and possible variety 

of data, and the Bureau is concerned 

that exempting ASDIs would detract 

from the utility of 1071 data in carrying 

out the purposes of section 1071 by 

removing important data from 

disclosure and review. 

The Bureau also considered feedback 

from SERs and other stakeholders who 

suggested that the Bureau exempt 

lenders other than ‘‘large’’ financial 

institutions, such as depository 

institutions with more than $1 billion in 

assets, and then potentially extend the 

rule to smaller lenders at a later time. 

These SERs and stakeholders argued 

that this approach would capture the 

vast majority of small business loans 

while avoiding imposing undue 

regulatory burden on smaller lenders, 

who might be less capable of absorbing 

such costs. However, the Bureau is not 

currently persuaded that capturing 

lending data only from large financial 

institutions would be necessary or 

appropriate to carry out section 1071’s 

statutory purposes. 

Supporters of collecting data only 

from large depository institutions argue 

that such depository institutions may be 

more capable of absorbing compliance 

costs. However, the Bureau is concerned 

that data collection from only large 

depository institutions may not provide 

adequate data for community 

development purposes, as there may be 

demographic disparities among 

applications by the type (and size) of 

financial institution. Likewise, data 

collection from only large depository 

institutions would not allow the Bureau 

to conduct fair lending analyses for 

other types of financial institutions. In 

general, the Bureau believes that 

appropriately carrying out the purposes 

of section 1071 necessitates collecting 

small business lending data from all 

sizes and types of financial institutions 

(other than those with the lowest 

volume of lending activity), particularly 

given the variety of entities identified in 

section 704B(h)(1), discussed above. See 

the section-by-section analysis of 

proposed § 1002.114 below, however, 

for further discussion of a possible 

tiered compliance date based on the size 

of the financial institution. 

Therefore, for the reasons described 

above, Bureau is not proposing an assetbased exemption to the definition of a 

covered financial institution. 

Alternative Considered—Other 

Exemptions 

The Bureau is not proposing to adopt 

alternative exemptions or exceptions to 

the definition of covered financial 

institution, other than the loan-volume 

threshold as described above. 

As discussed above, the Bureau 

believes that, in light of the text and 

purposes of section 1071, the Bureau 

should generally adopt the posture that 

all manner of small business lenders 

should be subject to reporting. Feedback 

from SERs and others generally did not 

provide compelling policy reasons or 

legal arguments for exempting entire 

classes of financial institutions. 

Moreover, the Bureau believes that most 

policy arguments that were raised in 

this context are better addressed 

through potential activity-based 

considerations. 

With respect to government lenders, 

the Bureau has not identified, nor did 

SERs or other stakeholders provide, 

policy or legal rationales for excluding 

government lenders from data 

collection. To the contrary, a few SERs, 

particularly CDFIs, strongly preferred 

that all lenders, including government 

entities, be subject to section 1071 data 

collection and reporting requirements; 

one stakeholder likewise urged the 

Bureau not to exempt government 

lenders. The Bureau believes that 

collecting information on small business 

lending by government entities furthers 

the purposes of section 1071. Moreover, 

the Bureau believes, as described above 

in the discussion of proposed comment 

105(a)–1, that government entities are 

included within the phrase ‘‘other 

entity’’ in the ECOA section 704B(h)(1) 

definition of ‘‘financial institution.’’ For 

example, the Bureau believes that it will 

be helpful to identify the business and 

community development needs of 

women-owned, minority-owned, and 

small businesses by collecting lending 

data from both an online lender and a 

county-run assistance program for 

establishing new businesses. 

For the same reasons, the Bureau does 

not believe that exempting not-for-profit 

lenders from data collection is 

consistent with the purposes of section 

1071. The Bureau believes that 

organizations exempt from taxation 

pursuant to 26 U.S.C. 501(c) play a 

crucial role in lending to small 

businesses, particularly those that are 

women- or minority-owned, in certain 

communities. 

Those providing feedback generally 

argued for categorical exemptions 

because, they said, certain financial 

institutions (1) would encounter 

difficulty absorbing compliance costs; 

(2) are integral to a community’s lending 

needs; and/or (3) employ business 

methods or offer products not 

conducive to data collection and 

reporting. With respect to compliance 

costs, the Bureau believes that directly 

considering a financial institution’s 

activity is a more appropriate way to 

address this concern. With respect to a 

financial institution’s lending 

importance for a community or region 

(such as low income or rural), the 

Bureau believes that such arguments 

emphasize the importance of collecting 

and analyzing such data to further the 

purposes of section 1071 rather than 

justify an exemption. Finally, with 

respect to considering the particularities 

of certain business models, the Bureau 

is persuaded that it can most 

appropriately address such concerns by 

considering potentially modified 

reporting rules for particular business 

models and specific products. See the 

section-by-section analyses of proposed 

§§ 1002.104(b) and 1002.109(a)(3). The 

Bureau is proposing comment 105(a)–1, 

discussed above, consistent with the 

considerations discussed here. 

Therefore, for the reasons described 

above, the Bureau is not proposing to 

define a covered financial institution by 

providing alternative exemptions or 

exceptions. The Bureau seeks comment 

on this approach, including data or 

information that might bear upon any 

such alternative exemptions in light of 

section 1071’s purposes. 

Section 1002.106 Business and Small 

Business 

ECOA section 704B(h)(2) defines the 

term ‘‘small business’’ as having the 

same meaning as ‘‘small business 

concern’’ in section 3 of the Small 

Business Act.484 The Bureau is 

proposing to define a small business 

consistent with the statutory language. 

In particular, the Bureau is proposing to 

define a small business concern to have 

the same meaning as the term ‘‘small 

business concern’’ in 15 U.S.C. 632(a), 

as implemented by 13 CFR 121.101 

through 121.107. Notwithstanding the 

size standards set forth in 13 CFR 

121.201, for purposes of proposed 

subpart B, the Bureau is proposing that 

a business is a small business if and 

only if its gross annual revenue for its 

preceding fiscal year is $5 million or 

less. The Bureau is seeking SBA 

approval for this alternate small 

business size standard pursuant to the 

Small Business Act.485

The Bureau believes it may be 

instructive for financial institutions to 

first consider whether an applicant may 

be a business under proposed 

§ 1002.106(a), and then to consider, if 

the applicant is a business, whether the 

business is small under § 1002.106(b). 

Furthermore, the Bureau believes that 

these proposed definitions implement 

the statutory language of section 1071 


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56426 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

486 15 U.S.C. 632. 

487 13 CFR 121.105. 

488SBREFA Outline at 14–18. 

489 13 CFR 121.105(b). 

490The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 20–22. 

491 15 U.S.C. 632. 

492 13 CFR 121.105(a)(1). 

493See, e.g., 13 CFR 121.105(b), which states that 

a business concern may be in the legal form of an 

individual proprietorship, partnership, limited 

liability company, corporation, joint venture, 

association, trust or cooperative, except that where 

the form is a joint venture there can be no more 

than 49 percent participation by foreign business 

entities in the joint venture. Thus, for example, 

financial institutions would not be required to 

collect and report data under proposed subpart B 

for not-for-profit applicants, because they are not 

‘‘organized for profit’’ and are thus not a ‘‘business 

concern.’’ 

494See 12 U.S.C. 5493(c)(2)(A). 

495ECOA section 704B(a). 

496ECOA section 704B(e)(2). 

while reflecting the need for a wide 

variety of financial institutions to apply 

a simple, broad definition of a small 

business that would be practical across 

the many product types, application 

types, technology platforms, and 

applicants in the market. 

For the reasons set forth below, the 

Bureau is proposing § 1002.106 to 

implement ECOA section 704B(h)(2) 

and pursuant to its authority under 

ECOA section 704B(g)(1) to prescribe 

such rules and issue such guidance as 

may be necessary to carry out, enforce, 

and compile data under section 1071. 

106(a) Business 

Background 

ECOA section 704B(h)(2) defines the 

term ‘‘small business’’ as having the 

same meaning as ‘‘small business 

concern’’ in section 3 of the Small 

Business Act.486 The Small Business 

Act provides a general definition of a 

‘‘small business concern,’’ authorizes 

SBA to establish detailed size standards 

for use by all agencies, and permits an 

agency to request SBA approval for a 

size standard specific to an agency’s 

program. The SBA’s regulations define a 

‘‘business concern’’ as ‘‘a business 

entity organized for profit, with a place 

of business located in the United States, 

and which operates primarily within the 

United States or which makes a 

significant contribution to the U.S. 

economy through payment of taxes or 

use of American products, materials or 

labor.’’ 487

SBREFA Proposals Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated it was considering proposing to 

define ‘‘small business’’ by crossreferencing the SBA’s general definition 

of ‘‘small business concern’’ but 

adopting a simplified size standard for 

purposes of its section 1071 rule.488

Thus, the Bureau explained that it was 

considering a proposal under which 

financial institutions would not be 

required to collect and report 1071 data 

for not-for-profit applicants, because 

they are not ‘‘organized for profit’’ and 

are thus not a ‘‘business concern.’’ The 

Bureau explained that a business 

concern may take a number of different 

legal forms, including a sole 

proprietorship, partnership, LLC, 

corporation, joint venture, trust, or 

cooperative.489 The Bureau explained 

that, because the definition is limited to 

American businesses, if the Bureau 

adopted this definition for purposes of 

1071, loans to foreign companies would 

be outside the scope of 1071 data 

collection and reporting requirements. 

Feedback from stakeholders regarding 

the proposal under consideration 

focused primarily on how the Bureau 

might define a business size standard, 

addressed below.490 The Bureau did 

receive limited feedback, however, 

suggesting that the Bureau consider 

certain modifications or adjustments to 

the definition of a business concern, 

such as clarifying that the term does not 

include foreign-owned entities, certain 

trusts, and certain real estate holding 

companies. 

Proposed Rule 

Proposed § 1002.106(a) would define 

a business as having the same meaning 

as the term ‘‘business concern or 

concern’’ in 13 CFR 121.105. This 

proposed definition is consistent with 

ECOA section 704B(h)(2), which defines 

the term ‘‘small business’’ as having the 

same meaning as ‘‘small business 

concern’’ in section 3 of the Small 

Business Act.491 The SBA has issued 13 

CFR 121.105, ‘‘How does SBA define 

‘business concern or concern,’’’ 

pursuant to the Small Business Act. The 

Bureau refers to the entirety of that 

section for additional information. In 

particular, the Bureau notes that this 

definition includes elements such as 

being ‘‘a business entity organized for 

profit’’ that has ‘‘a place of business 

located in the United States’’ and 

‘‘operates primarily within the United 

States or . . . makes a significant 

contribution to the U.S. economy.’’ 492

The Bureau is not providing 

interpretations of this SBA regulation in 

proposed subpart B because the Bureau 

believes that existing SBA 

interpretations are responsive to the 

general questions posed at SBREFA.493

The Bureau seeks comment on this 

proposed definition of a business, and 

generally seeks comment on whether 

additional clarification is needed. 

106(b) Small Business 

Background 

Section 1071 data collection 

purposes, requirements, and potential 

impacts. A key component of the 

Bureau’s fair lending work under the 

Dodd-Frank Act is to ensure fair, 

equitable, and nondiscriminatory access 

to credit for both individuals and their 

communities.494 Section 1071 of the 

Dodd-Frank Act, which amended 

ECOA, requires financial institutions to 

collect and report to the Bureau data 

regarding applications for credit for 

women-owned, minority-owned, and 

small businesses. ECOA section 

704B(h)(2) states that ‘‘[t]he term ‘small 

business’ has the same meaning as the 

term ‘small business concern’ in section 

3 of the Small Business Act (15 U.S.C. 

632).’’ Section 1071 was adopted for the 

dual statutory purposes of facilitating 

fair lending enforcement and enabling 

communities, governmental entities, 

and creditors to identify business and 

community development needs and 

opportunities of women-owned, 

minority-owned, and small 

businesses.495

As set forth in section 1071, the data 

that financial institutions would be 

required to collect and report to the 

Bureau include, among other things, the 

gross annual revenue of the business in 

the preceding fiscal year, the type and 

purpose of the loan, the census tract for 

the applicant’s principal place of 

business, and the race, sex, and 

ethnicity of the principal owners of the 

business.496 ECOA section 704B(f)(2)(C) 

further provides that information 

compiled and maintained under the 

statute shall be ‘‘annually made 

available to the public generally by the 

Bureau, in such form and in such 

manner as is determined by the Bureau, 

by regulation.’’ The Bureau believes that 

the collection and subsequent 

publication of robust and granular data 

pursuant to section 1071 regarding 

credit applications for small businesses, 

including those that are women- and 

minority-owned, will provide muchneeded transparency to an otherwise 

opaque market and better ensure fair, 

equitable, and nondiscriminatory access 

to credit. 

The Bureau understands that access to 

fair, equitable, and nondiscriminatory 

credit is crucial to the success of small 

businesses. Small businesses— 

including women-owned and minorityowned small businesses—need access to 

credit to smooth out business cash flows 


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497 15 U.S.C. 632(a)(2)(A) and (B). 

498The SBA recently changed its regulations on 

the calculation of average annual receipts for all of 

SBA’s receipts-based size standards, and for other 

agencies’ proposed receipts-based size standards, 

from a three-year averaging period to a five-year 

averaging period, outside of the SBA Business Loan 

and Disaster Loan Programs. 84 FR 66561 (Dec. 5, 

2019). 

499Public Law 111–240, 124 Stat. 2504 (2010). 

500 15 U.S.C. 632 note. 

501 15 U.S.C. 632(a)(2)(C). 

502 13 CFR 121.903(a)(2). 

503 13 CFR 121.903(a)(5). 

504 12 CFR 1002.9(a)(3)(i). 

505 Id. The notification requirements for 

applicants with gross annual revenues in excess of 

$1 million are generally more flexible in substance 

and also do not impose a firm deadline for 

provision of a Regulation B notification. 12 CFR 

1002.9(a)(3)(ii). 

506See 12 CFR 1002.5(a). 

and to enable entrepreneurial 

investments that take advantage of, and 

sustain, opportunities for growth. The 

market these businesses turn to for 

credit is vast, varied, and complex. 

Overall, small businesses have many 

options when it comes to financing, 

including a wide range of products and 

providers. Yet market-wide data on 

credit to small businesses remains very 

limited, particularly with respect to 

applicants’ protected demographic 

information at the core of section 1071. 

The Bureau believes that a section 1071 

rulemaking would provide data that 

could serve as a significant resource for 

financial institutions, community 

groups, policy makers, and small 

businesses. 

SBA size standards. The Small 

Business Act permits the Small 

Business Administrator to prescribe 

detailed size standards by which a 

business concern may be categorized as 

a small business, which may be based 

on the number of employees, dollar 

volume of business, net worth, net 

income, a combination of these, or other 

appropriate factors.497

As implemented by the SBA, these 

size standards generally hinge on 

average annual receipts or the average 

number of employees of the business 

concern and are customized industryby-industry across 1,057 6-digit NAICS 

codes. Specifically, the SBA typically 

uses two primary measures of business 

size for size standards purposes: (i) 

Average annual gross receipts 498 for 

businesses in services, retail trade, 

agricultural, and construction 

industries, and (ii) average number of 

employees for businesses in all 

manufacturing, most mining and 

utilities industries, and some 

transportation, information and research 

and development industries. To 

measure business size, the SBA also 

uses financial assets for certain financial 

industries, and for the petroleum 

refining industry, it uses refining 

capacity and employees. The SBA’s size 

standards are used to establish 

eligibility for a variety of Federal small 

business assistance programs, including 

for Federal government contracting and 

business development programs 

designed to assist small businesses in 

obtaining Federal contracts and for 

SBA’s loan guarantee programs, which 

provide access to capital for small 

businesses that are unable to qualify for 

and receive conventional loans 

elsewhere. Under the Small Business 

Jobs Act of 2010 (Small Business 

Act),499 the SBA is required to review 

all size standards no less frequently 

than once every five years.500 The Small 

Business Act further provides that no 

Federal agency may prescribe a size 

standard for categorizing a business 

concern as a small business concern 

unless certain conditions are met, 

including approval by the SBA’s 

Administrator.501

The SBA’s rule governing its 

consideration of other agencies’ requests 

for approval of alternate size standards 

requires that the agency seeking to 

adopt an alternate size standard consult 

in writing with the SBA’s Division Chief 

for the Office of Size Standards in 

advance of issuing an NPRM containing 

the proposed alternate size standard.502

The Bureau has met this requirement. 

After issuing an NPRM, the agency must 

provide a copy of the published NPRM 

to the Division Chief for the Office of 

Size Standards, and the agency cannot 

adopt a final rule including its alternate 

size standard until the size standard has 

been approved by the SBA’s 

Administrator.503

Market considerations. A wide variety 

of financial institutions, with varying 

levels of sophistication and experience, 

extend credit to small businesses. As 

proposed, section 1071 applies to 

abroad range of financial institutions. 

Banks and credit unions that serve a 

breadth of customers typically organize 

their commercial lending operations 

into segments based on a combination of 

risk, underwriting, product offering, and 

customer management factors that are 

appropriate to each segment. The three 

most frequent organizational groupings 

are retail/small business, middle 

market, and large corporate banking. 

Commercial customers are generally 

assigned based on their revenue 

potential and aggregate credit exposure, 

with smaller accounts assigned to the 

retail/small business banking area. The 

overwhelming preponderance of small 

businesses are generally found in the 

retail/small business banking group, 

which may also conduct consumer 

banking. 

Today, the distinguishing 

characteristic that many larger financial 

institutions (principally banks with $10 

billion or more in assets) use to assign 

small businesses into the retail/small 

business banking group is gross annual 

revenue. While cut-offs vary by 

financial institution, the most common 

demarcations categorize small/retail 

customers as those below $5 million, or 

up to $10 million, in gross annual 

revenue. The maximum amount of a 

retail/small business banking term loan 

or credit line is typically $5 million or 

less. 

Financial institutions that do not 

conduct SBA lending generally do not 

collect or consider the number of 

employees of a small business applying 

for credit, but they often capture gross 

annual revenue information, including 

for regulatory compliance purposes. 

Specifically, retail/small business 

lenders routinely collect applicants’ 

gross annual revenue information 

because notification requirements under 

existing Regulation B vary for business 

credit applicants depending on whether 

or not they ‘‘had gross revenues of $1 

million or less in [their] preceding fiscal 

year.’’ 504 For a business applicant with 

gross annual revenues of $1 million or 

less, a creditor must provide a 

notification following an adverse action, 

such as a credit denial, that is generally 

similar to that provided to a consumer 

in both substance and timing.505 As a 

result, small business lenders often 

adopt compliance management systems 

similar to those found among consumer 

lenders. 

The Bureau believes it is important 

for a financial institution to be able to 

quickly determine at the beginning of 

the application process whether an 

applicant is a ‘‘small business’’ for 

purposes of the 1071 rule. Financial 

institutions generally cannot inquire 

about an applicant’s protected 

demographic information (including the 

race, sex, and ethnicity of an applicant’s 

principal owners) without being legally 

required to do so.506 As discussed in the 

Overview of this part V, this proposal 

will only require (and thus only permit) 

such inquiries for small businesses. 

While the Bureau is proposing to allow 

financial institutions flexibility in when 

they seek this protected demographic 

information, the Bureau believes that 

financial institutions generally have the 

best chance of obtaining it, and 

supporting the purposes of section 1071, 

if they ask for it in the earlier stages of 

the application process. As a result, a 


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507SBREFA Outline at 16. 

508 Id. 509Specifically, under this approach, the Bureau 

first considered the total number of employer firms 

in each NAICS 6-digit industry, based on U.S. 

Census Bureau data. U.S. Census Bureau, 2017 

Statistics of U.S. Businesses (2017), https://

www.census.gov/data/datasets/2017/econ/susb/ 

2017-susb.html. Next, within each NAICS 2-digit 

industry, the Bureau determined how many unique 

size standards are applied within that 2-digit 

industry and the total number of employer firms to 

which each unique standard is applied. The 

simplified standard for each NAICS 2-digit industry 

is the one that applies to the largest number of firms 

within that industry. 

financial institution may need to know, 

even before the application is initiated, 

which application path the applicant 

must follow—a 1071-governed or a non1071-governed application path. 

Early feedback. From very early on in 

its discussions with stakeholders 

regarding section 1071, the Bureau has 

received feedback focused primarily on 

how the Bureau might define a business 

size standard. For example, in response 

to the Bureau’s 2017 RFI, many 

stakeholders expressed concern about 

the difficulties in determining the 

appropriate NAICS code for businesses 

and in applying the NAICS-based 

standards in determining whether a 

business loan applicant is a small 

business. Commenters who addressed 

the issue of a small business definition 

were universally in favor of the Bureau 

adopting something less complex than 

the SBA’s size standards based on 6- 

digit NAICS codes. Commenters noted 

that the use of these standards is 

relatively complex and would introduce 

burdens for the 1071 rule with limited 

benefit. There was broad support in this 

particular context for a simpler 

definition of small business, particularly 

echoing the 2017 RFI’s mention of gross 

annual revenue as a threshold 

delineation defining a small business. In 

addition to revenue, number of 

employees, loan amount, total exposure 

of the business, or some combination of 

those factors were also mentioned as 

possible bases for alternate size 

standards. While community groups 

supported a simpler definition, some 

cautioned that whatever definition the 

Bureau chooses must cover most small 

businesses in order to comport with 

congressional intent. 

SBREFA Proposals Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated that it believed that using a 

simpler, more straightforward approach 

to the size standard aspect of the ‘‘small 

business’’ definition was a better 

approach for purposes of its 1071 

rule.507 The Bureau further stated that 

such an approach would assist both 

financial institutions and applicants 

seeking to quickly understand whether 

a business is ‘‘small’’ and to employ a 

workable size standard for small 

business data collection without 

navigating the potential complexities of 

determining the appropriate 6-digit 

NAICS code, and then the relevant size 

standard based on that NAICS code, for 

each applicant. 

The Bureau stated in the SBREFA 

Outline that it was considering three 

alternative approaches to determining 

whether an applicant business is 

small.508 These three approaches, 

described in more detail below, would 

have used: (1) Only gross annual 

revenue (‘‘SBREFA First Alternative 

Approach’’); (2) either the number of 

employees or average annual receipts/ 

gross annual revenue, depending on 

whether the business is engaged in 

either manufacturing/wholesale or 

services (‘‘SBREFA Second Alternative 

Approach’’); or (3) size standards across 

13 industry groups that correspond to 2- 

digit NAICS code industry groupings 

(‘‘SBREFA Third Alternative 

Approach’’). 

Under the SBREFA First Alternative 

Approach, the Bureau considered 

proposing a size standard using the 

gross annual revenue of the applicant 

business in the prior year, with a 

potential ‘‘small’’ threshold of $1 

million or $5 million. 

Under the SBREFA Second 

Alternative Approach, the Bureau 

considered proposing a size standard of 

a maximum of 500 employees for 

manufacturing and wholesale industries 

and a maximum of $8 million in gross 

annual revenue for all other industries. 

The Bureau selected 500 employees as 

a potential threshold for manufacturing 

and wholesale industries because that 

figure is the most common of the SBA’s 

employee-based size standards. The 

Bureau selected $8 million for all other 

industries because that figure is the 

most common size standard threshold 

for average annual receipts. The Bureau 

stated that it was considering using 

gross annual revenue, rather than the 

SBA’s average annual receipts, for 

consistency with the 1071 statutorily 

required gross annual revenue data 

point. 

Under the SBREFA Third Alternative 

Approach, the Bureau considered 

proposing a size standard using gross 

annual revenue or the number of 

employees based on a size standard in 

each of 13 2-digit NAICS code categories 

that applies to the largest number of 

firms within each 2-digit NAICS code 

category.509 Applying the SBA’s 2019 

size standards, the third alternative 

would result in eight different size 

standards across the 13 categories. 

The Bureau stated it was not planning 

to propose requiring that financial 

institutions verify information provided 

by applicants necessary for determining 

whether an applicant is small, 

regardless of the Bureau’s approach to a 

small business size standard. Rather, the 

Bureau was considering proposing that 

a financial institution would generally 

report the information as provided by 

the applicant. However, if the financial 

institution verifies such information for 

its own purposes, it would report the 

verified information to the Bureau. 

SERs generally preferred a simple 

small business definition and expressed 

concern that the SBA’s approach to 

defining a small business—which bases 

classification on an applicant’s 6-digit 

NAICS code—is relatively complex. The 

Bureau discusses the concerns with 

respect to the potential complexity of 

gathering NAICS codes in the sectionby-section analysis of proposed 

§ 1002.107(a)(15) below, and the Bureau 

discusses the concerns with respect to 

the potential complexity using NAICS 

codes to determine small business status 

below. 

Nearly all SERs expressed some 

familiarity with the SBA’s small 

business definition. More than half the 

SERs currently gather an applicant’s 

NAICS code as a routine part of the 

application process, because NAICS 

codes are used for SBA loans and for 

CDFI Fund reporting. One SER also uses 

this information for tracking the 

concentration of its loans across certain 

industries. Some SERs gather NAICS 

codes from applicants’ tax documents or 

business credit reports and others rely 

on information provided directly by the 

applicants; these SERs emphasized the 

importance of permitting reliance on 

applicant self-reported data. 

One SER remarked that it would be 

critical for the purposes of section 1071 

to have sectoral industry information 

about applicants in some form, such as 

NAICS codes, in order to ensure 

meaningful data. The Bureau discusses 

the independent value of NAICS codes, 

and related comments from SERs 

regarding certain difficulties and 

challenges surrounding collecting 

NAICS codes from applicants, in the 

section-by-section analysis of proposed 

§ 1002.107(a)(15) below. Another SER 

expressly opposed using NAICS codes 

to determine whether an applicant is a 

small business for purposes of section 

1071. A few SERs stated that they did 

not think it would be particularly costly 

to collect NAICS codes for all of their 

small business loans, and one SER 

described the SBA’s classification 


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510SBREFA Panel Report at 44. 

511 Id. 512 Id. 

approach as precise and not very 

burdensome. 

Some SERs supported the SBREFA 

First Alternative Approach for defining 

a small business, which would use an 

applicant’s gross annual revenue with a 

potential ‘‘small’’ threshold of $1 

million or $5 million. Several SERs 

were supportive of this simple approach 

but thought the potential threshold 

should be higher. For most SERs, nearly 

all their small business customers had 

less than $5 million in gross annual 

revenue; most are under $1 million. 

Several SERs remarked that a $1 million 

gross annual revenue threshold would 

be too low, noting that it would exclude 

many businesses defined by SBA 

regulations as ‘‘small’’; some of these 

SERs said that a $5 million gross annual 

revenue threshold would be acceptable. 

Some SERs advocated for higher 

revenue thresholds, such as $8 million 

or $10 million. One SER cautioned that 

a small business definition based only 

on gross annual revenue would not 

account for regional variations in 

business size. One SER specifically 

suggested that the Bureau align its small 

business definition with the $1 million 

standard used by certain supervisory 

agencies for CRA reporting (which 

requires the reporting of loans in 

original amounts of $1 million or less to 

businesses and, if known, identification 

of whether the business’s gross annual 

revenue is $1 million or less). However, 

this SER also supported other versions 

of the SBREFA First Alternative 

Approach and SBREFA Second 

Alternative Approach if the Bureau did 

not adopt the CRA approach. Relatedly, 

there were some concerns about 

capturing revenue information from 

small businesses. Some SERs do not 

collect these data now, or do not do so 

across all lending products. SERs also 

expressed a concern that some 

applicants likely would not know their 

gross annual revenue as a precise dollar 

amount. See the section-by-section 

analysis of proposed § 1002.107(a)(14) 

below for a discussion of the gross 

annual revenue data point. 

Some SERs supported the Bureau’s 

SBREFA Second Alternative Approach, 

which would distinguish between 

applicants in manufacturing and 

wholesale industries (500 employees) 

and all other industries ($8 million in 

gross annual revenue). These SERs 

stated that while this approach was still 

relatively simple, it would nonetheless 

capture most relevant data. One SER 

noted a discrepancy between the 

thresholds, stating that a manufacturer 

with 500 employees would be much 

larger than a business with $8 million 

in gross annual revenue. Some SERs 

expressed concerns about how to collect 

data on the number of employees, 

particularly regarding how part-time 

and seasonal employees, and 

contractors, would be counted. One SER 

suggested that a small business be 

defined as having less than $10 million 

in annual revenue and 50 or fewer 

employees. Another SER emphasized 

the importance of including collection 

and reporting requirements for 

applicants with very few or no 

employees on payroll, stating that most 

minority-owned and women-owned 

small businesses have no employees. 

One SER opposed the SBREFA Second 

Alternative Approach, stating that it 

would be too complex and potentially 

confusing. 

One SER also supported the SBREFA 

Third Alternative Approach as closest to 

the SBA approach, stating that it reflects 

the SBA’s substantially different 

definitions of a small business across 

different industries. This SER stated that 

the SBREFA First and Second 

Alternative Approaches would exclude 

many SBA-qualified small businesses. 

Other SERs also stated that this 2-digit 

NAICS code alternative was 

significantly less complex and prone to 

less human error than the SBA 

definition using 6-digit NAICS codes. 

On the other hand, one SER stated that 

the SBREFA Third Alternative 

Approach would be the most costly and 

difficult to implement compared to the 

other two alternatives under 

consideration. 

The SBREFA Panel recommended 

that the Bureau seek to adopt a 

definition of ‘‘small business’’ that is 

easy for small business applicants to 

understand and straightforward for 

financial institutions to implement, 

while still collecting comprehensive 

data regarding lending to small 

businesses.510 The SBREFA Panel also 

recommended that the Bureau continue 

to explore how information that small 

financial institutions may or may not 

currently collect from small business 

applicants (specifically, gross annual 

revenue, number of employees, and 

NAICS code) might inform the potential 

selection of an alternative for a ‘‘small 

business’’ size standard.511 The SBREFA 

Panel also recommended that the 

Bureau continue to explore ways to 

minimize burden on both the small 

financial institutions collecting NAICS 

code information as well as the small 

business applicants who need to 

provide it, for example the possibility of 

collecting the 2-digit NAICS code rather 

than the 6-digit code.512

Feedback on the SBREFA materials 

from stakeholders other than SERs 

showed broad support for the Bureau 

pursuing a simplified version of the 

SBA small business definition, focusing 

chiefly on the size standard. A diverse 

array of stakeholders requested that the 

Bureau provide a simplified small 

business definition, including a wide 

variety of lenders, trade associations, 

and community groups. However, at 

least one commenter explicitly urged 

the Bureau to adopt the SBA definition. 

Reasons for supporting a simpler 

definition included that it might lower 

compliance costs (and therefore, the 

commenters noted, the cost of credit), it 

would obviate the need for financial 

institutions to understand or track the 

SBA size standards, and a more 

complex definition might impact data 

consistency or quality (either because 

financial institutions might incorrectly 

report data, or because the data itself 

might not lend itself to analysis). 

Several stakeholders voiced concern 

with respect to the SBA’s detailed 

approach to categorizing the applicant’s 

business, arguing that NAICS codes 

were developed for procurement, 

contained too many categories, and 

were not familiar to many financial 

institutions and applicants. 

Stakeholders offered varying levels of 

support for the Bureau’s proffered size 

standard alternatives, although in 

general there was more support for a 

standard using only gross annual 

revenue. Many stakeholders, including a 

variety of trade associations, supported 

the SBREFA First Alternative Approach; 

a few explicitly opposed it. Those 

voicing support generally preferred the 

simplicity of the approach; some 

stakeholders noted that a definition 

using gross annual revenue aligned with 

how lenders typically consider an 

applicant’s size for other purposes. 

Stakeholders suggested that the Bureau 

select a specific revenue limit for small 

businesses including $500,000, $1 

million, $5 million, and $8 million. 

Some stakeholders expressing support 

for a $8 million revenue limit noted that 

it would better capture small businesses 

in wholesale and manufacturing, while 

allowing the Bureau to adopt a single, 

uniform standard. Stakeholders 

opposing the SBREFA First Alternative 

Approach generally expressed concern 

with using gross annual revenue, either 

citing concerns about its accuracy or 

because they said a uniform gross 

annual revenue standard would not 

account for regional variation among 


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513 15 U.S.C. 632(a)(2)(C). 

businesses or reflect the SBA’s general 

approach to distinguishing businesses 

by industry. One stakeholder generally 

expressed concern that the SBREFA 

First Alternative Approach might 

exclude too many small business 

applicants from the 1071 rule. 

Several stakeholders, mostly 

community groups, supported the 

SBREFA Second Alternative Approach; 

several comments from industry 

opposed the approach. Those in support 

of the SBREFA Second Alternative 

Approach characterized it as providing 

a balance between simplicity and 

providing results more closely aligned 

with the more comprehensive SBA 

approach, which distinguishes 

businesses by industry. Some 

stakeholders expressed concern with 

respect to distinguishing the nature of 

the applicant’s business (e.g., whether it 

was engaged in manufacturing or 

wholesale), and others thought that 

there may be difficulties accurately 

measuring the number of employees. 

A few stakeholders supported the 

SBREFA Third Alternative Approach, 

while several explicitly opposed it. 

Supporters of the SBREFA Third 

Alternative Approach praised how 

closely the alternative aligned with the 

SBA’s definition, while those in 

opposition criticized it as overly 

complex. In particular, those opposing 

this approach were concerned that it 

would still require financial institutions 

to have a close working knowledge of 

NAICS codes. 

A few stakeholders advocated that the 

Bureau consider adopting a small 

business definition that incorporated 

loan size. Some of these stakeholders 

suggested that the Bureau consider 

aligning this definition with standards 

in the CRA. One stakeholder suggested 

that the Bureau define a small business 

as one with gross annual revenue of $1 

million where the business has 

requested a loan of $1 million or less. 

Proposed Rule 

Proposed § 1002.106(b) would define 

a small business as having the same 

meaning as the term ‘‘small business 

concern’’ in 15 U.S.C. 632(a), as 

implemented in 13 CFR 121.101 

through 121.107. The Bureau believes 

that adopting existing statutory and 

regulatory small business definitions, 

which are widely understood and 

already the subject of notice and 

comment, is consistent with the 

purposes of section 1071 and will 

facilitate compliance. Proposed 

§ 1002.106(b) would further state that, 

notwithstanding the size standards set 

forth in 13 CFR 121.201, for purposes of 

proposed subpart B, a business is a 

small business if and only if its gross 

annual revenue, as defined in proposed 

§ 1002.107(a)(14), for its preceding fiscal 

year is $5 million or less. This proposed 

definition largely adopts the SBREFA 

First Alternative Approach with a 

threshold of $5 million. The Bureau 

believes this proposed definition 

implements the statutory language of 

section 1071 while reflecting a need for 

financial institutions to apply a simple, 

broad definition of a small business. 

The Bureau is seeking SBA approval for 

this alternate small business size 

standard pursuant to the Small Business 

Act.513

Proposed comments 106(b)–1 and 

106(b)–2 would clarify the obligations of 

covered financial institutions when new 

information may arise that could change 

the determination of whether an 

applicant is a small business, which in 

turn gives rise to requirements under 

proposed subpart B and/or prohibitions 

under existing Regulation B. The Bureau 

acknowledges that a financial 

institution’s understanding of an 

applicant’s gross annual revenue may 

change as the institution proceeds 

through underwriting. Proposed 

comment 106(b)–1 would explain that if 

a financial institution initially 

determines an applicant is a small 

business as defined in proposed 

§ 1002.106 based on available 

information and obtains data required 

by proposed § 1002.107(a)(18) through 

(20), but the financial institution later 

concludes that the applicant is not a 

small business, the financial institution 

may process and retain the data without 

violating ECOA or this regulation if it 

meets the requirements of proposed 

§ 1002.112(c)(3). Proposed comment 

106(b)–2 would explain that if a 

financial institution initially determines 

that the applicant is not a small 

business as defined in proposed 

§ 1002.106, but then later concludes the 

applicant is a small business, the 

financial institution shall endeavor to 

compile, maintain, and report the data 

required under proposed § 1002.107(a) 

in a manner that is reasonable under the 

circumstances. 

Proposed comment 106(b)–3 would 

explain that a financial institution may 

rely on an applicant’s representations 

regarding gross annual revenue (which 

may or may not include an affiliate’s 

revenue) for purposes of determining 

small business status under 

§ 1002.106(b). 

For the reasons discussed above in the 

section-by-section analysis of proposed 

§ 1002.106(a), the Bureau is proposing 

to define a small business as having the 

same meaning as the term ‘‘small 

business concern’’ in 15 U.S.C. 632(a), 

as implemented in 13 CFR 121.101 

through 121.107. However, for reasons 

discussed in detail below, the Bureau is 

proposing that notwithstanding the size 

standards set forth in 13 CFR 121.201, 

for purposes of subpart B, a business is 

a small business if and only if its gross 

annual revenue, as defined in proposed 

§ 1002.107(a)(14), for its preceding fiscal 

year is $5 million or less. Generally, the 

Bureau believes that adopting this gross 

annual revenue standard from the 

SBREFA First Alternative Approach is 

consistent with the purposes of section 

1071 and addresses the concerns that 

the Bureau has heard with respect to 

determining whether applicants are 

small businesses for purposes of 

complying with section 1071, 

particularly with respect to the concerns 

regarding determining the applicant’s 

NAICS code, and the implications 

thereof. Due to concerns expressed by 

other stakeholders, which are described 

above, and upon its own further 

consideration as discussed in this 

section-by-section analysis under 

Alternatives Considered below, the 

Bureau is not proposing the $1 million 

gross annual revenue standard from the 

SBREFA First Alternative Approach. 

The Bureau seeks comment on this 

proposed definition of a small business, 

including the $5 million gross annual 

revenue size standard, as well as 

whether additional clarification is 

needed for any aspect of this proposed 

definition. The Bureau also seeks 

comment on whether another variation 

of the proposed size standard would 

better serve the purposes of section 

1071, such as a lower revenue size 

standard or a higher one, potentially at 

the $8 million or $10 million level. The 

Bureau also seeks comment on whether, 

in addition to the above-described gross 

annual revenue-based size standard, a 

small business definition that also 

included any business that was 

furnished a loan pursuant to an SBA 

program (regardless of the applicant’s 

gross annual revenue) would further the 

purposes of 1071. 

Similarly, the Bureau seeks comment 

on whether the SBREFA Second 

Alternative Approach at $8 million 

gross annual revenue or 500 employees 

(depending on the type of business) 

would align more closely with section 

1071’s purposes. Likewise, the Bureau 

seeks comment on whether a variation 

of the proposed size standard, such as 

using an applicant’s average gross 

annual revenue averaged over two or 

five years, would better serve the 

purposes of section 1071. In addition, 

the Bureau seeks comment on defining 


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514SBREFA Outline at 16. 

a small business consistent with the 

entirety of existing SBA regulations, 

including any advantages or 

disadvantages that using such a 

definition might pose specifically in the 

context of this rulemaking. Specifically, 

the Bureau seeks comment on how the 

proposed size standard would fit in 

with a financial institution’s current 

lending or organization practices. If the 

financial institution is an SBA lender, 

the Bureau seeks comment on whether 

the proposed size standard would 

introduce additional difficulties or 

challenges. 

In order to keep pace with changes to 

the SBA’s own size standards and the 

potential impact of future inflation, the 

Bureau is considering whether it might 

update its proposed $5 million gross 

annual revenue size standard over time 

(perhaps at the end of a calendar year 

in order to allow financial institutions 

to use the same threshold consistently 

throughout the year). The Bureau seeks 

comment on how this should be done 

and the frequency at which it should 

occur. 

Alternatives Considered 

Gross annual revenue of $1 million. 

Under the SBREFA First Alternative 

Approach, the Bureau considered 

proposing a size standard using the 

gross annual revenue of the applicant 

business in the prior year, with a 

potential ‘‘small’’ threshold of $1 

million or $5 million.514 However, upon 

further consideration, the Bureau is 

concerned that the $1 million threshold 

considered under the SBREFA First 

Alternative Approach likely would not 

satisfy the SBA’s requirements for an 

alternative size standard across 

industries and would exclude too many 

businesses designated as small under 

the SBA’s size standards. 

Loan size. The Bureau considered 

defining a small business based at least 

in part on loan size. For example, one 

SER suggested that the Bureau align its 

small business definition with the $1 

million standard for revenue and loan 

size used by certain supervisory 

agencies for CRA reporting. The Bureau 

also considered that under the FFIEC 

Call Report collections, banks report 

small loans made to businesses and 

farms. Through the Credit Union Call 

Report, credit unions report commercial 

loans over $50,000 made to members. 

The Bureau believes that such 

potential definitions do not bear a 

sufficient relationship to the size of the 

business or its operations. The abovementioned Call Report data, for 

example, is reported regardless of the 

size of the business. Thus, such Call 

Reports would capture lending 

information regarding small loans 

furnished to businesses that may be 

dominant in their field. Likewise, under 

a definition similar to the CRA, 

application data for businesses with low 

revenue that may be applying for large 

loans would be excluded. The Bureau 

does not believe that adopting such an 

approach would further the purposes of 

section 1071. The Bureau also received 

some stakeholder feedback cautioning 

against using the CRA definition based 

on loan size, because such a definition 

would exclude substantial portions of 

small business lending. 

Existing SBA size standards. As 

discussed above, the Bureau is seeking 

approval from the SBA to use a $5 

million gross annual revenue alternative 

size standard in defining a ‘‘small 

business’’ for purposes of this 

rulemaking, as the Bureau does not 

believe the SBA’s size standards are 

suitable for this data collection initiative 

and prefers to establish a more 

appropriate small business definition 

limited to the section 1071 rulemaking. 

The Bureau believes that requiring 

application of existing SBA size 

standards for the section 1071 rule 

could result in many financial 

institutions having to undergo 

operational and/or compliance 

management system changes. The 

Bureau believes that it will reduce 

burden for financial institutions, 

particularly those without sophisticated 

compliance management systems or 

familiarity with SBA lending, to comply 

with a gross annual revenue size 

standard for the section 1071 small 

business definition that better aligns 

with current lending practices. 

If the Bureau were to adopt a small 

business definition using the existing 

SBA size standards that vary by 

industry based on 6-digit NAICS codes, 

financial institutions would only be able 

to request an applicant’s protected 

demographic information further along 

in the application process, once they 

have obtained the multiple pieces of 

data that would be necessary to 

determine whether the applicant is 

small and, therefore, the 1071 process 

applies. The Bureau is concerned that 

this delay would make it more difficult 

for financial institutions to collect 

applicants’ protected demographic 

information that is important to both of 

section 1071’s statutory purposes. The 

Bureau is particularly concerned about 

financial institutions’ ability to collect 

these data for applications that are 

withdrawn or closed for incompleteness 

early in the application process. These 

data collection considerations differ 

from those applicable to SBA lending 

programs, whereby a lender often 

cannot (and should not) make an 

accurate eligibility determination for an 

SBA loan until later in the application 

process, often after a loan has already 

been initially decisioned and after the 

lender has collected information related 

to size, time in business, and other data. 

In order to allow financial institutions 

to quickly determine whether the 

section 1071 rule applies, the Bureau is 

seeking to minimize complexity for 

financial institutions in determining 

whether a covered application is 

reportable because the applicant 

business is a small business—a 

necessary determination for the 1071- 

based collection of any other 

information. The Bureau believes that 

the section 1071 rule would benefit 

from a universal, easy-to-apply 

reporting trigger that does not need to be 

supported by additional documentation 

or research. Such a reporting trigger 

must be easily understood by small 

business owners who may be 

completing an application online, or by 

the tens of thousands of customer-facing 

personnel who take small business 

applications in an industry with a 

typical annual turnover rate of 10 to 20 

percent. The Bureau believes that a 

gross annual revenue reporting trigger 

will facilitate better compliance with 

1071 requirements because it aligns 

with current lending and organizational 

practices. 

The Bureau is concerned that 

requiring financial institutions to rely 

on the SBA’s existing size standards for 

purposes of the section 1071 data 

collection and reporting requirements 

would pose risks to the efficient 

operation of small business lending. 

Based on the overwhelmingly consistent 

feedback the Bureau has received from 

stakeholders on this issue, the Bureau 

believes that using the SBA’s existing 

size standards for the purposes of 

section 1071—wherein the financial 

institution must quickly determine the 

appropriate 6-digit NAICS code for 

businesses and then apply a variety of 

standards, including potentially 

gathering information to determine five 

years of the applicant’s average annual 

receipts or employee information— 

would not align with current lending 

and organizational practices. 

Application of the existing size 

standards, at the beginning of the 

application process, could slow down 

the application process, particularly at 

institutions that are often able to render 

credit decisions in a matter of minutes; 

the Bureau is concerned that financial 

institutions may be compelled to raise 

the cost of credit or originate fewer 


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515ECOA section 704B(a). 

516The Bureau understands that the SBA recently 

changed its regulations on the calculation of 

average annual receipts for all of SBA’s receiptsbased size standards, and for other agencies’ 

proposed receipts-based size standards, from a 

three-year averaging period to a five-year averaging 

period, outside of the SBA Business Loan and 

Disaster Loan Programs. 84 FR 66561 (Dec. 5, 2019). 

517 Generally, the average number of employees of 

the business concern is used (including the 

employees of its domestic and foreign affiliates) 

based upon numbers of employees for each of the 

pay periods for the preceding completed 12 

calendar months. See 13 CFR 121.106(b)(1). 518To measure business size, the SBA also uses 

financial assets for certain financial industries, and 

for the petroleum refining industry, it uses refining 

capacity and employees. 519See 12 CFR 1002.9(a)(3). 

520 13 CFR 121.104(a) and (c). 521 Id. 

covered credit transactions as a result. 

Such an outcome could needlessly 

affect access to credit for small 

businesses. Eliminating credit 

opportunities or reducing access to 

credit to small businesses, including 

women-owned and minority-owned 

small businesses, in this way would 

conflict with the statutory purpose of 

section 1071 to ‘‘enable communities, 

governmental entities, and creditors to 

identify business and community 

development needs and opportunities of 

women-owned, minority-owned, and 

small businesses.’’ 515

The Bureau expects that many 

financial institutions, for efficiency, will 

bifurcate their business credit 

application procedures based on an 

initial determination of whether the 

application will be subject to section 

1071. The Bureau therefore believes that 

many financial institutions will not 

proceed with taking applicant 

information until the financial 

institution is able to determine that the 

applicant is small (in which case, 

section 1071 will require the financial 

institution to collect and report the 

applicant’s protected demographic 

information) or that the applicant is not 

small (where ECOA generally prohibits 

the financial institution from collecting 

protected demographic information). If 

this process requires determining the 

correct NAICS code for the applicant, 

and in many cases, requesting five years 

of average annual receipts or employee 

information from the applicant, the 

Bureau believes that businesses seeking 

access to credit will encounter, at a 

minimum, otherwise avoidable delays 

in processing applications. 

The Bureau believes that the $5 

million gross annual revenue standard it 

is proposing is a more efficient and 

appropriate measure of applicant size 

for purposes of determining whether 

small business lending data collection is 

required pursuant to section 1071. The 

Bureau understands that the SBA 

generally bases business concern size 

standards on average annual receipts or 

the average number of employees of the 

business concern, as customized 

industry-by-industry across 1,057 6- 

digit NAICS codes. The SBA typically 

uses two primary measures of business 

size for size standards purposes: (i) 

Average annual gross receipts 516 for 

businesses in services, retail trade, 

agricultural, and construction 

industries, and (ii) average number of 

employees 517 for businesses in all 

manufacturing industries, most mining 

and utilities industries, and some 

transportation, information, and 

research and development industries.518

The Bureau understands that SBA’s size 

standards are used to establish 

eligibility for a variety of Federal small 

business assistance programs, including 

for Federal government contracting and 

business development programs 

designed to assist small businesses in 

obtaining Federal contracts and for 

SBA’s loan guarantee programs, which 

provide access to capital for small 

businesses that are unable to qualify for 

and receive conventional loans 

elsewhere. The Bureau notes that the 

size standard used under section 1071 

would only be used to determine 

whether small business lending data 

collection is required pursuant to 

section 1071, and would have no 

bearing on eligibility for Federal small 

business assistance. Moreover, the 

Bureau believes it is far more likely that 

an applicant will be able to readily 

respond to a question regarding its gross 

annual revenue for the preceding fiscal 

year—something already contemplated 

by existing Regulation B for all business 

credit to determine whether notice 

requirements apply 519—than offer the 

closest metric currently in use by SBA 

regulations, which is generally average 

annual receipts for the previous five 

fiscal years.520 Furthermore, use of this 

gross annual revenue standard would be 

efficient, as a financial institution is 

statutorily required to collect and report 

gross annual revenue by ECOA section 

704B(e)(2)(F). 

The Bureau believes that section 1071 

differs from other programs that may 

have been contemplated pursuant to the 

Small Business Act’s provisions 

pertaining to the establishment of size 

standards. First and most notably, the 

rulemaking contemplated by section 

1071 is not a ‘‘program’’ in the 

traditional sense of a procurement or 

other Federal assistance program; the 

rule would not confer a direct benefit or 

advantage to the small business 

applicant or financial institution in 

terms of contract, procurement, loan 

guaranty, or government backed 

debenture. Rather, financial institutions 

will be contributing information about 

credit applications for businesses 

identified as small under section 1071— 

information that will be valuable to the 

Bureau, financial institutions, 

policymakers, and other stakeholders, 

including small businesses. Second, 

unlike other such alternative size 

standard requests, the Bureau notes that 

a size standard under section 1071 

would apply to businesses across all 

sectors applying for financing, rather 

than a particular industry or sector. And 

third, the Bureau believes that arriving 

at a simplified size standard is an 

essential element to this ‘‘program,’’ as 

more complex approaches may limit 

opportunities for small businesses by 

reducing access to credit. 

Section 1071 is also unique in that 

Congress specified that the data 

collection regime include a particular 

form of revenue for the businesses at 

issue. As discussed in the section-bysection analysis of proposed 

§ 1002.107(a)(14) below, section 1071 

requires a financial institution to collect 

‘‘the gross annual revenue of the 

business in the last fiscal year of the 

women-owned, minority-owned, or 

small business loan applicant preceding 

the date of the application.’’ 521 The 

Bureau considered whether under 

section 1071 a financial institution 

should have to apply two different 

revenue-based rules (first, one for 

determining whether the business is 

small under the existing SBA size 

standards and therefore section 1071 

data must be collected and reported; 

and, second, if the business is small, 

another for reporting the business’s 

gross annual revenue in the last fiscal 

year), or whether applying only one 

revenue-based rule for section 1071 

could be sufficient. The Bureau believes 

that requiring financial institutions to 

apply both would be unnecessarily 

confusing and burdensome, and would 

also increase potential for errors in data 

collection. The Bureau does not believe 

it is appropriate to use only average 

annual receipts, given the language of 

section 1071. Moreover, as discussed 

below, section 1071 amends ECOA, 

which already incorporates gross annual 

revenue as implemented under existing 

Regulation B. 

ECOA section 704B(e)(2)(G) requires a 

financial institution to collect and 

report the race, sex, and ethnicity of the 

principal owners of the business. 

Existing Regulation B generally 

prohibits a creditor from inquiring about 


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522Existing § 1002.5(a)(2). ECOA states that it is 

not discrimination for a financial institution to 

inquire about women-owned or minority-owned 

business status, or the race, sex, and ethnicity of 

principal owners pursuant to section 1071. 15 

U.S.C. 1691(b)(5). 

523The 2012 SUSB is the most recent Census 

product to have categories of revenue and 

employees granular enough to conduct this 

analysis. The Bureau constructed the 2012 

equivalents of the second and third alternatives due 

to the vintage of the SUSB data available and used 

the SBA’s 2012 size standards for the analysis. The 

2012 SUSB only covers employer firms or 

businesses with at least one employee. 

such protected demographic 

information in connection with a credit 

transaction unless otherwise required by 

Regulation B, ECOA, or other State or 

Federal law, regulation, order, or 

agreement.522 Thus, in order to avoid 

potential liability under ECOA and 

existing Regulation B, a financial 

institution must accurately determine 

that a business credit application is 

subject to section 1071 before inquiring 

about the applicant’s protected 

demographic information. The Bureau 

does not believe the SBA’s existing size 

standards allow for the quick and 

accurate determination of small 

business status required for this 1071 

data collection initiative. Specifically, 

the Bureau does not believe this 

determination can be quickly and 

accurately made if, as required under 

the SBA’s existing size standards, the 

financial institution must determine the 

appropriate NAICS code for the 

business and then apply the NAICSbased size standards to determine 

whether a business loan applicant is a 

small business. 

As discussed above, SERs and other 

stakeholders have expressed concern to 

the Bureau about the difficulties in 

determining the appropriate NAICS 

code for businesses and in applying the 

NAICS-based size standards. They 

generally preferred a simple small 

business definition and expressed 

concern that the SBA’s approach to 

defining a small business—which bases 

classification on an applicant’s 6-digit 

NAICS code—is relatively complex in 

this context. The Bureau believes that 

removing a NAICS-based small business 

determination as a step in determining 

small business status will both facilitate 

compliance and better achieve the 

purposes of section 1071. The Bureau 

understands that one reason that SERs 

and others expressed a strong desire for 

a simple approach to determining 

whether an applicant is small is that 

this initial determination may drive the 

application process. To comply with 

section 1071 requirements, financial 

institutions may use a different 

application process, or different or 

additional application materials, with 

applicants for business credit that are 

small businesses than they do with 

applicants that are not small businesses. 

Thus, quickly and accurately 

determining whether an applicant is a 

small business at the outset of the 

application process may be a crucial 

step, one that financial institutions 

would benefit from being able to 

seamlessly accomplish. Considering the 

requirements and prohibitions in ECOA 

with respect to protected demographic 

information, the Bureau understands the 

import that financial institutions have 

placed on both the speed and accuracy 

of this determination. 

As discussed in the section-by-section 

analysis of proposed § 1002.107(a)(15) 

below, the Bureau believes that NAICS 

codes possess considerable value for 

section 1071’s fair lending purpose as 

well as its business and community 

development purpose beyond being 

necessary for determining whether an 

applicant is a small business under the 

SBA’s size standards. The Bureau is 

therefore proposing that financial 

institutions be required to collect and 

report NAICS codes as one of the data 

fields for applications subject to section 

1071. However, the Bureau believes that 

gathering NAICS code information at 

some point during the application 

process, while still the subject of some 

concern for financial institutions, is a 

different consideration from requiring 

NAICS information as a necessary step 

to beginning an application (and 

correctly determining which type of 

application to initiate). 

The Bureau also believes that this 

simplified alternative size standard will 

provide largely consistent reporting 

results, as compared to adopting the full 

SBA size standards. The Bureau used 

data from the U.S. Census’s 2012 

Statistics of U.S. Businesses (SUSB) and 

the U.S. Department of Agriculture’s 

2012 Census of Agriculture to analyze 

how each of the Bureau’s contemplated 

alternative approaches would change 

the number of businesses defined as 

‘‘small’’ relative to the SBA 

definition.523 If all NAICS 

classifications and size assessments 

could be done correctly, applying the 

SBA’s full 6-digit NAICS code-based 

size standards would result in complete 

coverage of small businesses as defined 

by the SBA—all applications by small 

businesses would be reported (other 

than those made to financial institutions 

that qualify for an exemption) and no 

applications made by non-small 

businesses would be reported. The 

Bureau estimates that 270,000 

businesses that would be small under 

the SBA’s existing size standards (out of 

7.2 million small employer businesses 

and farms) would not be covered by the 

Bureau’s proposed $5 million gross 

revenue standard. The Bureau further 

estimates that the Bureau’s proposed 

rule would cover some 77,000 

businesses that would not be small 

under the SBA size standards. The 

Bureau believes that such variation with 

respect to the SBA’s current size 

standards is an appropriate trade-off for 

the reasons described herein. 

The Bureau notes, however, that a $5 

million gross annual revenue alternative 

size standard would affect some 

industries more than others. That is, 

applications for small businesses would 

be reported to the Bureau less from 

some industries than others. In general, 

there will be a larger proportion of 

businesses whose applications would 

not be reported in industries with a 

higher revenue-based size standard. The 

industries most affected by this are the 

retail trade and construction industries. 

Other industries that would be 

disproportionately affected may include 

manufacturing, wholesale trade, health 

care and social assistance, and 

professional, scientific, and technical 

services. The Bureau received little 

public feedback with respect to such 

concerns, although the Bureau seeks 

comment with respect to any potential 

effects on particular subsets of 

applicants that may be 

disproportionately included or excluded 

on the basis of a gross annual revenue 

standard (such as those subject to 

employee-based size standards), 

particularly in light of section 1071’s 

purposes. 

The Bureau also believes that a 

simplified size standard will be 

important for financial institutions that 

may not frequently engage in small 

business lending in determining 

whether they are covered under the 

1071 rule. As discussed in the sectionby-section analysis of proposed 

§ 1002.105(b), the Bureau is proposing 

to mandate section 1071 small business 

lending data collection only from those 

financial institutions that originated at 

least 25 covered credit transactions from 

small businesses in each of the two 

preceding calendar years. Those 

financial institutions that do not 

frequently lend to small businesses will 

be seeking to track precisely how many 

covered credit transactions for small 

businesses they have originated. The 

Bureau believes that it is important to 

empower financial institutions to 

quickly ascertain whether a covered 

credit transaction was furnished to a 

small business, such that infrequent 

lenders can continue to monitor 


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524See 84 FR 66561, 66562 (Dec. 5, 2019). 

525As discussed in greater detail above in E.2 of 

the Overview to this part V, the Bureau interprets 

the phrase ‘‘pursuant to a request under subsection 

(b)’’ in section 1071 as referring to all of the data 

points contemplated by ECOA section 704B(e), not 

merely whether the applicant is a minority-owned, 

women-owned, or small business. 

526ECOA section 704B(a). 

527ECOA section 704B(e)(4), (f). 528SBREFA Outline at 24. 

whether section 1071 compliance is 

required. 

Average gross annual revenue. The 

Bureau considered proposing an 

approach that would use an average 

gross annual revenue calculated over an 

averaging or ‘‘lookback’’ period instead 

of using the gross annual revenue for the 

preceding fiscal year. This alternative 

approach would be similar to the SBA 

approach of using a five-year annual 

receipts average. The Bureau 

understands that the SBA expects the 

five-year average to: (i) Enable some 

mid-size businesses currently 

categorized above their corresponding 

size standards to gain or regain small 

business status and thereby qualify for 

participation in Federal assistance 

intended for small businesses, and (ii) 

allow some advanced and larger small 

businesses close to their size thresholds 

to lengthen their small business status 

for a longer period and thereby continue 

their participation in Federal small 

business programs.524 However, because 

the 1071 rule is not connected to 

eligibility for participation in any 

Federal programs for small business 

loans, grants, procurement, or 

otherwise, the Bureau believes that 

allowing financial institutions to 

consider applicants’ gross annual 

revenue for the preceding fiscal year is 

sufficient for 1071 purposes. The 

Bureau also notes that using gross 

annual revenue for the preceding fiscal 

year is consistent with the notification 

requirements of existing Regulation B 

and the Bureau’s approach in proposed 

§ 1002.107(a)(14) regarding the gross 

annual revenue data point. The Bureau 

believes that using this measure instead 

of an average will better align with 

current lending practices and will 

simplify determinations regarding 1071 

reporting status. 

Section 1002.107 Compilation of 

Reportable Data 

107(a) Data Format and Itemization 

Background 

ECOA section 704B(e) requires 

financial institutions to ‘‘compile and 

maintain’’ records of information 

provided by applicants ‘‘pursuant to a 

request under subsection (b),’’ and 

requires them to ‘‘itemiz[e]’’ such 

information to ‘‘clearly and 

conspicuously disclose’’ a number of 

data points; 525 the Bureau refers to 

these as statutory data points. Section 

704B(e)(2)(H) provides the Bureau with 

authority to require ‘‘any additional data 

that the Bureau determines would aid in 

fulfilling the purposes of [section 

1071]’’; the Bureau refers to data points 

adopted under this authority as 

discretionary data points. The stated 

statutory purposes of 1071 are twofold: 

(1) To facilitate enforcement of fair 

lending laws; and (2) to enable 

communities, governmental entities, 

and creditors to identify business and 

community development needs and 

opportunities of women-owned, 

minority-owned, and small 

businesses.526 The Bureau notes that 

‘‘discretionary’’ in this context means 

discretionary for the Bureau to adopt, 

not discretionary for financial 

institutions to comply with. 

The 1071 data collected and reported 

by financial institutions would 

generally be made available to the 

public unless the Bureau decides to 

delete or modify certain data to advance 

a privacy interest.527 As discussed 

below in part VI, the Bureau is 

proposing to use a balancing test to 

determine what data should be deleted 

or modified, but does not intend to 

apply the balancing test until financial 

institutions have reported at least a full 

year of 1071 data to the Bureau. The 

Bureau notes that the utility of 1071 

data to particular groups of data users 

will depend on the specific data 

collected and the form, manner, and 

extent to which the Bureau makes such 

data available to the public. 

The users of data from the Bureau’s 

proposed 1071 rule could include the 

Bureau itself; other Federal agencies 

including the prudential banking 

regulators; Congress; State and local 

governments; community, consumer, 

and civil rights groups; researchers and 

academics; financial institutions; small 

businesses; and small business trade 

organizations. The comprehensive data 

that would be collected under the 

Bureau’s rule is not available elsewhere, 

though some aggregate information for 

some loans to businesses—but not 

applications—exists in other sources. 

For example, there are several datasets 

on loans to businesses by depository 

institutions. The FFIEC Call Report data 

provide information on banks’ and 

savings associations’ total outstanding 

number and amount of loans to 

businesses for loans under $1 million 

and farms for loans under $500,000. The 

CRA requires banks and savings 

associations with assets over a specified 

threshold ($1.322 billion as of 2021) to 

report data on loans to businesses with 

origination amounts of $1 million or 

less and loans to farms with origination 

amounts of $500,000 or less. NCUA Call 

Reports include information on credit 

unions’ outstanding and originated 

commercial loans to members over 

$50,000. Though the Bureau and other 

agencies with supervisory jurisdiction 

can currently approximate some 1071 

data through requests during 

examinations of individual institutions, 

the agencies would only have access to 

data from a relatively small number of 

such institutions at any one time and 

the data obtained would not be uniform 

among institutions. The availability of 

uniform 1071 data across different types 

of financial institutions should 

significantly improve agencies’ ability to 

focus limited supervisory resources on 

institutions with higher fair lending 

risk. Section 1071 data may also provide 

insight into how well the market is 

meeting the credit needs of small 

businesses in general, as well as 

women- and minority-owned small 

businesses in particular, and could 

potentially be used to identify market 

opportunities. 

The Bureau has received feedback 

relevant to the 1071 rulemaking from a 

variety of sources, including through the 

SBREFA process as well as the Bureau’s 

1071 Symposium and the 2017 RFI on 

small business lending. This feedback 

addressed, among other things, the 

potential inclusion of discretionary data 

points in the 1071 rulemaking, which is 

discussed further below. By discussing 

these potential discretionary data points 

under consideration in the SBREFA 

Outline, the Bureau obtained helpful 

feedback on costs and benefits from the 

SERs and other stakeholders to inform 

the Bureau’s decision-making for 

purposes of this NPRM. 

SBREFA Proposals Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

explained its understanding of the data 

points enumerated in section 1071.528

The Outline noted that ECOA section 

704B(b) requires financial institutions to 

inquire whether an applicant for credit 

is a women-owned, minority-owned, or 

small business. In addition, the statute 

states that the information compiled and 

maintained by a financial institution 

under section 704B(e)(1) shall be 

itemized in order to clearly and 

conspicuously disclose a number of 

particular items that are enumerated in 

the statute. In the Outline, the Bureau 


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529 Id. at 24–36. 

530 Id. at 33. 

531The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 25–30. 532See Regulation C § 1003.3(d). 

stated that it was considering proposing 

to require all of these data points.529

The Bureau also discussed in the 

SBREFA Outline its proposals under 

consideration regarding data points 

adopted pursuant to its discretionary 

data points authority under ECOA 

section 704B(e)(2)(H).530 The Bureau 

explained that it was considering 

proposing to require that financial 

institutions report discretionary data 

points regarding pricing, time in 

business, NAICS code, and number of 

employees. 

SERs provided feedback on nearly all 

aspects of the data points under 

consideration, including certain 

feedback applicable to all data points.531

Regarding data points generally, most 

SERs requested that the Bureau make 

the collection and reporting of data 

points as simple as possible. Two SERs 

stated that collecting and reporting the 

statutory data points would not pose 

any issues because they collect them 

now. A number of SERs urged the 

Bureau to require collection and 

reporting of a number of data points 

based only on information as provided 

by the applicant. One SER stated that 

the Bureau should be aware that, as 

with HMDA reporting, the cost of 

collecting and reporting the data points 

will include expensive data quality 

scrubs in order to avoid negative 

examination findings. Another SER 

stated that it will be challenging to 

standardize the data so reporting can be 

automated, and that this will likely 

require significant training and a 

tremendous amount of human 

intervention. 

Furthermore, some SERs expressed 

concern about asking applicants to 

provide certain information (in 

particular the race, sex, and ethnicity of 

principal owners), as they believed that 

applicants would feel uncomfortable 

providing, or even being asked about, 

that information, and that if applicants 

are denied credit they might feel it was 

because of the protected demographic 

information they provided. One SER 

stated that the collection of 1071 data 

could seem like an intrusion of privacy 

by the financial institution, particularly 

to minority borrowers. The SER stated 

that prospective applicants may decide 

to seek financing elsewhere. Another 

SER stated that some prospective 

applicants’ distrust of the Federal 

government (and concern over how 

1071 data might be used) might 

adversely impact their ability to lend to 

the communities they serve. Other SERs 

that currently collect this information 

(for example, because they are CDFIs or 

SBA lenders) indicated that they 

generally do not have difficulty 

collecting demographic information 

from borrowers. 

Several SERs suggested that the 

Bureau develop a system to assist in the 

collection of applicants’ protected 

demographic information, and possibly 

other applicant-provided 1071 data, that 

would avoid the need for financial 

institutions to request and store 

sensitive information about applicants. 

One SER suggested that this system 

could also permit applicants to input 

their addresses for geocoding. 

SERs also provided detailed feedback 

on the discretionary data points that the 

Bureau was considering. One SER stated 

that the cost of collecting and reporting 

the discretionary data points under 

consideration would be significant, and 

another SER stated that the Bureau 

should include as few data points as 

possible to avoid unnecessary costs. 

Another SER stated that the Bureau 

should finalize a rule with just the 

statutorily required data points and 

avoid adding any discretionary data 

points. That SER suggested that if the 

Bureau does include discretionary data 

points, the Bureau could consider 

providing an exemption from 

discretionary data point collecting and 

reporting for certain small 1071 

reporters, similar to the partial data 

point exemption approach taken under 

HMDA.532

Other SERs favored the inclusion of 

some or all of the discretionary data 

points. Two SERs stated their support 

for the inclusion of all four 

discretionary data points under 

consideration. One of these SERs 

suggested that the Bureau also collect 

information regarding the way the 

application was taken (in person, by 

phone, or online) in order to monitor 

possible discouragement of applicants. 

The other SER suggested that the Bureau 

also collect credit score information. 

Stakeholders commenting on the 

statutory data points and data points in 

general largely echoed the SERs’ 

concerns. Industry commenters 

suggested that the method of collection 

be as clear and simple as possible, that 

the cost burden be taken into account, 

and that the Bureau not require 

verification of applicant-provided 

information. Community groups largely 

supported the Bureau’s proposals under 

consideration for the statutory data 

points, and emphasized the importance 

of the new 1071 data collection regime. 

A large majority of industry 

stakeholders commenting on the 

SBREFA Outline opposed the collection 

of any discretionary data points, stating 

that including them would be overly 

burdensome and unnecessary. Industry 

commenters argued that the 1071 rule 

would be very burdensome in any case, 

requiring new software and onerously 

different business processes, and adding 

data points would only increase that 

burden. Some commenters stated that 

collecting and reporting the 

discretionary data points would 

increase compliance obligations and 

costs, and likely impact credit costs and 

availability for small business 

customers. Some commenters were 

concerned about the discretionary data 

points being made public without 

contextual information, potentially 

leading to damaging misinterpretations. 

One stakeholder stated that unnecessary 

discretionary data points would add to 

the already significant privacy concerns 

of financial institutions and borrowers. 

Several commenters suggested that the 

Bureau consider an incremental 

approach to expanding the data 

collection in the future should the 

statutory fields not be sufficient to 

accomplish the original intent of 1071. 

Several other stakeholders suggested 

that if the Bureau includes discretionary 

data points, it should provide an 

exemption from reporting them for 

smaller financial institutions. 

Community groups and several 

community development lenders 

supported mandatory reporting of the 

discretionary data points under 

consideration, saying that they would 

help achieve section 1071’s purposes. 

One stakeholder stated that the 

discretionary data points under 

consideration relate to underwriting 

decisions and must be accounted for so 

credit providers cannot—as they said 

HMDA reporters have done for years— 

hide behind data not collected as 

justification for their lending disparities. 

A community development lender 

supported the collection of the 

discretionary data points, but suggested 

that the Bureau not collect number of 

employees. Some stakeholders 

suggested additional discretionary data 

points. 

Regarding data points in general, the 

SBREFA Panel recommended that the 

Bureau consider proposing in the NPRM 

that applicant-provided data points be 

self-reported by the applicant only, 

without an obligation for the financial 

institution to verify the information 


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533SBREFA Panel Report at 46. 

534 Id. 

535 Id. 

536SBREFA Outline at 34–35. 537See part VI below. 

538See generally Fed. Fin. Insts. Examination 

Council, The Home Mortgage Disclosure Act, 

https://ffiec.cfpb.gov/ (last visited July 28, 2021). 

provided by the applicant.533 Regarding 

the discretionary data points, the 

SBREFA Panel recommended that if 

time in business, number of employees, 

and NAICS code become part of the 

proposal, the Bureau continue to 

explore ways to minimize the burden to 

small financial institutions of collecting 

and reporting such data; and with 

respect to NAICS code specifically, the 

burden on small business applicants 

who need to provide the information.534

As to pricing, the Panel recommended 

that if this data point becomes part of 

the proposal, the Bureau seek comment 

on potential methods for avoiding 

misinterpretations of disparities.535

Proposed Rule 

The Bureau is proposing to adopt the 

statutory data points largely consistent 

with its proposals under consideration 

at SBREFA, but with certain changes as 

discussed in the section-by-section 

analyses of the individual data points 

below. Consistent with its approach 

under consideration in the SBREFA 

Outline,536 the Bureau is proposing 

discretionary data points relating to 

pricing, time in business, NAICS code, 

and number of workers. In addition, 

based on feedback from SERs and other 

stakeholders and in the course of 

developing the proposed rule, the 

Bureau identified several additional 

data points that it believes would be 

important to the quality and 

completeness of the 1071 data collected 

and would aid significantly in 

furthering the purposes of section 1071. 

The proposed rule would adopt 

additional discretionary data points 

regarding application method, 

application recipient, denial reasons, 

and number of principal owners. In 

addition, the Bureau is relying on ECOA 

section 704B(e)(2)(H), as well as its 

authority under 704B(g)(1), to make 

certain clarifications to the statutory 

data points. These data points are all 

discussed in detail in the section-bysection analyses of proposed 

§ 1002.107(a)(1) through (21) below. 

The Bureau continues to believe that 

discretionary data points for pricing, 

time in business, NAICS code, and 

number of workers would serve the 

purposes of 1071, improve the utility of 

the data for stakeholders, and 

potentially reduce the occurrence of 

misinterpretations or incorrect 

conclusions based on analysis of an 

otherwise more limited data set. The 

Bureau also believes that discretionary 

data points for application method, 

application recipient, denial reasons, 

and number of principal owners would 

help to achieve these goals more 

effectively. 

In proposing these discretionary data 

points, the Bureau considered the 

additional operational complexity and 

potential reputational harm that 

collecting and reporting discretionary 

data points could impose on financial 

institutions. The Bureau has sought to 

respond to industry concerns regarding 

discretionary data points by proposing a 

limited number of discretionary data 

points that would offer the highest value 

in light of 1071’s statutory purposes. For 

this reason, the Bureau is not proposing 

certain additional discretionary data 

points suggested by SERs and other 

stakeholders such as credit score or 

applicant’s business structure (see the 

discussion below). In addition, the 

Bureau has not chosen to take an 

incremental approach to adding data 

points, as one stakeholder suggested, or 

permitting collecting and reporting of 

discretionary data points to be phased 

in over time. The Bureau believes the 

information from the proposed 

discretionary data points would further 

section 1071’s purposes for the reasons 

stated above, and should be collected 

and reported as soon as possible. In 

addition, data from these discretionary 

data points would be an important part 

of the privacy balancing test analysis 

that would be conducted after the first 

year of 1071 data is received.537 The 

Bureau will consider industry concerns 

about potential reputational harm that 

collecting and reporting discretionary 

data points could impose on financial 

institutions when it conducts the 

privacy balancing test analysis. 

In regard to the specific method by 

which a financial institution would 

collect the 1071 data points, the 

proposed rule would require a covered 

financial institution to compile and 

maintain data regarding covered 

applications from small businesses, and 

require that the data be compiled in the 

manner prescribed for each data point 

and as explained in associated Official 

Interpretations (included in this 

proposed rule) and the Filing 

Instructions Guide (FIG) that the Bureau 

anticipates later providing on a yearly 

basis. The proposed rule would then 

explain that the data compiled shall 

include the items described in proposed 

§ 1002.107(a)(1) through (21). The 

Official Interpretations, sometimes 

referred to as official comments or 

official commentary, provide important 

guidance on compliance with the 

regulation and are discussed in this 

preamble in relation to each data point 

as well as other regulatory provisions. 

The FIG would provide instructions on 

the operational methods for compiling 

and reporting data, including which 

codes to report for different required 

information. The FIG would be updated 

yearly, as is the FIG that is used with 

HMDA compilation and reporting.538

The Bureau notes that some of the 

details contained in the proposed 

regulatory text and commentary may 

also be appropriate for inclusion in the 

FIG, and it anticipates that it may 

choose to relocate some such details to 

the FIG when issuing the final rule. For 

example, proposed § 1002.107(a)(1) 

addresses the unique identifier data 

point. A portion of proposed comment 

107(a)(1)–1 would explain that the 

unique identifier must not exceed 45 

characters, and may only include 

standard numerical and/or alphabetical 

characters and cannot include dashes, 

other special characters, or characters 

with diacritics. At the final rule stage, 

the Bureau might consider removing 

those details from the commentary and 

addressing them instead in the FIG, in 

order to preserve flexibility in how the 

submission platform is ultimately 

designed and implemented. 

Proposed comment 107(a)–1 would 

provide general guidance on complying 

with § 1002.107(a), and would explain 

that: (i) A covered financial institution 

reports the data even if the credit 

originated pursuant to the reported 

application was subsequently sold by 

the institution; (ii) a covered financial 

institution annually reports data for 

covered applications for which final 

action was taken in the previous 

calendar year; and (iii) a financial 

institution reports data for a covered 

application on its small business 

lending application register for the 

calendar year during which final action 

was taken on the application, even if the 

institution received the application in a 

previous calendar year. The Bureau 

believes that these operational 

instructions would clarify a financial 

institution’s collection and reporting 

requirements and so facilitate 

compliance. The Bureau also believes 

that these instructions would help to 

ensure the accuracy and consistency of 

the data collected and reported. 

The Bureau crafted the proposed rule 

in consideration of the concerns and 

input of the SERs and other 

stakeholders. First, the proposed rule 

would generally not require a financial 


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539 12 CFR 1003.4(a)(1)(i). 

540 12 CFR 1003.3(d)(5). 

institution to verify applicant-provided 

information, as discussed more fully in 

the section-by-section analysis of 

proposed § 1002.107(b) below, and has 

limited the discretionary data points to 

those that the Bureau believes would be 

most useful for the purposes of section 

1071. In addition, the Bureau has 

considered the costs, including data 

quality scrubs, automation and training, 

that would be imposed by the collection 

and reporting of the statutory and 

discretionary data points; these are 

discussed in detail in part VII below. 

The Bureau has attempted to craft the 

collection and reporting requirements to 

be as clear and operationally 

manageable as possible, and requests 

comment on potential methods for 

increasing clarity and manageability. 

In regard to concerns from SERs and 

other stakeholders about being required 

to collect applicants’ protected 

demographic information for purposes 

of section 1071, the Bureau notes that 

several SERs reported collecting this 

kind of information currently (because 

they are CDFIs, or because they are 

participating in certain SBA or similar 

loan guarantee programs). In addition, 

the Bureau crafted the proposed rule to 

provide flexibility for financial 

institutions in the collection and 

reporting of this information. The 

Bureau is also not proposing an 

exemption for small financial 

institutions from reporting the 

discretionary data points, as suggested 

by some SERs and commenters. As 

explained in the section-by-section 

analysis of proposed § 1002.105(b) 

above, certain institutions with limited 

small business loan originations would 

be exempt from 1071 collection and 

reporting obligations. Furthermore, the 

Bureau is concerned that the usefulness 

of the data collected would be reduced 

if the data set is incomplete for some 

financial institutions. Finally, the 

Bureau is not proposing at this time to 

establish a Federal collection system for 

protected demographic or other 

information for use with 1071 reporting 

that would avoid the need for financial 

institutions to request and store this 

information about applicants, as 

suggested by several SERs. 

The Bureau seeks comment on its 

proposed approach to the collection and 

reporting of the 1071 data points, 

including the specific requests for input 

above and in the section-by-section 

analysis of each of the proposed data 

points below. 

Proposed Rule—Other Discretionary 

Data Points Considered But Not 

Proposed 

As mentioned above, SERs and other 

stakeholders suggested some additional 

data points for the Bureau’s 

consideration, and the Bureau 

considered others in the development of 

this proposed rule. Because of the 

operational complexities likely to be 

posed by each of these potential data 

points, as well as the reasons explained 

below, the Bureau has chosen not to 

propose to include any of the following 

data points in the 1071 rule. 

Nonetheless, the Bureau seeks comment 

on whether the following potential data 

points or any others would further the 

purposes of section 1071 and thus 

should be considered for inclusion in 

the final rule. 

• Type of business/entity structure 

(sole proprietorship, C-corp, LLC, 

partnership, etc.). This information 

could be useful in providing context to 

the race, sex, and ethnicity data 

regarding applicants’ principal owners. 

However, the Bureau believes that 

collecting the number of principal 

owners, as proposed in 

§ 1002.107(a)(21), would better serve 

this purpose. 

• Credit score. Collecting credit score 

and other credit information could be 

particularly useful for the fair lending 

purpose of section 1071. However, 

because of the different types of scores 

and different situations in which a 

financial institution would or would not 

access scores, the Bureau believes that 

this data point could be quite 

complicated and involve complex subfields, which could pose operational 

difficulties for financial institutions in 

collecting and reporting this 

information. These complexities could 

also make it difficult for data users to 

understand and interpret credit score 

data. 

• Credit reporting information, 

including whether credit information 

was accessed. This data point could also 

be complicated and involve complex 

sub-fields, making it difficult for 

financial institutions to collect and 

report. As with credit score, these 

complexities could also make it difficult 

for data users to understand and 

interpret these data. In addition, it is not 

clear that this information would be 

useful without also collecting credit 

score. 

• Percentage ownership of each 

principal owner and percentage 

ownership by women and by minorities. 

This information could be useful in 

providing context to the ethnicity, race, 

and sex data regarding applicants’ 

principal owners. However, the Bureau 

is concerned that requesting this type of 

percentage data could be confusing to 

applicants and could result in 

inconsistent responses across applicants 

and institutions. The Bureau believes 

that collecting the number of principal 

owners, as proposed in 

§ 1002.107(a)(21), would better serve 

this same purpose. 

• Whether the applicant has an 

existing relationship with the financial 

institution and the nature of that 

relationship. This information could 

provide additional context for a 

financial institution’s credit decision, 

and thus could be useful for both of 

section 1071’s statutory purposes. 

However, the Bureau believes that the 

usefulness of the data collected may not 

justify the additional operational 

complexity of identifying and tracking 

such relationships for reporting. 

• Customer number, and/or unique 

(but anonymous) identification number 

for applicants or associated persons for 

tracking of multiple applications. This 

information could be useful to track 

multiple applications by a single small 

business within a particular financial 

institution, whether submitted at one 

time or over the course of the year. 

However, the Bureau believes that the 

potential difficulties posed by requiring 

the reporting of this information— 

particularly for applications that have 

been withdrawn or abandoned—would 

not be warranted in light of the utility 

of the data. 

107(a)(1) Unique Identifier 

Background 

ECOA section 704B(e)(2)(A) requires 

financial institutions to collect and 

report ‘‘the number of the application 

. . . .’’ Regulation C includes a similar 

reporting requirement for a universal 

loan identifier (ULI),539 though some 

insured credit unions and depositories 

whose lending activity falls below 

applicable thresholds are partially 

exempt and only need to report a nonuniversal loan identifier (NULI).540 Both 

the ULI and the NULI use only 

alphanumeric characters, and do not 

allow use of identifying information 

about the applicant or borrower in the 

identifier. The ULI is ‘‘unique’’ in the 

national HMDA reporting market 

because it uses a unique legal entity 

identifier (LEI) for the reporting 

institution and then the identifier is 

required to be unique within that 


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541 12 CFR 1003.4(a)(1)(i)(A), (B)(2). The NULI is 

only required to be unique within the annual loan/ 

application register in which the covered loan or 

application is included. 12 CFR 1003.3(d)(5)(ii). 

542The ULI length limit is included in the 

Bureau’s yearly Filing Instructions Guide. See 

Bureau of Consumer Fin. Prot., Filing instructions 

guide for HMDA Data collected in 2021 (2021), 

https://s3.amazonaws.com/cfpb-hmda-public/prod/ 

help/2021-hmda-fig.pdf. The limit for the NULI is 

in Regulation C § 1003.3(d)(5). 

543SBREFA Outline at 26. 

544SBREFA Panel Report at 26–27. 

545 Id. at 45. 

546SBREFA Outline at 26. 

institution.541 The ULI must be no more 

than 45 characters and the NULI must 

be no more than 22 characters.542

SBREFA Proposals Under Consideration 

and Feedback Received 

The Bureau stated in the SBREFA 

Outline that it was considering 

proposing that financial institutions 

report an alphanumeric application or 

loan number of no more than 45 

characters that is unique, within the 

financial institution, to the referenced 

extension (or requested extension) of 

credit and that remains uniform through 

the application and origination stages of 

the process.543 The financial institution 

would assign this number to an 

application, and the number would be 

reported as the application number if 

the credit applied for was not 

originated. The same number would be 

reported as the loan number if the credit 

applied for was originated. The 

application/loan number would not 

include any identifying information 

about the applicant. The Bureau stated 

that it was considering proposing a 

structure for the method of assigning 

and reporting the application/loan 

number under section 1071 to follow 

HMDA/Regulation C formatting and 

other requirements, which might reduce 

initial software development costs. 

SERs reported varied practices with 

respect to assigning application and 

loan numbers.544 Some SERs stated they 

do not assign application numbers; 

some of those SERs indicated, however, 

that they do assign loan numbers at or 

before origination. Two SERs reported 

tracking applications and loans using an 

identification number assigned to the 

customer. One SER expressed concern 

about reporting actual loan numbers to 

the Bureau due to potential identity 

theft, and requested that the Bureau 

permit financial institutions to generate 

a new application/loan number 

specifically for 1071 reporting purposes. 

One SER stated that if an applicant 

requests more than one type of credit 

product, a separate application/loan 

number is assigned to each product 

request, while other SERs indicated they 

use a single application number even if 

multiple products are requested. 

The SBREFA Panel recommended 

that in the NPRM the Bureau consider 

proposing to permit financial 

institutions to report ‘‘dummy’’ 

application/loan numbers assigned 

specifically for 1071 reporting purposes, 

rather than the numbers they use 

internally.545

Feedback from other stakeholders 

echoed many of the SERs’ concerns, 

making clear that many lenders do not 

assign numbers at the application stage 

and others assign them at various points 

in the process. One commenter 

explained that being required to assign 

an application number early would 

disrupt its procedures. Another 

commenter stated that the Bureau 

should provide flexibility in this data 

point to account for the wide range of 

practices. 

Proposed Rule 

The Bureau is proposing to require 

that financial institutions report an 

alphanumeric identifier starting with 

the LEI of the financial institution. This 

unique alphanumeric identifier would 

be required to be unique within the 

financial institution to the specific 

covered application, and would be 

required to be usable to identify and 

retrieve the specific file corresponding 

to the application for or extension of 

credit. The Bureau is also proposing 

commentary with additional details, as 

discussed below. 

This proposed unique identifier 

requirement closely follows the 

SBREFA Outline approach for this data 

point, with certain adjustments and 

clarifications. First, the Bureau has 

chosen to propose the more precise term 

of ‘‘unique identifier,’’ instead of 

‘‘application/loan number,’’ which was 

the term used in the SBREFA Outline. 

In addition, the Bureau had stated that 

its approach in the SBREFA Outline 

would follow Regulation C formatting 

and other requirements, but did not 

explicitly discuss the use of ‘‘dummy’’ 

numbers, as is done with HMDA.546 For 

clarity, the Bureau is including language 

in proposed comment 107(a)(1)–1 that 

would explain that the identifier does 

not have to be the number that the 

financial institution uses for the 

application internally. Proposed 

comment 107(a)(1)–1 would also 

provide the formatting requirements for 

the unique identifier. The Bureau is 

proposing an identifier of 45 characters 

or fewer, as is currently required for 

HMDA. 

The Bureau notes that the SBREFA 

Outline language could be read to 

suggest that the financial institution 

must assign a number to an application 

and then keep that number uniform 

throughout its subsequent processing of 

the application; this is not what was 

intended. The Bureau is making clear in 

the proposal that the unique identifier 

would not need to stay ‘‘uniform’’ 

throughout the application and 

subsequent processing. Proposed 

comment 107(a)(1)–1 would explain 

that the financial institution may assign 

the unique identifier at any time prior 

to reporting the application. Proposed 

comment 107(a)(1)–1 would also 

explain that refinancings or applications 

for refinancing must be assigned a 

different identifier than the transaction 

that is being refinanced. 

Proposed comment 107(a)(1)–2 would 

make clear that the unique identifier 

must not include any directly 

identifying information regarding the 

applicant or persons (natural or legal) 

associated with the applicant. The 

Bureau is aware that internal 

identification numbers assigned by the 

financial institution to the application 

or applicant could be considered 

directly or indirectly identifying 

information, and requests comment on 

this issue. The Bureau also notes that, 

as discussed in part VI.C.6.i, due to 

privacy risks the Bureau is proposing to 

not publish the unique identifier data 

field in unmodified form; the Bureau is 

seeking comment on potential 

modifications to or deletion of this data 

field in the published application-level 

1071 data. 

Proposed comment 107(a)(1)–2 would 

also cross-reference proposed 

§ 1002.111(c) and related commentary, 

which prohibit any personally 

identifiable information concerning any 

individual who is, or is connected with, 

an applicant, in records retained under 

proposed § 1002.111. 

As stated above, the Bureau is 

proposing to require that the unique 

identifier begin with the financial 

institution’s LEI; this requirement was 

not stated in the SBREFA Outline. 

Pursuant to proposed 

§ 1002.109(b)(1)(vi), any covered 

financial institution that does not 

currently use an LEI would be required 

to obtain and maintain an LEI in order 

to identify itself when reporting the 

1071 data. Including the financial 

institution’s LEI in the unique 

identifiers that it assigns to its 

applications should not cause extra 

operational difficulty once the 

programming to do so has been 


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547 Id. 

548SBREFA Panel Report at 27. 

549 Id. at 45. 

550SER feedback primarily directed at how to 

define an application under section 1071, rather 

than the date reported for that application, are 

discussed in connection with the section-by-section 

analysis of proposed § 1002.103(a) above. 

551SBREFA Panel Report at 30. 

implemented. The Bureau believes that 

including the LEI will increase the 

specificity and usefulness of the 

identifier and the record it identifies. 

Although a ‘‘check digit’’ is required for 

the HMDA ULI, the Bureau is not 

proposing to require its use in the 1071 

unique identifier. The Bureau believes 

that, based on its current expectations 

for a 1071 reporting platform, a check 

digit would be unnecessary. 

The Bureau’s proposal is intended to 

avoid the potential problems identified 

by SERs during the SBREFA process. 

The method proposed would 

accommodate different institutions’ 

numbering systems because the unique 

identifier can be created separately from 

that internal system. The Bureau’s 

proposed approach would also alleviate 

the identity theft concerns raised with 

respect to reporting actual loan 

numbers, though the Bureau is unlikely 

to release the unique identifier data 

reported to the Bureau publicly in any 

case. In regard to the issue of requests 

by the same applicant for more than one 

credit product at the same time, the 

Bureau proposes to treat those as 

separate applications. See the sectionby-section analysis of proposed 

§ 1002.103 above. 

The Bureau seeks comment on its 

proposed approach to the unique 

identifier data point. In addition, the 

Bureau requests comment on the use of 

the LEI in the unique identifier and the 

possible use of a check digit. 

107(a)(2) Application Date 

Background 

ECOA section 704B(e)(2)(A) requires 

financial institutions to collect and 

report the ‘‘date on which the 

application was received.’’ 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated it was considering proposing that 

financial institutions report the 

application date using either (i) the date 

shown on a paper or electronic 

application form; or (ii) the day on 

which a credit request becomes an 

‘‘application.’’ 547 The Bureau 

considered proposing that application 

date be reported with a day, month, and 

year. The Bureau also considered 

proposing that financial institutions 

have a grace period of several days on 

either side of the date reported to reduce 

the compliance burden of pinpointing 

an exact date on which an application 

was received. 

Most SERs stated that application date 

would not be difficult to report, though 

some suggested different triggers for the 

reporting of application date.548 This 

feedback overlapped with feedback on 

the definition of an application. Several 

SERs suggested the date an application 

is completed and submitted for 

underwriting review should be the 

triggering date. Several other SERs 

expressed support for reporting the date 

based on when a credit memorandum is 

generated. One SER suggested that each 

financial institution be permitted to 

develop its own process for reporting 

application date, so long as it is done 

consistently. Another SER expressed 

concern with reporting application date 

as a general matter, explaining that a 

date is not currently recorded in their 

system as a matter of practice. Instead 

of application date, that SER suggested 

that financial institutions report the date 

they make a decision on the loan. 

Several SERs were strongly in favor of 

the Bureau providing a grace period of 

several days on either side of the date 

reported to reduce compliance burden. 

Other stakeholders to comment on 

this data point were generally in favor 

of the proposal under consideration, 

and particularly the grace period, which 

they expressed would reduce the 

compliance burden of pinpointing an 

exact date. One stakeholder suggested a 

7-day grace period. One financial 

institution suggested that application 

date be assigned up through and 

including at closing in order to 

accommodate financing requests outside 

normal business hours. 

The SBREFA Panel recommended 

that the Bureau seek comment on how 

best to define ‘‘application date’’ in light 

of how it decides to propose defining an 

‘‘application.’’ 549

Proposed Rule 

The Bureau is proposing to require 

reporting of application date in 

§ 1002.107(a)(2) as the date the covered 

application was received by the 

financial institution or the date on a 

paper or electronic application form. 

Proposed § 1002.107(a)(2) is consistent 

with the Bureau’s proposal under 

consideration in the SBREFA Outline, 

with revised language for clarity. 

Proposed comments 107(a)(2)–1 and –2 

would clarify the need for a financial 

institution to take a consistent approach 

when reporting application date, and 

provide guidance on how to report 

application date for indirect 

applications. In light of SER and other 

stakeholder feedback 550 supportive of 

permitting a grace period for reporting 

the date of application, the Bureau is 

proposing a safe harbor in 

§ 1002.112(c)(4), which would provide 

that a financial institution does not 

violate proposed subpart B if it reports 

on its small business lending 

application register an application date 

that is within three calendar days of the 

actual application date pursuant to 

proposed § 1002.107(a)(2). 

The Bureau seeks comment on its 

proposed approach to collecting 

application date in § 1002.107(a)(2) and 

associated commentary. As 

recommended by the SBREFA Panel, 

the Bureau also seeks comment on how 

best to define this data point in light of 

the Bureau’s proposed definition of 

‘‘covered application’’ in § 1002.103. 

107(a)(3) Application Method 

ECOA section 704B(e)(2)(H) 

authorizes the Bureau to require 

financial institutions to compile and 

maintain ‘‘any additional data that the 

Bureau determines would aid in 

fulfilling the purposes of [section 

1071].’’ The Bureau believes that 

application method data will aid in 

fulfilling the purposes of section 1071, 

as explained below. 

The Bureau did not address the 

method of application as a potential 

data point under consideration in the 

SBREFA Outline. However, during the 

SBREFA process, one CDFI SER 

suggested collecting information 

regarding the way an application was 

taken (in person, by phone, or online) in 

order to monitor for possible 

discouragement of applicants.551

Relatedly, several SERs that took 

applications for credit primarily or 

entirely online asserted that such 

channels were less likely to result in 

discrimination and more likely to 

increase access to credit to womenowned and minority-owned small 

businesses. 

In light of this feedback during the 

SBREFA process, pursuant to its 

authority under ECOA section 

704B(e)(2)(H), and for the reasons set 

forth below, the Bureau is proposing to 

require financial institutions to collect 

and report application method. 

Proposed § 1002.107(a)(3) would define 

this data point as the means by which 

the applicant submitted the covered 

application directly or indirectly to the 

financial institution. The Bureau is also 

proposing commentary to accompany 

proposed § 1002.107(a)(3). 


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552ECOA section 704B(b). 

The Bureau believes that data on 

application method would improve the 

market’s understanding of how 

applicants apply for credit which, in 

turn, would facilitate fair lending 

enforcement, including helping 

determine whether certain application 

methods are more or less likely to be 

associated with violations of fair 

lending laws. This proposed data field 

would also permit comparisons across 

financial institutions for a given 

application method. In addition, data on 

application method supports 1071’s 

statutory purposes by assisting with an 

understanding of the business and 

community development needs of a 

particular geographic region. For 

instance, application method may help 

users of 1071 data analyze the extent to 

which financial institutions may be 

providing access to credit online or by 

telephone in ‘‘credit deserts’’ where 

financial institutions do not have 

branch operations. 

The Bureau also believes that 

collecting data on application method 

will aid in analysis of multiple 1071 

data points collected and reported by 

financial institutions, including the 

ethnicity, race, and sex of applicants’ 

principal owners. First, these data will 

assist the Bureau and other data users in 

identifying whether applicants are more 

or less likely to provide this (and other) 

1071 information in different 

application channels. This information 

may also assist in determining whether 

a financial institution has procedures to 

collect applicant-provided data at a time 

and in a manner that is reasonably 

designed to obtain a response, as would 

be required by proposed 

§ 1002.107(c)(1). 

Finally, data on application method 

would assist in analyzing data reported 

under, and assessing compliance with, 

proposed § 1002.107(a)(20), which 

requires financial institutions to collect 

principal owners’ ethnicity and race via 

visual observation or surname in certain 

circumstances. Having application 

method reporting will allow the Bureau 

and other data users to determine, for 

example, which applications could be 

subject to data collection via visual 

observation or surname (because the 

financial institution met with the 

applicant in person) and, together with 

information reported under proposed 

§ 1002.107(a)(20), which of those 

applications did and did not have 

information collected that way. 

Proposed comment 107(a)(3)–1 would 

clarify that a financial institution 

complies with proposed § 1002.107(a)(3) 

by reporting the means by which the 

applicant submitted the application 

from one of the following options: inperson, telephone, online, or mail. 

Proposed comment 107(a)(3)–1 would 

explain how financial institutions are to 

choose which application method to 

report, including via a ‘‘waterfall 

approach’’ when they have contact with 

an applicant in multiple ways. 

Proposed comment 107(a)(3)–1.i 

would provide that an financial 

institution reports the application 

method as ‘‘in-person’’ if the financial 

institution, or another party acting on 

the financial institution’s behalf, meets 

with the applicant in person (for 

example, in a branch office, at the 

applicant’s place of business, or via 

electronic media with a video 

component). Proposed comment 

107(a)(3)–1.ii would provide that a 

financial institution reports the 

application method as ‘‘telephone’’ if 

the financial institution, or another 

party acting on the financial 

institution’s behalf, did not meet with 

the applicant in person as described in 

proposed comment 1002.107(a)(3)–1.i 

but communicated with the applicant 

by telephone or via electronic media 

without a video component. 

Proposed comment 107(a)(3)–1.iii 

would provide that a financial 

institution reports the application 

method as ‘‘online’’ if it, or another 

party acting on the financial 

institution’s behalf, did not meet with 

the applicant in person and did not 

communicate with the applicant by 

telephone as described in proposed 

comments 1002.107(a)(3)–1.i and ii but 

communicated with the applicant 

through an online application, 

electronic mail, text message, and/or 

some other form of online 

communication. Proposed comment 

107(a)(3)–1.iv would provide that a 

financial institution reports the 

application method as ‘‘mail’’ if the 

financial institution, or another party 

acting on the financial institution’s 

behalf, did not meet with the applicant 

in person and did not communicate 

with the applicant by telephone, as 

described in proposed comments 

1002.107(a)(3)–1.i and ii, but 

communicated with the applicant in 

writing via United States mail, courier 

or overnight service, or hand-delivery 

(including hand-delivery of documents 

via an overnight drop box or at a teller 

window). 

Proposed comment 107(a)(3)–2 would 

provide guidance on what application 

method a financial institution would 

report for interactions with applicants 

both online and by mail. In short, a 

financial institution would report 

application method based on the 

method by which it, or another party 

acting on its behalf, requested the 

ethnicity, race, and sex of the 

applicant’s principal owners pursuant 

to proposed § 1002.107(a)(20). Proposed 

comment 107(a)(3)–2 also would 

provide separate examples of when the 

application method should be reported 

as ‘‘online’’ and ‘‘mail.’’ 

The Bureau seeks comment on its 

proposed approach to this data point. 

107(a)(4) Application Recipient 

ECOA section 704B(e)(2)(H) 

authorizes the Bureau to require 

financial institutions to compile and 

maintain ‘‘any additional data that the 

Bureau determines would aid in 

fulfilling the purposes of [section 

1071].’’ Although the Bureau did not 

address application recipient as a 

potential data point under consideration 

in the SBREFA Outline, the Bureau 

believes that application recipient data 

would aid in fulfilling the purposes of 

section 1071, as explained below. 

Financial institutions employ a wide 

variety of lending models in extending 

credit to small businesses. During the 

SBREFA process, the Bureau explored 

section 1071’s requirement to collect 

and report certain data for any 

‘‘application to a financial institution 

for credit,’’ which could be read as 

applying to more than one financial 

institution when an intermediary 

provides the application to another 

financial institution that takes final 

action on the application.552 See the 

section-by-section analysis of proposed 

§ 1002.109(a)(3) below for a discussion 

of proposed reporting obligations where 

multiple financial institutions are 

involved in a covered credit transaction. 

Financial institutions, of course, may 

receive applications for credit directly 

from small businesses—depending on 

the institution, applications may be 

submitted online, by telephone, by mail, 

or in person at a branch location, the 

applicant’s place of business, or some 

other place. In addition, some financial 

institutions may receive applications 

routed to them through third parties, 

such as brokers or vehicle or equipment 

dealers. Some financial institutions 

issue credit cards branded for particular 

retailers, for which applications are 

taken in person at the retailer’s store 

locations. Some brokers and dealers 

may send applications to a single 

financial institution, while others may 

send them to multiple financial 

institutions at the same time. In these 

types of application scenarios involving 

third parties, the financial institution 

may not directly interact with the 


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553SBREFA Outline at 13. 

554ECOA section 704B(e)(2)(B). 

555Regulation C § 1003.4(a)(2), (14), (25), (27), 

(28), (37), and (38). 

556SBREFA Outline at 26–27. 

557 Id. 

558 Id. 

559 Id. at 27. 

applicant at all during the application 

process. 

In the SBREFA Outline, the Bureau 

noted the wide array of small business 

lending models operating today. The 

Bureau noted that certain section 1071 

requirements might apply to 

intermediaries in the application 

chain.553 As discussed in the section-bysection analysis of proposed 

§ 1002.109(a)(3) below, several SERs 

voiced support for aligning reporting 

requirements for financial institutions 

that are not the lender of record with the 

approach taken for HMDA reporting in 

the Bureau’s Regulation C. The Bureau 

did not receive feedback from SERs on 

whether data concerning the existence 

of intermediaries should be collected. 

Other stakeholders did urge the Bureau, 

however, to provide clear rules for 

lenders that work with partners, 

including when lenders should, and 

need not, collect 1071 data. 

Stakeholders also urged the Bureau to 

provide clear rules that would work for 

a broad array of business models, 

including lenders working with partners 

and agents. 

The Bureau believes that information 

regarding how an application is 

received would enhance small business 

lending data and further the purposes of 

section 1071. Pursuant to its authority 

under ECOA section 704B(e)(2)H), the 

Bureau is thus proposing 

§ 1002.107(a)(4), which would require 

financial institutions to collect and 

report the application recipient, 

meaning whether the applicant 

submitted the covered application 

directly to the financial institution or its 

affiliate, or whether the applicant 

submitted the covered application 

indirectly to the financial institution via 

a third party. Proposed comment 

107(a)(4)–1 would clarify that if a 

financial institution is reporting actions 

taken by its agent consistent with 

proposed comment 109(a)(3)–3, then the 

agent is considered the financial 

institution for the purposes of proposed 

§ 1002.107(a)(4). 

The Bureau believes that collecting 

data on application recipient, in 

combination with application method, 

as discussed above, would improve the 

market’s understanding of how small 

businesses interact with financial 

institutions when applying for credit 

which, in turn, would facilitate fair 

lending analysis, including identifying 

risks in small business lending. 

Information about application method 

and whether the application was 

submitted directly or indirectly also 

would promote the community and 

business development purposes of the 

statute by improving the public’s 

understanding of the structure of small 

business lending originations across the 

market, the methods by which credit is 

originated for particular groups or 

underserved markets, and trends over 

time (for example, to the extent 

applicant preferences shift from inperson to online interactions). It will 

also be helpful for the Bureau and data 

users to know the relationship between 

the covered financial institution and the 

applicant in the context of certain other 

collected and reported data. 

The Bureau also believes that 

collecting and reporting information on 

the application recipient may facilitate 

fair lending analysis because particular 

business models may provide more or 

less reliable information with respect to 

the ethnicity, race, and sex of the 

principal owners of the applicant. In 

addition, the Bureau believes that 

collecting and reporting information on 

the application recipient may assist 

with an understanding of the business 

and community development needs of 

an area or applicant. For instance, the 

proposed collection of application 

recipient may help users of 1071 data 

understand whether financial 

institutions making credit decisions are 

directly interacting with the applicant 

and/or generally operate in the same 

community as the applicant. Finally, the 

Bureau expects that financial 

institutions know and track how they 

receive applications for credit from 

small businesses and thus does not 

believe that this data point should be 

difficult for financial institutions to 

collect and report. 

The Bureau seeks comment on its 

proposed approach to this data point. 

107(a)(5) Credit Type 

Background 

Section 1071 requires financial 

institutions to collect and report ‘‘the 

type and purpose of the loan or other 

credit being applied for.’’ 554 (The credit 

purpose data point is addressed in 

proposed § 1002.107(a)(6).) For HMDA 

reporting, Regulation C requires 

numerous data points that indicate the 

type of credit applied for or originated: 

the type of guarantees used; lien order; 

loan term; the presence of 

nontraditional contract terms including 

balloon, interest only, and negative 

amortization payments; variable rate 

information; open-end status; and 

reverse mortgage status.555 Section 1071 

provides no additional information or 

details regarding what aspects of credit 

type should be collected and reported. 

SBREFA Proposals Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated it was considering proposing that 

financial institutions report the loan/ 

credit type data point via three subcomponents: (1) Type of Loan Product 

(chosen from a specified list); (2) Type 

of Guarantee (chosen from a specified 

list); and (3) Loan Term (in months, or 

using ‘‘Not Applicable’’ for products 

that do not have a loan term and for 

applications that did not specify a loan 

term). The SBREFA Outline included 

lists of types of loan product and types 

of guarantees.556

The Bureau explained in the SBREFA 

Outline that a separate category for the 

presence of a guarantee was included in 

recognition of the fact that a guaranteed 

loan is often made as a counteroffer for 

either a requested loan by the applicant 

or because the applicant does not 

qualify for a conventional loan.557

Having guarantee status captured as a 

feature of loan type therefore would 

provide useful information. The Bureau 

also noted that some borrowers 

specifically request a government 

guaranteed loan program and/or receive 

a loan from a financial institution that 

only participates in such a program.558

For reporting when an application 

requests more than one type of loan 

product, the Bureau stated in the 

SBREFA Outline that it was considering 

whether to propose that (1) financial 

institutions choose up to three items 

from the subcomponent lists for the 

Loan Type data point if there is only 

one application and multiple products/ 

guarantees/terms were asked for; or (2) 

financial institutions report separate 

applications/originations for each loan 

type requested or originated. The 

Bureau explained that financial 

institutions would be able to choose 

more than one guarantee for originated 

or approved but not accepted credit. For 

loan product and loan term, however, 

financial institutions would report only 

one of each subcomponent on originated 

credit or credit approved but not 

accepted.559

A number of SERs requested certain 

products be added to the ‘‘product type’’ 

list; this feedback generally aligned with 

feedback regarding product coverage 

(see the section-by-section analysis of 

proposed § 1002.104 above). Two SERs 

suggested that line increases should be 


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560SBREFA Panel Report at 45. 

excluded. Some SERs requested that the 

Bureau permit multiple types of 

guarantees to be selected for a single 

application, and one SER suggested that 

FHA guarantees be added to the 

guarantee list. One SER explained that 

government guarantees and personal 

guarantees are different—the 

government guarantee being a credit 

enhancement and a personal guarantee 

being a form of collateral. 

The SBREFA Panel recommended 

that the Bureau consider modifying the 

product type and guarantee lists in 

accordance with the various suggestions 

made by SERs. The Panel also 

recommended that the Bureau seek 

comment on how financial institutions 

currently handle increases in lines of 

credit and how best to require reporting 

of this data point for multiple lines of 

credit within the same account.560

The Bureau also received feedback 

from other stakeholders regarding this 

data point. A community group 

commenter stated that the three data 

fields making up this data point are 

appropriate choices because each is 

necessary separately and in combination 

to help determine whether lenders are 

responding to the needs for credit by 

offering affordable and sustainable 

products to traditionally underserved 

small businesses. Commenters 

requesting that additional products be 

covered by the rule, such as MCAs, 

likewise said those products would 

need to be added to the loan product 

list. Another commenter stated that the 

Bureau should also expand the number 

of guarantees that a financial institution 

can select because creditors will 

sometimes stack four or five guarantees 

on a single loan product. 

One commenter stated that the ‘‘type 

and purpose of the financing’’ are fluid 

in the application process, and the 

Bureau should make it clear that highlevel, general, or categorical information 

is sufficient for these data points. Other 

commenters appreciated the inclusion 

of ‘‘other,’’ ‘‘unknown,’’ and ‘‘other/ 

unknown’’ in the field lists to facilitate 

compliance. One commenter asked that 

the Bureau provide clear guidance on 

how this data point should be reported, 

and another stated that reporting this 

data point should not be costly if it is 

defined simply and left unchanged. 

Treatment of multiple products 

requested at the same time. Regarding 

how a single request for multiple loan/ 

credit products should be reported, 

some commenters supported reporting 

separate applications while others 

supported requiring reporting as a single 

application. One commenter suggested 

that the Bureau should accommodate 

both approaches. Another commenter 

remarked that if a business is applying 

for multiple products, the basic 

information is going to be the same, the 

only difference would be which product 

is funded. This same commenter 

suggested that if multiple applications 

are reported, that will overinflate the 

data points as the business does not 

have three separate applications, but 

only one application for different 

products. This commenter further 

pointed out that there are instances 

where a business is only applying for a 

loan but ends up liking the terms of a 

line of credit, and asked whether that 

change in decision would become a new 

application. 

Proposed Rule 

The Bureau is proposing in 

§ 1002.107(a)(5) to require that financial 

institutions collect and report the 

following information regarding the 

type of credit applied for or originated: 

(i) The credit product; (ii) The type or 

types of guarantees that were obtained 

for an extension of credit, or that would 

have been obtained if the covered credit 

transaction were originated; and (iii) 

The length of the loan term, in months, 

if applicable. These aspects of credit 

type are discussed in turn below. This 

proposal is consistent with the approach 

presented in the SBREFA Outline, and 

would require the financial institution 

to choose the credit product and 

guarantee(s) from a specified list. (These 

lists are provided in the commentary 

accompanying proposed 

§ 1002.107(a)(5).) The lists include 

choices for ‘‘Other’’ and ‘‘Not provided 

by applicant and otherwise 

undetermined,’’ as appropriate, to 

facilitate compliance. Based on the 

feedback from SERs and other 

stakeholders, and consistent with the 

SBREFA Panel’s recommendation to 

consider modifying the product type 

and guarantee lists in accordance with 

the suggestions made by SERs, the 

Bureau has updated the lists to reflect 

additional credit products and types of 

guarantees. The Bureau is also 

proposing to use the term ‘‘credit type’’ 

for this data point, rather than the 

SBREFA Outline term ‘‘loan/credit 

type,’’ for clarity and consistency with 

terminology used elsewhere in the 

proposal. 

The Bureau believes that it is 

reasonable to interpret the statutory 

term ‘‘credit type’’ to comprise the 

proposed three data fields, because they 

are critical to understanding the nature 

of small business credit applied for and 

provided, as explained below. For the 

reasons discussed herein, the Bureau 

believes that the subcategories of credit 

product (including collateral), guarantee 

type, and loan term would aid in 

fulfilling the purposes of section 1071. 

Financial institutions generally have all 

of the information required for this data 

point when they process applications 

(and the reporting regime would be 

sufficiently flexible when they do not), 

so the Bureau does not believe there is 

anything in this approach that would 

impose particular operational difficulty. 

Additionally, the Bureau believes it is 

reasonable to interpret type of credit 

‘‘applied for’’ to include the type of 

credit actually originated when an 

application results in an extension of 

credit. 

The Bureau seeks comment on its 

proposed approach to the credit type 

data point, including the lists of 

products and guarantees proposed and 

the other specific requests for input 

below. 

Credit product. The first data field the 

Bureau is proposing to include in the 

credit type data point is the credit 

product (i.e., a commonly understood 

category of small business lending like 

term loans or lines of credit) which the 

Bureau considers to be an integral part 

of the statutory requirement to collect 

credit type. The Bureau believes 

information about the various products 

sought by applicants would further the 

purposes of section 1071 by 

demonstrating, for example, how small 

businesses of different sizes or in 

different sectors choose to pursue, or 

ultimately access, different forms of 

credit. 

The Bureau distinguishes between 

secured and unsecured term loans and 

lines of credit in its list of credit 

products because it believes that 

whether a term loan or line of credit is 

collateralized can have such a 

significant effect on things like approval 

rates and pricing that secured and 

unsecured products fundamentally 

differ in kind. For this reason, the 

Bureau believes that including 

information on the use of collateral in 

the credit product data field will help 

data users to avoid inaccurate 

interpretations of 1071 data. The Bureau 

believes that whether a loan is secured 

or unsecured will be part of an 

application or loan file and, as a result, 

should not be operationally difficult to 

report once a financial institution’s 1071 

compliance system is set up. 

Proposed comment 107(a)(5)–1 would 

present the instructions for collecting 

and reporting credit product and the 

proposed list of credit products from 

which financial institutions would 

select. Proposed comment 107(a)(5)–1 

would explain that a financial 


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institution complies with 

§ 1002.107(a)(5)(i) by selecting the credit 

product requested from the list provided 

in the comment. It would also explain 

that if an applicant requests more than 

one credit product, the financial 

institution reports each credit product 

requested as a separate application. 

The issue of how to collect and report 

multiple products applied for at the 

same time affects several data points, 

but is most salient for credit type. The 

Bureau believes that requiring a separate 

application to be reported for each 

credit product requested would yield 

more complete and useful data, and that 

a financial institution should not 

experience operational difficulties in 

copying the relevant information, 

identical for most data points, to 

separate lines in the small business 

lending application register. This issue 

is discussed more fully in the sectionby-section analysis of proposed 

§ 1002.103(a), which also addresses the 

Bureau’s proposed approach to multiple 

lines of credit within the same account. 

The Bureau intends the list of credit 

products provided in proposed 

comment 107(a)(5)–1 to align with the 

most common types of credit products 

in small business lending. As explained 

above, the list for credit product 

included in the SBREFA Outline has 

been amended based on SER and 

stakeholder input, as well as other 

considerations. Specifically, ‘‘Merchant 

cash advance’’ and ‘‘Other sales-based 

financing transaction’’ have been added 

to the list to correspond with their 

inclusion as covered credit transactions 

under proposed § 1002.104. See the 

section-by-section analysis of proposed 

§ 1002.104 above for a more complete 

discussion of products covered by and 

excluded from the Bureau’s proposal. 

Proposed comment 107(a)(5)–6 would 

explain when ‘‘other sales-based 

financing transaction’’ is used for 

reporting. 

Proposed comment 107(a)(5)–1 would 

also explain that if the credit product for 

an application does not appear on the 

list of products provided, the financial 

institution selects ‘‘other’’ as the credit 

product and reports the specific product 

via free-form text. The Bureau believes 

that allowing financial institutions to 

choose ‘‘other’’ when the credit product 

for the application does not appear on 

the provided list would facilitate 

compliance. In addition, collecting this 

information on ‘‘other’’ credit products 

would assist the Bureau in monitoring 

product trends and key developments in 

the small business lending market, 

which the Bureau could use to inform 

any future iterations of the list. 

Proposed comment 107(a)(5)–2 would 

explain that, pursuant to proposed 

§ 1002.107(c)(1), a financial institution 

is required to maintain procedures 

reasonably designed to collect 

applicant-provided data, which 

includes credit product. However, if a 

financial institution is nonetheless 

unable to collect or otherwise determine 

credit product information because the 

applicant does not indicate what credit 

product it seeks and the application is 

denied, withdrawn, or closed for 

incompleteness before a credit product 

is identified, the proposed comment 

would explain that the financial 

institution reports that the credit 

product is ‘‘not provided by applicant 

and otherwise undetermined.’’ This 

option is similar to the ‘‘unknown’’ 

response under consideration during 

SBREFA, but has been revised to more 

accurately reflect the situations in 

which the response would be 

appropriate. The Bureau believes that 

permitting use of this response would 

facilitate compliance and enhance the 

quality of data collected. As discussed 

above, commenting stakeholders 

supported the flexibility afforded by this 

kind of response. 

Proposed comment 107(a)(5)–3 would 

explain how a financial institution 

reports a transaction that involves a 

counteroffer. The comment would state 

that if a financial institution presents a 

counteroffer for a different credit 

product than the product the applicant 

had initially requested, and the 

applicant does not agree to proceed with 

the counteroffer, a financial institution 

reports the application for the original 

credit product as denied pursuant to 

proposed § 1002.107(a)(9). If the 

applicant agrees to proceed with 

consideration of the financial 

institution’s counteroffer, the financial 

institution reports the disposition of the 

application based on the credit product 

that was offered, and does not report the 

original credit product applied for. The 

Bureau believes that, in the complex 

circumstances created by counteroffers, 

the meaning of the type of credit 

‘‘applied for’’ is ambiguous, and it is 

reasonable to interpret the credit 

product ‘‘applied for’’ to mean the credit 

product considered via the applicant’s 

response to the counteroffer. For a 

discussion of the Bureau’s proposed 

treatment of counteroffers more 

generally, see the section-by-section 

analysis of proposed § 1002.107(a)(9) 

below. 

The Bureau notes that, under its 

proposal, line increases would be 

reportable so that the small business 

lending market can be tracked 

accurately. See the section-by-section 

analysis of proposed § 1002.103(a) 

above for additional details. However, 

the Bureau is not proposing that line 

increases be included as a separate item 

in the credit product list. 

The Bureau seeks comment on its 

proposed approach to this data field, 

including the appropriateness and 

usefulness of the products included in 

the list, whether there are other 

products that should be added, and the 

proposed treatment of counteroffers. 

The Bureau also seeks comment on how 

financial institutions currently handle 

increases in lines of credit and whether 

a line increase should be considered a 

credit product, and on whether an 

overdraft line of credit should be 

considered a product separate from a 

line of credit and thus added to the 

product list. 

Type of guarantee. The second data 

field the Bureau is proposing to include 

in the credit type data point is 

guarantee. The Bureau considers the 

guarantee obtained for an extension of 

credit to be part of the credit ‘‘type’’ 

because it is fundamental to the nature 

of the transaction in that it meaningfully 

impacts terms such as interest rates, 

such that guarantee information could 

help to explain potential disparities in 

outcomes and reduce inaccurate 

conclusions, aiding in fulfilling the fair 

lending purpose of section 1071. 

Indeed, in common parlance, small 

business credit transactions are often 

referred to using the name of the 

guarantee (e.g., ‘‘a 7(a) loan,’’ referring 

to the SBA 7(a) guarantee). Because 

various types of guarantees are available 

for different credit products, the Bureau 

believes that guarantee type should 

constitute a separate data field within 

the credit type data point, so that data 

users can conduct separate analyses 

with respect to credit product and 

guarantees, and to avoid excessive 

complexity in the credit product data 

field. Information on the distribution of 

government loan guarantees (such as 

those provided in SBA programs) across 

different geographic areas and applicant 

groups should allow a better 

understanding of how those programs 

function on the ground, aiding in 

fulfilling the business and community 

development purpose of section 1071. 

As with collateral, information on 

guarantees is generally a part of an 

application or loan file and should not 

be operationally difficult to report once 

a financial institution’s 1071 

compliance system is set up. 

Proposed comment 107(a)(5)–4 would 

present the instructions for collecting 

and reporting type of guarantee and the 

proposed list of guarantees from which 

financial institutions would select. 


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561SBREFA Outline at 27. 562ECOA section 704B(e)(2)(B). 

Proposed comment 107(a)(5)–4 would 

explain that a financial institution 

complies with § 1002.107(a)(5)(ii) by 

selecting the type or types of 

guarantee(s) obtained for an originated 

covered credit transaction, or that 

would have been obtained if the covered 

credit transaction were originated, from 

the list provided in the comment. 

The Bureau intends the list of 

guarantee types provided in proposed 

comment 107(a)(5)–4 to align with the 

most common types of guarantees used 

in small business lending. As explained 

above, the list for guarantee type 

included in the SBREFA Outline has 

been amended based on SER and 

stakeholder input. Specifically, ‘‘FHA 

insurance’’ and ‘‘Bureau of Indian 

Affairs guarantee,’’ which the Bureau 

believes are often used with small 

business credit, have been added. 

Proposed comment 107(a)(5)–4 would 

also explain that the financial 

institution may select, if applicable, up 

to a maximum of five guarantees for a 

single application or transaction. In the 

SBREFA Outline, the Bureau stated that 

it was considering allowing financial 

institutions to report more than one 

guarantee for an application or 

originated credit.561 The Bureau 

understands that small business credit 

may have more than one guarantee, 

such as an SBA guarantee and a 

personal guarantee, and believes that 

more complete information can be 

collected by requiring as many as five to 

be reported. 

Proposed comment 107(a)(5)–4 would 

also explain that if the type of guarantee 

for an application or originated 

transaction does not appear on the list 

of guarantees provided, the financial 

institution selects ‘‘other guarantee,’’ 

and reports the type of guarantee as freeform text. As with credit product, the 

Bureau believes that allowing financial 

institutions to choose ‘‘other’’ when a 

guarantee for the application does not 

appear on the provided list will 

facilitate compliance. In addition, 

collecting this information on ‘‘other’’ 

guarantee types would assist the Bureau 

in monitoring trends in usage of other 

types of guarantees and key 

developments in the small business 

lending market, which the Bureau could 

use to inform any future iterations of the 

list. 

Finally, proposed comment 107(a)(5)– 

4 would provide that if no guarantee is 

obtained or would have been obtained 

if the covered credit transaction were 

originated, the financial institution 

selects ‘‘no guarantee.’’ Because a small 

business credit transaction does not 

always involve use of a guarantee, the 

Bureau is not proposing to include ‘‘not 

provided by applicant and otherwise 

undetermined’’ as an option. If no 

guarantee is identified for an 

application, the financial institution 

would report ‘‘no guarantee.’’ 

In regard to the distinction one SER 

made between government and personal 

guarantees, the Bureau notes that the 

proposed rule would identify them as 

separate options within the data field, 

thereby allowing data users to analyze 

them independently. 

The Bureau seeks comment on its 

proposed approach to this data field, 

including the appropriateness and 

usefulness of the items listed, and 

whether there are other guarantees that 

should be added. The Bureau also seeks 

comment on whether five is the 

appropriate upper limit for reporting 

guarantees. 

Loan term. The third data field the 

Bureau is proposing to include in the 

credit type data point is the loan term. 

As with the consumer lending market, 

the pricing and sustainability of closedend credit transactions for small 

businesses are associated with term 

length, and without awareness of the 

term of the loan, data users will have 

less of an understanding of the types of 

credit being made available to 

applicants. Credit with a one-month 

term may differ not just in degree but in 

kind from credit with a 60-month term. 

The Bureau thus believes that the length 

of the loan term is a fundamental 

attribute of the type of credit that 

applicants are seeking such that it 

should be treated as a separate data field 

within credit type. As with other 

elements of the credit type data point, 

loan term information would allow data 

users to reduce inaccurate conclusions 

or misinterpretations of the 1071 data, 

aiding in fulfilling both the fair lending 

and business and community 

development purposes of section 1071. 

Likewise, the loan term will be part of 

the application or loan file and should 

not be operationally difficult to report 

once a financial institution’s 1071 

compliance system is set up. 

Proposed comment 107(a)(5)–5 would 

present the instructions for collecting 

and reporting loan term. Specifically, it 

would explain that a financial 

institution complies with proposed 

§ 1002.107(a)(5)(iii) by reporting the 

number of months in the loan term for 

the covered credit transaction, and that 

the loan term is the number of months 

after which the legal obligation will 

mature or terminate. The comment 

would further explain how to measure 

the loan term and the possible use of 

rounding. 

Proposed comment 107(a)(5)–5 would 

also make clear that if a credit product, 

such as a credit card, does not have a 

loan term, the financial institution 

reports loan term as ‘‘not applicable.’’ 

The financial institution also reports 

‘‘not applicable’’ if the application is 

denied, withdrawn, or determined to be 

incomplete before a loan term has been 

identified. The Bureau believes that 

permitting the use of ‘‘not applicable’’ 

in these situations would facilitate 

compliance and aid in the collection of 

appropriate data. The Bureau believes 

that the proposed regulatory text and 

commentary described above would 

alleviate many of the concerns of the 

SERs and other commenting 

stakeholders regarding the credit type 

data point. The credit product and 

guarantee type lists have been updated 

using their input and continued Bureau 

consideration. Multiple types of 

guarantees would be permitted by the 

proposal, and FHA guarantees have 

been added to the list. 

The Bureau believes the statutory 

term ‘‘type . . . of the loan’’ to be 

ambiguous, and reasonably interprets 

the term to include the credit product, 

any guarantee obtained, and the term of 

a closed-end loan because an accurate 

and useful record of the ‘‘type’’ of loan 

or credit would include those data 

fields. In the alternative, ECOA section 

704B(e)(2)(H) authorizes the Bureau to 

require inclusion of ‘‘any additional 

data that the Bureau determines would 

aid in fulfilling the purposes of [section 

1071],’’ and for the reasons discussed 

above, the Bureau has also determined 

that the subcategories of credit product 

(including collateral), guarantee type, 

and loan term would aid in fulfilling 

those purposes. 

The Bureau seeks comment on its 

proposed approach to this data field. 

107(a)(6) Credit Purpose 

Background 

Section 1071 requires financial 

institutions to collect and report ‘‘the 

type and purpose of the loan or other 

credit being applied for.’’ 562 (The credit 

type data point is addressed in proposed 

§ 1002.107(a)(5).) 

SBREFA Proposals Under Consideration 

and Feedback Received 

The Bureau stated in the SBREFA 

Outline that it was considering 

proposing that financial institutions 

report the loan/credit purpose data 

point by choosing one or more purposes 

from a specified list. In addition to 

several specific business purposes, the 

list included choices for ‘‘Other’’ or 


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563SBREFA Outline at 28. 

564SBREFA Panel Report at 27. 

565 Id. at 45. 

‘‘Unknown’’ to facilitate compliance. 

The Bureau also explained that it was 

considering proposing that financial 

institutions be allowed to choose up to 

three purposes when the applicant 

indicates more than one purpose.563

Some SERs stated that they collect 

information on loan/credit purpose, 

although the information they collect 

may be different from that in the loan/ 

credit purpose list in the SBREFA 

Outline.564 One SER did, however, 

suggest that the Bureau’s purposes list 

was similar to their list. Some SERs 

made suggestions of additional loan/ 

credit purposes to add to the list, 

including for inventory loans, 

agricultural loans, and contract 

financing. One SER requested that the 

Bureau clarify whether this data point is 

intended to capture the purpose of the 

loan or the type of collateral. Another 

SER recommended combining the 

categories of motor vehicle finance and 

equipment finance, explaining that 

certain financing can span both 

categories (such as for a truck and a 

trailer as a combined purchase). One of 

the SERs expressed concern about 

possible confusion regarding credit with 

multiple purposes, and another SER 

suggested that the Bureau provide clear 

instructions on this data point. Another 

SER suggested that the Bureau explain 

how a line of credit should be reported 

if there can be multiple lines for 

different purposes all within the same 

account. 

The SBREFA Panel recommended 

that the Bureau consider modifying the 

loan/credit purpose lists in accordance 

with the various suggestions made by 

SERs.565

Like the SERs, the other stakeholders 

who provided feedback on the SBREFA 

Outline stated that they often collect 

loan purpose information from 

applicants, but that the specific loan 

purposes they use differ somewhat from 

those listed in the SBREFA Outline. 

Stakeholders supported the inclusion of 

‘‘other’’ and ‘‘unknown’’ in the list of 

purposes, and one suggested that the 

Bureau add ‘‘Not Applicable’’ for 

products, such as credit cards, that do 

not have a specific purpose. As with the 

SERs, these stakeholders requested 

clarifications and several changes to the 

loan purposes list. One commenter 

stated that financial institutions should 

not have to present the entire list to 

applicants where a loan product’s terms 

do not allow the loan to be used for one 

or more of the specified purposes. That 

same commenter suggested that 

financial institutions should be allowed 

to include additional purposes not on 

the list, and in the instance an applicant 

selects an additional purpose, the 

financial institution would include it as 

‘‘other’’ unless the selected purpose 

squarely fits within, or is a subset of, a 

purpose specified on the Bureau’s list. 

Proposed Rule 

The Bureau is proposing in 

§ 1002.107(a)(6) to require that financial 

institutions collect and report the 

purpose or purposes of the credit 

applied for or originated. The Bureau’s 

proposed approach aligns with the 

SBREFA Outline approach, with certain 

adjustments. First, the Bureau is 

proposing to use the term ‘‘credit 

purpose’’ for this data point, rather than 

‘‘loan/credit purpose,’’ for clarity and 

consistency with terminology used 

elsewhere in the proposal. In addition, 

the proposal would provide a more 

complete description of the purposes 

listed, which would clarify the relation 

between the purpose of the credit and 

the form of collateral used. The proposal 

also reflects other changes to the list of 

purposes presented in the SBREFA 

Outline, as explained below. 

Proposed comment 107(a)(6)–1 would 

present instructions for collecting and 

reporting credit purpose and would 

provide the proposed list of credit 

purposes from which financial 

institutions would select. 

The proposed list is similar to the list 

in the SBREFA Outline although, 

consistent with the SBREFA Panel’s 

recommendation, the Bureau has made 

adjustments based on SERs’ suggestions, 

as well as those of other stakeholders 

and its own further consideration. First, 

the items on the SBREFA list that 

described types of collateral, such as 

commercial real estate, have been 

updated to more clearly reflect that the 

financial institution is collecting and 

reporting the purpose of the loan, and 

not the form of collateral, though the 

form of collateral may be referred to in 

describing that purpose. In addition, the 

listed purposes involving real estate 

now differentiate between dwelling and 

non-dwelling real estate. The Bureau 

believes that this distinction would help 

in collecting more precise and useful 

data. To facilitate compliance the 

Bureau is also proposing to add ‘‘not 

applicable’’ to the purposes list for use 

when an application is for a credit 

product that generally has 

indeterminate or numerous potential 

purposes, such as a credit card. 

Proposed comment 107(a)(6)–5 would 

also explain the use of ‘‘not applicable’’ 

as a response. In addition to the changes 

described above, the proposed list of 

purposes also reflects small 

nonsubstantive edits for clarity. 

Proposed comment 107(a)(6)–2 would 

explain that if the applicant indicates or 

the financial institution is otherwise 

aware of more than one purpose for the 

credit applied for or originated, the 

financial institution would report those 

purposes, up to a maximum of three, 

using the list provided, in any order it 

chooses. Since an applicant may have 

more than one purpose for a credit 

transaction, the Bureau believes it is 

appropriate to require collection and 

reporting of more than one credit 

purpose for this data point in that 

situation. The Bureau believes that 

having financial institutions report up 

to three purposes would provide useful 

and substantive data. The Bureau also 

believes that allowing financial 

institutions discretion as to the order of 

the purposes would facilitate 

compliance. 

Proposed comment 107(a)(6)–3 would 

explain that if a purpose of the covered 

credit transaction does not appear on 

the list of purposes provided, the 

financial institution reports ‘‘other’’ as 

the credit purpose and reports the 

purpose as free-form text. The Bureau 

believes that allowing financial 

institutions to choose ‘‘other’’ when a 

credit purpose for the application does 

not appear on the provided list would 

facilitate compliance. In addition, 

collecting this information on ‘‘other’’ 

credit purposes would assist the Bureau 

in monitoring trends in this area and 

key developments in the small business 

lending market, which the Bureau could 

use to inform any future iterations of the 

list. For efficiency and to facilitate 

compliance, proposed comment 

107(a)(6)–3 would also explain that if 

the application has more than one 

‘‘other’’ purpose, the financial 

institution chooses the most significant 

‘‘other’’ purpose, in its discretion, and 

reports that ‘‘other’’ purpose. The 

comment would then explain that a 

financial institution reports a maximum 

of three credit purposes, including any 

‘‘other’’ purpose reported. 

Proposed comment 107(a)(6)–4 would 

explain that, pursuant to proposed 

§ 1002.107(c)(1), a financial institution 

shall maintain procedures reasonably 

designed to collect applicant-provided 

information, which includes credit 

purpose. However, if a financial 

institution is nonetheless unable to 

collect or determine credit purpose 

information, the financial institution 

would report that the credit purpose is 

‘‘not provided by applicant and 

otherwise undetermined.’’ The Bureau 

believes that permitting use of this 

response would facilitate compliance 


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566ECOA section 704B(e)(2)(C). 

567SBREFA Outline at 28–29. 

568 Id. 569See SBREFA Panel Report at 27–28. 

and enhance the quality of data 

collected. 

In order to facilitate compliance, the 

Bureau is also proposing comments 

107(a)(6)–6 and –7. Proposed comment 

107(a)(6)–6 would clarify that, as 

explained in proposed comment 104(b)– 

4, subpart B does not apply to an 

extension of credit that is secured by 1– 

4 individual dwelling units that the 

applicant or one or more of the 

applicant’s principal owners does not, 

or will not, occupy. Proposed comment 

107(a)(6)–7 would clarify the collection 

and reporting obligations of financial 

institutions with respect to the credit 

purpose data point, explaining that the 

financial institution would be 

permitted, but not required, to present 

the list of credit purposes provided in 

comment 107(a)(6)–1 to the applicant. 

Proposed comment 107(a)(6)–7 would 

further explain that the financial 

institution would also be permitted to 

ask about purposes not included on the 

list provided in proposed comment 

107(a)(6)–1. Finally, proposed comment 

107(a)(6)–7 would clarify that if an 

applicant chooses a purpose or purposes 

that are similar to purposes on the list 

provided, but uses different language, 

the financial institution would report 

the purpose or purposes from the list 

provided. The Bureau believes that 

minimizing use of free-form text here 

would improve the usefulness of the 

data collected and facilitate compliance. 

The Bureau believes that, with the 

modifications discussed above, the list 

of credit purposes provided in proposed 

comment 107(a)(6)–1 appropriately 

aligns with the purposes of credit 

sought in the small business credit 

market. As explained above, the Bureau 

has clarified the distinction between the 

purpose of the credit and the collateral 

involved, as one SER suggested. In 

addition, the Bureau believes that the 

explanations and instructions in the 

proposed commentary accompanying 

§ 1002.107(a)(6) should reduce any 

confusion as to how a financial 

institution would comply when an 

application involves multiple purposes, 

and in other situations. In regard to the 

SER comment about multiple lines of 

credit for different purposes within the 

same account, see the discussion of 

‘‘covered application’’ in the section-bysection analysis of proposed 

§ 1002.103(a) above. 

The Bureau seeks comment on its 

proposed approach to the credit purpose 

data point. In addition, the Bureau seeks 

comment on whether there are any 

purposes that should be added to or 

modified on its proposed list including, 

in particular, on the potential usefulness 

of including ‘‘agricultural credit’’ and 

‘‘overdraft line of credit’’ in the credit 

purposes list. Finally, the Bureau 

requests comment on whether further 

explanations or instructions with 

respect to this data point would 

facilitate compliance. 

107(a)(7) Amount Applied For 

Background 

Section 1071 requires financial 

institutions to collect and report ‘‘the 

amount of the credit or credit limit 

applied for, and the amount of the credit 

transaction or the credit limit 

approved.’’ 566

The Bureau notes that for HMDA, 

Regulation C § 1003.4(a)(7) requires 

reporting of ‘‘the amount of the covered 

loan or the amount applied for, as 

applicable,’’ which requires reporting of 

the amount applied for only when the 

credit is not originated. Because section 

1071 uses the conjunction ‘‘and’’ rather 

than ‘‘or,’’ the Bureau reads section 

1071 to require collection and reporting 

of the amount applied for regardless of 

whether the application is ultimately 

approved or originated. (The amount 

approved or originated data point is 

addressed in proposed § 1002.107(a)(8).) 

SBREFA Proposals Under Consideration 

and Feedback Received 

The Bureau stated in the SBREFA 

Outline that it was considering 

requiring financial institutions to report 

the amount applied for data point using 

the initial amount of credit or credit 

limit requested by the applicant at the 

application stage, or later in the process 

but prior to the financial institution’s 

evaluation of the credit request.567 The 

Bureau further explained in the 

SBREFA Outline that this method 

would not require reporting of amounts 

discussed before an application is made 

to a financial institution, but would 

capture the initial amount requested at 

the application stage or later, and would 

reflect the amount of the request that 

was evaluated by the financial 

institution in making a credit decision. 

In addition, if the applicant did not 

request a particular amount, but the 

financial institution underwrote the 

application as being for a specific 

amount, the financial institution would 

report the amount considered for 

underwriting. If the particular product 

applied for would not involve a specific 

amount requested or underwritten, the 

financial institution would report ‘‘Not 

Applicable’’ for this data point. Finally, 

the Bureau suggested in the SBREFA 

Outline 568 that when an applicant 

responds to a ‘‘firm offer’’ that specifies 

an amount, which may occur in 

conjunction with a pre-approved credit 

solicitation, the amount applied for 

would generally be the amount of the 

firm offer. 

Because of the relationship between 

the amount applied for and the amount 

approved or originated data points, the 

following summary of SER feedback 

includes input on both.569 One SER 

articulated the importance of capturing 

data on both the amount applied for and 

the amount approved, stating that both 

data points were necessary to identify 

potentially discriminatory practices, 

such as discouragement, in the lending 

process. Another SER explained that the 

amount applied for could change during 

the iterative application process, 

particularly with a business that may 

not have previously had a banking 

relationship with the financial 

institution, but that the amount 

generally stayed consistent through 

underwriting. Other SERs asserted that 

differences between the amounts 

requested and approved were frequent, 

for a variety of reasons. One SER stated 

that they notify applicants of a 

preliminary offered amount, which 

often changes after documentation and 

underwriting. One example offered was 

that disparities between the amount 

applicants applied for and the amount 

the lenders approved may be 

attributable to collateral being assessed 

at a different value than the amount the 

applicants initially requested. Some 

SERs also remarked that differences in 

these amounts were often attributable to 

financial institutions acting as 

counselors or advisors to small 

businesses, including start-ups, and 

going back and forth until arriving at an 

amount that is appropriate given the 

customer’s needs. 

One SER (who supported reporting 

the amount initially applied for and the 

amount approved) strongly opposed 

reporting counteroffers, stating that 

negotiation is quite prevalent in small 

business lending. Another SER 

suggested that the Bureau use ranges for 

reporting the amount applied for, rather 

than specific numbers, and that the 

Bureau allow a financial institution to 

report ‘‘not applicable’’ if an applicant 

does not specify an amount requested. 

A SER also suggested there could be 

other potential complexities in 

capturing data on credit amount/limit 

the applicant applied for and credit 

amount/limit the lender approved, such 

as simultaneous or grouped financings 

involving multiple products, different 

sub-limits for each product or loan, and 


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Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56447 

570 Id. 

a general credit limit for an entire 

facility. SERs asked that these data 

points be captured in a manner that took 

these complexities into account. 

The SBREFA Panel recommended 

that the Bureau seek comment on 

potential methods for avoiding 

misinterpretations of disparities 

between the credit amount/limit applied 

for and the credit amount/limit 

approved.570

The Bureau also received feedback 

from other stakeholders regarding this 

data point. Industry stakeholders 

providing feedback on the SBREFA 

Outline emphasized that arriving at an 

applied for amount is a complex, 

iterative process and that the reporting 

requirement should be flexible. One 

stakeholder suggested that the Bureau 

propose to require reporting of the 

amount of the request that was 

evaluated by the financial institution in 

making the credit decision. That 

stakeholder echoed the comments of 

others when it explained that the 

amount of credit requested can change 

a great deal in formulating an 

application. The stakeholder further 

explained that some borrowers request a 

specific amount immediately, others 

may not arrive at a number until after 

two or three sessions, and still others 

may float multiple numbers during 

several conversations, trying to gauge a 

loan officer’s reaction. Another 

stakeholder commented that an 

applicant’s stated credit desires can be 

arbitrary and that comparing the initial 

amount requested against the amount 

approved could be misleading and is 

not a reliable measure of the health or 

efficacy of small business lending. Other 

stakeholders stated that an applicant 

will often or usually state a specific 

amount early on, but that the amount 

will usually change during the process 

for various appropriate reasons. One 

stakeholder explained that small 

business loans generally are not a quick 

affair and require substantial review by 

and interaction between the lender and 

borrower, and business credit that it is 

uncommon for a small business 

applicant’s requested credit amount to 

stay the same from application to 

underwriting. One trade association 

stated that many small businesses will 

request a much higher loan amount than 

what is ultimately approved after 

evaluation of collateral, particularly in 

transactions involving real estate or 

equipment, and that for start-ups and 

sole proprietorships a lack of 

sophistication can also lead to initial 

requests being unrealistic. That trade 

association further explained that in 

these cases, the financial institution will 

work with the applicant to arrive at a 

more reasonable amount, which could 

take place over a period of weeks or 

months. The trade association then 

recommended that the Bureau allow 

reporting of an amount that is 

determined at a later stage than the first 

request. Finally, another industry 

stakeholder requested that the Bureau 

propose to allow reporting of the 

applied for amount using ranges of 

numbers, stating that applicants often 

request credit this way. 

A community group stakeholder 

stated that the Bureau should require 

financial institutions to report the initial 

amount requested at the time of 

application, explaining that the amount 

of credit requested is important for the 

purposes of section 1071, which it 

described as including enforcing fair 

lending laws and assessing whether 

credit needs are met. 

Two stakeholders supported the use 

of ‘‘not applicable’’ when the credit 

product does not have a specific amount 

or limit, and another stakeholder said 

that no ‘‘applied for’’ credit limit should 

be required for open-end products. Two 

other stakeholders requested that the 

Bureau allow the use of ‘‘not 

applicable’’ whenever an applicant does 

not request a specific amount. 

Proposed Rule 

The Bureau is proposing in 

§ 1002.107(a)(7) to require that a 

financial institution collect and report 

‘‘the initial amount of credit or the 

initial credit limit requested by the 

applicant.’’ Proposed comment 

107(a)(7)–1 would explain that a 

financial institution is not required to 

report credit amounts or limits 

discussed before an application is made, 

but must capture the amount initially 

requested at the application stage or 

later. In addition, proposed comment 

107(a)(7)–1 would state that if the 

applicant does not request a specific 

amount, but the financial institution 

underwrites the application for a 

specific amount, the financial 

institution reports the amount 

considered for underwriting as the 

amount applied for. Finally, proposed 

comment 107(a)(7)–1 would instruct 

that if the applicant requests an amount 

as a range of numbers, the financial 

institution reports the midpoint of that 

range. 

The Bureau is aware that there could 

be complexity in pinpointing the 

specific initial amount requested by an 

applicant in the fluid process of a small 

business credit application, which the 

Bureau acknowledges could make this 

data point difficult for financial 

institutions to collect and report. 

Nonetheless, the statute requires that 

the amount applied for be reported, and 

that information could be important for 

both of section 1071’s statutory 

purposes. The Bureau believes that its 

proposed regulatory text and 

commentary, described above, would 

provide a flexible compliance regime for 

this data point that would accommodate 

different business practices. A financial 

institution would not be required to 

report amounts discussed before the 

application is made, which would 

accommodate preliminary informal 

interactions. In addition, the proposed 

comment’s instruction on how to report 

this data point when the applicant 

requests a range of numbers would 

facilitate compliance in that situation 

and yield data that would be 

comparable to the other data collected 

for this data point (i.e., specific numbers 

and not ranges of numbers). The Bureau 

believes that more precise information 

will be more useful and should not 

create extra difficulty for financial 

institutions to collect. 

Furthermore, proposed comment 

107(a)(7)–1 would address the method 

for reporting when no initial amount is 

requested by the applicant—that is, the 

financial institution reports the amount 

considered for underwriting as the 

amount applied for. The Bureau 

believes that this method would aid 

compliance and yield appropriate data 

by avoiding the need to report a 

preliminary number when a financial 

institution’s business practices do not 

result in there being such a number to 

report. The Bureau understands that a 

specific amount is often not required by 

many financial institutions for products 

such as credit cards, as the financial 

institution assigns the credit limit as 

part of the credit evaluation process. 

The SER and stakeholder feedback 

from SBREFA suggest that mandating 

reporting of an amount applied for in all 

cases could impose undue compliance 

burden and complicate Regulation B 

compliance for entities that do not, for 

certain products, currently require that 

the borrower request a specific credit 

amount or credit limit as part of the 

financial institution’s application 

process. In light of the complexities and 

concerns described by the SERs and 

other stakeholders, and the Bureau’s 

understanding that sometimes there is 

no amount underwritten to, the Bureau 

believes that the amount applied for 

data point should avoid interfering with 

this arrangement by allowing use of 

‘‘not applicable’’ in certain instances. 

Thus, proposed comment 107(a)(7)–2 

would explain that if the particular 

product applied for does not involve a 


jspears on DSK121TN23PROD with PROPOSALS2
56448 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

571See 15 U.S.C. 1681a(l); see also Regulation B 

comment 12(b)(7)–1 (describing offers of credit). 

572ECOA section 704B(e)(2)(C). 

573SBREFA Outline at 23. 

specific amount requested or 

underwritten, the financial institution 

reports that the requirement is ‘‘not 

applicable.’’ 

In addition to situations in which no 

amount applied for is requested by the 

financial institution or underwritten to 

and the amount applied for would be 

‘‘not applicable,’’ as described above, 

the Bureau understands that there may 

be situations where the financial 

institution requests an amount applied 

for but the applicant nonetheless does 

not provide one. To address this 

situation, proposed comment 107(a)(7)– 

2 would explain that, in compliance 

with proposed § 1002.107(c)(1), a 

financial institution shall maintain 

procedures reasonably designed to 

collect applicant-provided information, 

which includes the credit amount 

initially requested by the applicant. 

However, if a financial institution is 

nonetheless unable to collect or 

otherwise determine the amount 

initially requested, the financial 

institution reports that the amount 

applied for is ‘‘not provided by 

applicant and otherwise 

undetermined.’’ The Bureau believes 

that providing the reporting flexibilities 

in proposed comment 107(a)(7)–2, along 

with the proposed reporting of the 

amount presented for underwriting 

when appropriate, would facilitate 

compliance by accommodating different 

business practices and would also allow 

for collection of useful data. 

Proposed comment 107(a)(7)–3 would 

provide instructions for reporting the 

amount applied for in regard to firm 

offers. ‘‘Firm offers’’ involve 

solicitations to small businesses when 

they have been pre-approved for a term 

loan, line of credit, or credit card.571

Proposed comment 107(a)(7)–3 would 

explain that when an applicant 

responds to a ‘‘firm offer’’ that specifies 

an amount or limit, which may occur in 

conjunction with a pre-approved credit 

solicitation, the financial institution 

reports the amount applied for as the 

amount of the firm offer, unless the 

applicant requests a different amount. If 

the firm offer does not specify an 

amount or limit and the applicant does 

not request a specific amount, the 

amount applied for is the amount 

underwritten by the financial 

institution. The Bureau believes that 

when the applicant knows the amount 

of the pre-approval before responding, 

that figure could appropriately be 

considered as the amount applied for. 

The Bureau understands that financial 

institutions often provide an amount in 

such solicitations. But if no amount 

appears in the pre-approved solicitation, 

the Bureau considers that an applicant 

responding to the firm offer has not 

requested a specific amount, and 

reporting of the amount underwritten 

would be appropriate. The Bureau’s 

proposal follows the SBREFA Outline’s 

approach under consideration for 

handling firm offers, and the SERs and 

other stakeholders did not object to this 

method. The Bureau seeks comment, 

however, on whether it should handle 

reporting of the amount applied for in 

connection with firm offers in a 

different manner than as set forth in this 

proposed comment, such as by requiring 

reporting of ‘‘not applicable’’ in 

situations where the firm offer does not 

specify an amount or limit and the 

applicant does not request one. 

Proposed comment 107(a)(7)–4 would 

explain that when reporting a covered 

application that seeks additional credit 

amounts on an existing account, the 

financial institution reports only the 

additional credit amount sought, and 

not any previous amounts sought or 

extended. The Bureau believes that this 

comment would facilitate compliance 

by providing clear guidance on 

reporting in this situation, and that 

avoiding double reporting of previous 

amounts would result in more 

appropriate and useful data. The Bureau 

notes that a request to withdraw 

additional credit amounts at or below a 

previously approved credit limit 

amount on an existing open-end line of 

credit would not be a covered 

application, and so proposed comment 

107(a)(7)–4 would not apply to such a 

situation. 

The Bureau believes that the proposed 

regulatory text and commentary 

described above would alleviate many 

of the concerns of the SERs and other 

stakeholders providing feedback on the 

SBREFA Outline. The Bureau notes that 

the proposal would accommodate 

different business practices and the 

often fluid nature of amounts applied 

for in small business lending. In regard 

to concerns about disparities between 

the amount applied for and the amount 

approved or originated, section 1071 

requires the collection and reporting of 

the amount applied for, which is 

important for both of section 1071’s 

statutory purposes. 

The Bureau seeks comment on its 

proposed approach to the amount 

applied for data point. The Bureau also 

requests comment on how best to 

require reporting of amount applied for 

in situations involving multiple 

products or credit lines under a single 

credit limit. The Bureau also requests 

comment on potential methods for 

avoiding misinterpretations of 

disparities between the amount applied 

for and the amount approved or 

originated. Finally, the Bureau requests 

comment on its proposed approach to 

reporting when a range of numbers is 

requested. 

107(a)(8) Amount Approved or 

Originated 

Background 

Section 1071 requires financial 

institutions to collect and report ‘‘the 

amount of the credit or credit limit 

applied for, and the amount of the credit 

transaction or the credit limit 

approved.’’ 572 (The amount applied for 

data point is addressed in proposed 

§ 1002.107(a)(7).) As explained in the 

section-by-section analysis of proposed 

§ 1002.107(a)(7) above, the Bureau reads 

section 1071 to require collection and 

reporting of the amount or limit applied 

for as well as the amount of the credit 

transaction or credit limit approved. 

SBREFA Proposals Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

explained that it was considering 

proposing that financial institutions 

report (1) the amount of the originated 

loan for a closed-end origination; (2) the 

amount approved for a closed-end loan 

application that is approved but not 

accepted; and (3) the amount of the 

credit limit approved for open-end 

products (regardless of whether the 

open-end product is originated or 

approved but not accepted).573 In light 

of the potential meaning of the statutory 

language, the Bureau explained that it 

was considering proposing different 

standards for closed-end and open-end 

products. In addition, the financial 

institution would report ‘‘Not 

Applicable’’ for this data point for 

applications that are denied, closed for 

incompleteness, or withdrawn by the 

applicant before a credit decision is 

made. 

The relevant SBREFA Panel Report 

section summarized feedback on both 

the amount applied for and the amount 

approved data points. For ease of 

reading, the Bureau has included the 

discussion of both above in the sectionby-section analysis of proposed 

§ 1002.107(a)(7). The following 

summary focuses more on the amount 

approved or originated data point. One 

SER articulated the importance of 

capturing data on both the amount 

applied for and the amount approved, 

stating that both data points were 

necessary to identify practices, such as 


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Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56449 

574The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 27–28. 

575 Id. at 46. 

discouragement, in the lending process. 

Other SERs asserted that differences 

between the amounts requested and 

approved were frequent, for a variety of 

reasons. One SER stated that they notify 

applicants of a preliminary offered 

amount, which often changes after 

documentation and underwriting. One 

example offered was that disparities 

between the amount applicants applied 

for and the amount the lenders 

approved may be attributable to 

collateral being assessed at a different 

value than the amount the applicants 

initially requested. 

One SER (who supported reporting 

the amount initially applied for and the 

amount approved) strongly opposed 

reporting counteroffers, stating that 

negotiation is quite prevalent in small 

business lending.574 Another SER also 

suggested there could be other potential 

complexities in capturing data on credit 

amount/limit the applicant applied for 

and credit amount/limit the lender 

approved, such as simultaneous or 

grouped financings involving multiple 

products, different sub-limits for each 

product or loan, and a general credit 

limit for an entire facility. SERs asked 

that these data points be captured in a 

manner that took these complexities 

into account. 

As noted in the feedback summary 

above, the SBREFA Panel 

recommendation addressed both the 

amount applied for and the amount 

approved data points. The Panel 

recommended that the Bureau seek 

comment on potential methods for 

avoiding misinterpretations of 

disparities between the credit amount/ 

limit applied for and the credit amount/ 

limit approved.575

Few of the stakeholders who provided 

written feedback on the SBREFA 

Outline objected to the reporting 

method under consideration for amount 

approved/originated. One commenter 

asked that this data point be reported 

using ranges of numbers rather than 

specific amounts, in order for it to be 

uniform with the method it suggested 

for the amount applied for data point. 

Other commenters pointed out possible 

confusion as to the definitions of closedend and open-end credit. In addition, 

commenters stated that sometimes 

applicants are provided more than one 

approval amount, and one commenter 

suggested that in such cases the Bureau 

should require reporting of the highest 

approval amount when the credit is 

approved but not accepted. 

Proposed Rule 

The Bureau is proposing in 

§ 1002.107(a)(8) that the amount 

approved or originated data point be 

collected and reported as follows: (i) For 

an application for a closed-end credit 

transaction that is approved but not 

accepted, the financial institution 

collects and reports the amount 

approved by the financial institution; 

(ii) for a closed-end credit transaction 

that is originated, the financial 

institution collects and reports the 

amount of credit originated; and (iii) for 

an application for an open-end credit 

transaction that is originated or 

approved but not accepted, the financial 

institution collects and reports the 

amount of the credit limit approved. 

The Bureau’s proposal follows the 

SBREFA Outline approach for this data 

point, with certain adjustments and 

clarifications. First, for clarity the 

proposed rule refers to this data point as 

‘‘amount approved or originated.’’ In 

addition, the Bureau is proposing 

comment 107(a)(8)–2 to explain that 

when a financial institution presents 

multiple approval amounts from which 

the applicant may choose, and the credit 

is approved but not accepted, the 

financial institution reports the highest 

amount approved. The Bureau believes 

that reporting the highest amount 

approved when credit is approved but 

not accepted, as addressed in this 

proposed comment, would most 

accurately reflect the amount of credit 

that was made available to the applicant 

in this situation. 

Proposed comment 107(a)(8)–1 would 

provide general instructions for the 

amount approved or originated data 

point, explaining that a financial 

institution would comply with 

proposed § 1002.107(a)(8) by reporting 

the amount approved or originated for 

credit that is originated or approved but 

not accepted. For applications that the 

financial institution, pursuant to 

proposed § 1002.107(a)(9), reports as 

denied, withdrawn by the applicant, or 

incomplete, the financial institution 

would report that the amount approved 

or originated is ‘‘not applicable.’’ The 

Bureau believes that these instructions 

and providing for reporting of ‘‘not 

applicable’’ in certain circumstances 

will facilitate compliance for this data 

point and elicit accurate and 

appropriate data. 

Proposed comments 107(a)(8)–3 and 

–4 would provide specific instructions 

for identifying and reporting the amount 

approved or originated for closed-end 

transactions, including refinancings. 

The Bureau believes that the 

instructions provided would facilitate 

compliance and elicit accurate and 

useful data. 

Proposed comment 107(a)(8)–5 would 

provide instructions regarding 

counteroffers and the amount approved 

or originated data point, explaining that 

if an applicant agrees to proceed with 

consideration of a counteroffer for an 

amount or limit different from the 

amount for which the applicant applied, 

and the covered credit transaction is 

approved and originated, the financial 

institution reports the amount granted. 

Proposed comment 107(a)(8)–5 would 

further explain that if an applicant does 

not agree to proceed with consideration 

of a counteroffer or fails to respond, the 

institution reports the action taken on 

the application as denied and reports 

‘‘not applicable’’ for the amount 

approved or originated. The proposed 

comment would then provide a 

reference to proposed comment 

107(a)(9)–2, which discusses the action 

taken data point in relation to 

counteroffers. For a more complete 

discussion of how the proposed rule 

would treat reporting obligations for 

applications involving counteroffers, see 

the section-by-section analysis of 

proposed § 1002.107(a)(9) below (action 

taken). 

Most of the SER feedback on the 

amount approved or originated data 

point focused on its relation to the 

amount applied for data point. That 

issue is discussed in the section-bysection analysis of proposed 

§ 1002.107(a)(7) above (amount applied 

for). One SER also expressed concern 

about reporting counteroffers in relation 

to the amount approved or originated 

data point. The Bureau believes that, as 

explained above, proposed comment 

107(a)(8)–5 provides an appropriate and 

manageable method for reporting 

amount approved or originated in 

counteroffer situations. Other 

stakeholders asked that the Bureau take 

into account the complexity of multiple 

product or account situations. The 

Bureau has done so in relation to its 

treatment of covered applications, 

discussed in the section-by-section 

analysis of proposed § 1002.103(a) 

above. In regard to the comment 

concerning confusion between closedend and open-end credit, the Bureau is 

proposing to define these terms clearly 

in the regulatory text at proposed 

§ 1002.102(e) and (n). As for the 

suggestion that the amount approved or 

originated data point be reported using 

ranges of numbers (for consistency with 

its request to report the amount applied 

for data point using ranges), the Bureau 

is not proposing to have financial 

institutions report the amount applied 

for using ranges of numbers, though it 


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56450 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

576SBREFA Outline at 29–30. 

577The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 28–29. 

578 Id. at 46. 

579 Id. 

does seek comment on this possibility 

in the section-by-section analysis of 

proposed § 1002.107(a)(7) above. 

The Bureau reads the statutory 

language ‘‘the amount of the credit 

transaction or the credit limit approved’’ 

to require the amount of the credit limit 

approved to be reported for open-end 

applications, and the amount of the 

credit transaction to be reported for 

closed-end applications. The Bureau 

believes the phrase ‘‘the amount of the 

credit transaction or the credit limit 

approved’’ to be ambiguous in regard to 

closed-end transactions because the 

most common meaning of the word 

‘‘transaction’’ in the context for closedend credit transactions would be an 

originated loan. Thus, the Bureau 

reasonably interprets the statute as 

requiring reporting of the amount 

originated for closed-end credit 

transactions. In the alternative, section 

1071 authorizes the Bureau to include 

any ‘‘additional data that the Bureau 

determines would aid in fulfilling the 

purposes of [section 1071].’’ The Bureau 

has determined that for closed-end 

credit transactions that are originated, 

reporting of the amount originated 

would aid in fulfilling the enforcement 

of fair lending laws, by indicating the 

credit that had been provided to 

different types of applicants in actual 

transactions. The Bureau has also 

determined that reporting of the amount 

originated for closed-end credit 

transactions would aid in fulfilling the 

business and community development 

purpose of section 1071 by providing a 

more complete and accurate picture of 

the credit actually being provided to 

different businesses and communities. 

In addition, in the alternative, the 

Bureau believes that it is appropriate to 

use its exception authority under ECOA 

section 704B(g)(2) to require the amount 

originated, rather than the amount 

approved, for originated closed-end 

credit transactions, because collecting 

data on the amount approved instead of 

the amount originated for a closed-end 

transaction would compromise the 

utility and quality of the data being 

reported, thus inhibiting the fair lending 

and business and community 

development purposes of section 1071. 

Similarly, the Bureau has determined 

that for closed-end credit that is 

approved but not accepted, the amount 

approved would aid in fulfilling the 

purposes of section 1071. Primarily, 

reporting of the amount approved for 

closed-end credit would aid in fulfilling 

the enforcement of fair lending laws, by 

indicating the credit that had been 

offered to different types of applicants 

when the transaction does not close and 

there is no amount originated to report. 

Reporting of the amount approved for 

closed-end credit would also aid in 

fulfilling the business and community 

development purpose of section 1071 by 

providing a more complete picture of 

the credit being offered to different 

businesses and communities. 

The Bureau seeks comment on its 

proposed approach to the amount 

approved or originated data point, 

including on the specific requests for 

input above. As recommended by the 

SBREFA Panel and explained in the 

section-by-section analysis of proposed 

§ 1002.107(a)(7) above, the Bureau 

requests comment on potential methods 

for avoiding misinterpretations of 

disparities between the credit amount or 

limit applied for and the credit amount 

or limit originated or approved and on 

the possible use of ranges of numbers 

for reporting the amount applied for and 

amount approved or originated data 

points. In addition, the Bureau requests 

comment on whether it would be useful 

and appropriate to require reporting of 

the amount approved as well as the 

amount originated for originated closedend credit transactions. 

107(a)(9) Action Taken 

Background 

ECOA section 704B(e)(2)(D) requires 

financial institutions to report the ‘‘type 

of action taken’’ on an application. 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated it was considering proposing five 

categories for reporting ‘‘action taken’’: 

Loan originated, application approved 

but not accepted, application denied, 

incomplete application (closed or 

denied), and application withdrawn by 

the applicant.576

Action taken categories in general. 

Most SERs were supportive of the action 

taken categories under consideration.577

Several SERs stated that the categories 

align with information they currently 

collect. One SER explained that a single 

application could pass through all of 

these stages and expressed concern that 

identifying the right category to report 

may be subjective and questioned by 

examiners or auditors after the fact. 

Another SER asked for additional clarity 

on the difference between denied 

applications and incomplete 

applications. This SER also suggested 

adding a category for lenders to indicate 

if an applicant is rate shopping. The 

SBREFA Panel recommended that the 

Bureau further clarify the circumstances 

in which each of the action taken 

categories should be used.578

Of the other stakeholders that 

provided feedback on this issue, several 

supported the action taken codes set 

forth in the SBREFA Outline. One 

industry commenter stated that the data 

point would generally not be difficult or 

expensive to report and two 

commenters reported currently tracking 

some similar (though not identical) 

fields. One community group 

commenter underscored the importance 

of collecting action taken codes 

(including approvals and denials) in 

order to track demand for credit and 

identify potential discrimination. The 

commenter also noted current available 

data (Community Reinvestment Act data 

and surveys) on small business lending 

provides limited information on supply 

and demand. The commenter stated that 

capturing incomplete and withdrawn 

applications was important as it may 

reflect discouragement or 

discriminatory treatment, and that the 

approved but not accepted category 

could reflect less favorable pricing or 

loan terms. Two industry commenters 

suggested the Bureau further simplify 

the action taken categories by 

eliminating the approved but not 

accepted and incomplete categories, and 

including only originated, abandoned, 

and denied categories. One stakeholder 

suggested adding a field for other 

circumstances, such as rate shopping. 

Several community group commenters 

suggested the action taken categories be 

expanded to include all the HMDA 

action taken categories. 

Treatment of counteroffers. In 

response to a question in the SBREFA 

Outline about whether counteroffers 

should be separately identified in the 

1071 data set, several SERs discussed 

the frequency of counteroffers in small 

business lending and the potential 

utility of capturing counteroffers in 

1071 data. One SER expressed concern 

with reporting each adjustment in the 

application process because, they said, 

not all counteroffers are memorialized 

in writing. In the context of discussions 

on the amount approved data point, a 

SER strongly opposed reporting 

counteroffers, stating that negotiation is 

quite prevalent in small business 

lending. The SBREFA Panel 

recommended the Bureau seek comment 

on whether to capture counteroffers in 

1071 data, and if so, the best method for 

doing so.579

Other stakeholders also commented 

on counteroffers. Several industry 


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580Regulation C comment 4(a)(8)(i)–9. 

commenters stated that counteroffers 

should not be reported. The commenters 

noted that there are often multiple 

rounds of back-and-forth 

communications in small business 

lending, that capturing counteroffers is 

unnecessary as the information is 

practically captured in the loan decision 

and other 1071 data (such as loan 

amount approved), and that 

counteroffers are not necessary to show 

the availability of credit. If reported, 

several industry commenters suggested 

use of a data flag to simplify reporting, 

avoid reporting of potentially numerous 

counteroffers in a single application, 

and avoid the additional costs for 

financial institutions to conduct edits 

and validity checks on each separate 

counteroffer. Another industry 

representative also urged that if 

counteroffers are reported, they should 

be considered a single application. No 

community groups commented on this 

topic. 

Proposed Rule 

The Bureau is proposing in 

§ 1002.107(a)(9) to require reporting of 

the action taken by the financial 

institution on the covered application, 

reported as originated, approved but not 

accepted, denied, withdrawn by the 

applicant, or incomplete. As discussed 

above, most SERs and other 

stakeholders were generally supportive 

of these categories. In addition, the 

Bureau is proposing to categorize all 

incomplete applications as a single 

category of ‘‘incomplete’’; while this 

proposed approach is not consistent 

with Regulation C comments 4(a)(8)(i)– 

4 and –6, the Bureau is concerned about 

potential errors in the data if financial 

institutions report incomplete denials 

separate from notices of incompleteness. 

There may also be some benefit for fair 

lending analysis to reserve the denied 

category solely for credit-related 

denials, rather than denials that are 

based on incompleteness. As noted 

below, the Bureau seeks comment on 

reporting the ‘‘incomplete’’ action taken 

category. 

In response to commenter 

suggestions, the Bureau considered 

removing or combining several action 

taken categories. For example, the 

Bureau considered eliminating the 

approved but not accepted category; 

however, because the Bureau believes 

data collected under this category 

would reflect demand for credit, the 

Bureau is retaining this category in its 

proposal. The Bureau also considered 

removing the category of incomplete 

applications. However, because the 

Bureau believes capturing data on 

incomplete applications is essential to 

identifying potential discrimination and 

discouragement during the application 

process, the Bureau is retaining this 

action taken category as well. Finally, 

the Bureau considered combining the 

incomplete and withdrawn categories, 

since both actions reflect an applicant’s 

inability or affirmative decision not to 

proceed with the request for credit. 

However, the Bureau is retaining 

incomplete and withdrawn as separate 

categories, as a high incidence of 

incomplete applications could signal an 

issue with the level of assistance 

provided by the financial institution (for 

example, not providing reasonable 

support or assistance to ensure an 

applicant satisfies all credit conditions; 

or providing more support to some 

applicants than others). As noted below, 

the Bureau seeks comment on this issue. 

The Bureau is not proposing 

additional action taken categories 

beyond what was considered in the 

SBREFA Outline. Although some 

commenters suggested the Bureau 

expand the action taken codes to those 

currently used in Regulation C 

(including preapprovals or purchased 

loans), the Bureau does not believe 

those additional fields would be 

appropriate or necessary in the context 

of section 1071 given the diversity of 

processes and other complexities in the 

small business lending space and 

because section 1071, unlike HMDA, 

does not expressly reference loan 

purchases. 

The Bureau also considered, but is not 

proposing, adding an action taken 

category or flag for counteroffers. As 

noted by certain SERs and other 

commenters, it would be potentially 

infeasible to capture all of the proposed 

1071 data fields for every back-and-forth 

counteroffer with an applicant, and 

attempting to do so would likely lead to 

confusion and data errors. The Bureau 

also agrees with commenter feedback 

that, even without a counteroffer flag or 

field, the proposed section 1071 data 

fields would capture many of the terms 

of accepted counteroffers (such as 

pricing, guarantee, etc.), as well as the 

amount initially requested by the 

applicant. Thus, the Bureau believes the 

addition of a counteroffer flag or field 

would provide limited useful 

information beyond what would be 

captured under the current proposal. 

Moreover, while a counteroffer flag or 

field might be useful as a screening tool 

for potential discrimination (for 

example, if women-owned businesses or 

minority-owned businesses are 

provided counteroffers or denied at a 

higher rate than male- or non-Hispanic 

white-owned businesses), a flag alone 

would lack any specificity to provide 

further fair lending analysis. 

Following the SBREFA Panel’s 

recommendation and feedback from 

other stakeholders, proposed comment 

107(a)(9)–1 would provide additional 

clarity on when a financial institution 

should select each of the proposed 

action taken codes. The financial 

institution identifies the applicable 

action taken code based on final action 

taken on the covered application. 

Proposed comment 107(a)(9)–2 would 

provide instructions for reporting action 

taken on covered applications that 

involve a counteroffer, along with 

examples. The Bureau’s proposed 

treatment of counteroffers aligns with 

how counteroffers are treated under 

existing § 1002.9 notification 

procedures. Specifically, proposed 

comment 107(a)(9)–2 would state that if 

a financial institution makes a 

counteroffer to grant credit on terms 

other than those originally requested by 

the applicant and the applicant declines 

to proceed with the counteroffer or fails 

to respond, the institution reports the 

action taken as a denial on the original 

terms requested by the applicant. If the 

applicant agrees to proceed with 

consideration of the financial 

institution’s counteroffer, the financial 

institution reports the action taken as 

the disposition of the application based 

on the terms of the counteroffer. This 

proposed approach to reporting 

counteroffers also aligns with how they 

are reported under Regulation C.580

Proposed comment 107(a)(9)–3 would 

discuss reporting action taken for 

rescinded transactions. Proposed 

comment 107(a)(9)–4 would clarify that 

a financial institution reports covered 

applications on its small business 

lending application register for the year 

in which final action is taken. Finally, 

proposed comment 107(a)(9)–5 would 

provide guidance for reporting action 

taken if a financial institution issues an 

approval that is subject to the applicant 

meeting certain conditions. 

The Bureau seeks comment on 

proposed § 1002.107(a)(9) that would 

require reporting of action taken and the 

associated commentary. The Bureau 

also specifically seeks comment on 

whether the ‘‘withdrawn by applicant’’ 

category should be merged with the 

‘‘incomplete’’ category for purposes of 

reporting action taken. The Bureau 

seeks comment as well on whether the 

Bureau’s proposal to categorize all 

incomplete applications as a single 

category of ‘‘incomplete’’ (closed or 

denied) should instead be reported 

consistent with the approach in 


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581SBREFA Outline at 30. 

582SBEFA Panel Report at 28–29. 

583SBREFA Outline at 29–30. 

584SBREFA Panel Report at 28–29. 

Regulation C, which provides separate 

categories for denials (including on the 

basis of incompleteness) and files closed 

for incompleteness (if the financial 

institution sent a written notice of 

incompleteness). In addition, the 

Bureau seeks comment on whether 

counteroffers that are not accepted, such 

as a credit offer for a lower credit 

amount than requested, should be 

reported as ‘‘approved but not 

accepted’’ rather than ‘‘denied,’’ in 

order to reflect the availability of credit. 

As recommended by the SBREFA Panel, 

the Bureau also seeks comment on 

whether to specifically capture 

counteroffers in section 1071 data, and 

if so, whether to use a counteroffer flag 

in the data or some other method. 

107(a)(10) Action Taken Date 

In addition to requiring financial 

institutions to collect and report the 

type of action they take on an 

application, as discussed in the sectionby-section analysis of proposed 

§ 1002.107(a)(9) above, ECOA section 

704B(e)(2)(D) requires financial 

institutions to collect and report the 

‘‘date of such action.’’ 

In the SBREFA Outline, the Bureau 

indicated that it was considering 

proposing that the action taken date be 

reported with a day, month, and year, 

and requested feedback on potential 

challenges financial institutions may 

have in identifying such date for each of 

the action taken categories.581 The 

Bureau received limited comments on 

this data point during the SBREFA 

process.582 One SER suggested that the 

Bureau provide a grace period of several 

days before and after the action taken 

date. Another SER recommended that 

the date assigned as the action taken 

date be to the best of the financial 

institution’s knowledge or belief given 

the uncertainty in assigning a particular 

date. The Bureau received similar 

feedback from other stakeholders. Two 

industry stakeholders suggested that a 

grace period or tolerance be provided to 

ease compliance burden, similar to the 

tolerance under consideration for the 

‘‘application date’’ data point. One 

stakeholder recommended that the 

action taken date for approved and 

denied loans be the exact date such 

actions occurred. 

Proposed § 1002.107(a)(10) would 

require action taken date to be reported 

as the date of the action taken by the 

financial institution. Proposed 

comments 107(a)(10)–1 through –5 

would provide additional details on 

how to report the action taken date for 

each of the action taken categories in 

proposed § 1002.107(a)(9). For example, 

proposed comment 107(a)(10)–1 would 

explain that for denied applications, the 

financial institution reports either the 

date the application was denied or the 

date the denial notice was sent to the 

applicant. 

The Bureau notes that its proposed 

approach for this data point largely 

mirrors the Regulation C approach for 

action taken date in § 1003.4(a)(8)(ii) 

and related commentary, with 

modifications to align with the action 

taken categories in proposed 

§ 1002.107(a)(9). Regarding the request 

from a SER and other stakeholders to 

adopt a grace period for the action taken 

date data point, the Bureau believes that 

a grace period or tolerance to report the 

action taken date would not be 

necessary, in light of the flexibility 

already provided in proposed comments 

107(a)(10)–1 through –5. Further, the 

Bureau believes that financial 

institutions generally already have 

policies and procedures in place to 

capture the date an action is taken in the 

normal course of their business 

operations. 

Proposed comment 107(a)(10)–4 

would explain that for covered credit 

transactions that are originated, a 

financial institution generally reports 

the closing or account opening date. 

That proposed comment also states that 

if the disbursement of funds takes place 

on a date later than the closing or 

account opening date, the institution 

may, alternatively, use the date of initial 

disbursement. 

The Bureau seeks comment on its 

proposed approach to the action taken 

date data point. 

In addition, for originated 

transactions, the Bureau is considering 

whether the date the application was 

approved should be captured in 

addition to, or instead of, the date of 

closing or account opening. The Bureau 

is also considering whether the date of 

closing or account opening should be 

reported separately from the date of 

disbursement of funds (for term loans) 

or funds availability (for lines of credit). 

Having these dates reported separately 

would permit the Bureau and other data 

users to determine the length of time 

elapsed between when an application is 

approved, when the closing occurred or 

the account was opened, and when the 

applicant actually received the loan 

funds or access to funds. Specifically, 

the Bureau is concerned that a lengthy 

gap between the loan approval date and 

the date the funds are made available to 

applicants could have adverse effects 

particularly on certain types of small 

businesses. For example, in agricultural 

lending where planting and harvesting 

seasons fall within certain time frames, 

if loan proceeds are not provided within 

a certain period of time after the 

financial institution receives and 

approves an application, the loan 

proceeds may no longer be of maximum 

value to the applicant. The Bureau seeks 

comment on whether it should adopt 

data points to capture application 

approval date and/or the date funds are 

disbursed or made available. 

107(a)(11) Denial Reasons 

Background 

ECOA section 704B(e)(2)(H) 

authorizes the Bureau to require 

financial institutions to compile and 

maintain ‘‘any additional data that the 

Bureau determines would aid in 

fulfilling the purposes of [section 

1071].’’ In addition to requiring 

financial institutions to collect and 

report the action taken date for denied 

applications, as discussed in the 

section-by-section analysis of proposed 

§ 1002.107(a)(10) above, the Bureau is 

proposing to require financial 

institutions to collect and report the 

principal reason or reasons an 

application was denied. The Bureau 

believes that collection of denial reason 

information would aid in fulfilling the 

purposes of section 1071, as explained 

below. 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, as part of its 

discussion regarding the action taken 

data point, the Bureau requested 

feedback on whether financial 

institutions would prefer to report 

denial reasons to help explain the 

decision on an application, and if so, 

whether reporting denial reasons should 

be mandatory or optional.583

When asked whether they would 

prefer reporting denial reasons to help 

explain the decision on an application, 

some SERs expressed concern about 

reporting denial reasons.584 These SERs 

asserted that requiring lenders to report 

reasons for denial could add more 

burden than benefit, may not be useful 

given the number of possible reasons for 

a denial, might not shed light on the 

actual reasons for a denial, may be 

difficult to standardize for uniform 

reporting, would require additional 

processes to ensure accurate reporting, 

and may present heightened privacy 

concerns. One SER expressed a 

preference to report denial reasons. 

Feedback received from other 

stakeholders was mixed. Stakeholders 


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585Existing § 1002.9(a)(3) requires creditors to 

provide the specific reasons for action taken or to 

notify business credit applicants of their right to 

request the reasons for denying an application or 

taking other adverse action. 

586See 2020 Small Business Credit Survey. The 

survey provides baseline data on the financing and 

credit positions of small firms in 2020. It delivers 

information on small business financing needs, 

decisions, and outcomes to policymakers, lenders, 

and service providers. However, the survey is not 

representative because it surveys only employer 

firms (with less than 500 employees) and is subject 

to the firms’ self-reporting. Also, only aggregate 

denial reasons are provided, and further 

breakdowns are unavailable. In addition, the survey 

provides a very limited list of denial reasons to 

survey respondents that may not correspond to 

denial reasons from financial institutions. See also 

Fed. Deposit Ins. Corp., Small Business Lending 

Survey (2018), https://www.fdic.gov/bank/ 

historical/sbls/section5.pdf. 

587See 80 FR 66127, 66204–05 (Oct. 28, 2015). 

opposing reporting denial reasons 

expressed concerns about the privacy of 

applicants’ information if such data 

were released to the public. For 

example, they asserted that if denial 

reasons were released to the public, 

such information would make it easy to 

identify applicants from small 

communities and expose an applicant’s 

sensitive business information like 

insufficient cashflow. One stakeholder 

mentioned that denial reasons may 

encompass multiple reasons and would 

therefore be burdensome to collect and 

store. 

Stakeholders in favor of optional 

(rather than mandatory) reporting of 

denial reasons asserted that reporting 

this information would be unnecessary 

and burdensome and may further push 

small and mid-size financial institutions 

out of small business lending, and 

suggested that, if included in the rule, 

reporting not be made mandatory (that 

is, financial institutions would be 

permitted but not required to report 

such information, at the financial 

institution’s discretion). One 

stakeholder suggested that rural 

community banks under $1 billion be 

exempted from reporting denial reasons 

due to data privacy concerns. 

Finally, stakeholders in favor of 

mandatory reporting of denial reasons 

asserted that such data provide 

regulators and the public with 

important—and currently unavailable— 

data necessary to uncover fair lending 

issues and identify underwriting factors 

that need to be addressed. They stressed 

that the collection of denial data (via the 

action taken data point) accompanied by 

robust denial reasons will provide small 

business applicants with useful and 

actionable information. In addition, 

commenters noted that these data will 

help identify barriers to credit for small 

businesses and provide deeper insight 

into the reasons why credit is denied. 

The SBREFA Panel did not make any 

recommendations related to denial 

reasons. 

Proposed Rule 

Proposed § 1002.107(a)(11) would 

require reporting of the principal reason 

or reasons the financial institution 

denied the covered application. 

Proposed comment 107(a)(11)–1 would 

explain that a financial institution 

complies with proposed 

§ 1002.107(a)(11) by reporting the 

principal reason or reasons it denied the 

application, indicating up to four 

reasons. The financial institution 

reports only the principal reason or 

reasons it denied the application, even 

if there are fewer than four reasons. The 

proposed comment provides an example 

to illustrate. The proposed comment 

would also state that reasons reported 

must accurately describe the principal 

reason or reasons the financial 

institution denied the application. 

Finally, the proposed comment provides 

a list of denial reasons from which 

financial institutions would select the 

principal reason or reasons for denying 

a covered application. 

Proposed comment 107(a)(11)–1 also 

explains that a financial institution 

reports the denial reason as ‘‘other’’ 

where none of the enumerated denial 

reasons adequately describe the 

principal reason or reasons it denied the 

application, and the institution reports 

the denial reason or reasons as free-form 

text. The Bureau believes that allowing 

financial institutions to choose ‘‘other’’ 

in this situation would facilitate 

compliance. In addition, collecting 

information on ‘‘other’’ denials would 

assist the Bureau in monitoring trends 

in this area and key developments in the 

small business lending market, which 

the Bureau could use to inform any 

future iterations of the list. 

Proposed comment 107(a)(11)–2 

would clarify that a financial institution 

complies with proposed 

§ 1002.107(a)(11) by reporting that the 

requirement is not applicable if the 

action taken on the application, 

pursuant to proposed § 1002.107(a)(9), 

is not a denial, and provides an 

example. 

The Bureau notes that its proposed 

approach for this data point largely 

mirrors the Regulation C approach for 

denial reasons in § 1003.4(a)(16) and 

related commentary, with modifications 

to align with the reasons applications 

are denied in the small business lending 

(rather than residential mortgage 

lending) context. 

Pursuant to its authority under ECOA 

section 704B(e)(2)(H), the Bureau 

believes that data regarding denial 

reasons would further the purposes of 

section 1071 by allowing data users to 

better understand the rationale behind 

denial decisions, help identify potential 

fair lending concerns, and provide 

financial institutions with data to 

evaluate their business underwriting 

criteria and address potential gaps as 

needed. In addition, robust data on 

application denial reasons across 

applicants, financial institutions, 

products, and communities could help 

target limited resources and assistance 

to applicants and communities, thus 

furthering section 1071’s community 

development purpose. With respect to 

fair lending compliance, denial reasons 

data would help data users analyze 

potential denial disparities. 

With regard to the potential 

additional compliance burdens SERs 

and other commenters referenced, the 

Bureau believes that, as a practical 

matter, most financial institutions are 

already documenting the principal 

reason or reasons for the denial in an 

adverse action notice, or should be 

prepared to do so if requested.585

However, the Bureau recognizes that if 

a financial institution is not currently 

covered by existing adverse action 

notice requirements under Regulation B, 

it may face greater challenges in 

reporting this information than financial 

institutions that currently provide 

adverse action notifications. The 

concerns raised by SERs and other 

stakeholders regarding the privacy 

implications of denial reasons are 

addressed in part VI.C.viii below. 

The Bureau also believes that 

exempting certain financial institutions 

from the requirement to report denial 

reasons, or permitting financial 

institutions to report denial reasons 

voluntarily, would not be appropriate 

given the need for consistent and 

meaningful data to further the purposes 

of section 1071. In addition, the Bureau 

considered gaps in the existing small 

business lending data and notes that 

available survey data are often not 

representative across the industry, does 

not provide timely information, and 

does not cover all entities involved in 

small business lending.586 The Bureau 

notes that the 2015 HMDA Final Rule 

added mandatory reporting of denial 

reasons to Regulation C because the 

Bureau recognized that the collection of 

denial reason data could facilitate more 

efficient and less burdensome fair 

lending examinations.587

Finally, the Bureau is aware that 

certain stakeholders are concerned that 

reporting denial reason data may result 

in fair lending actions against financial 

institutions for potential discriminatory 


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588For example, TILA’s standardized disclosure 

requirements and limits on linking compensation to 

loan terms, including pricing, do not apply to 

business loans. See, e.g., 15 U.S.C. 1639b, 

Regulation Z § 1026.36 (TILA’s prohibition on 

basing loan originator compensation on loan terms). 

589U.S. Dep’t of Com., Minority Business 

Development Agency, Disparities in Capital Access 

between Minority and Non-Minority-Owned 

Businesses: The Troubling Reality of Capital 

Limitations Faced by MBEs, at 3, 5, 21, 36–37 

(2010), https://archive.mbda.gov/page/executivesummary-disparities-capital-access-betweenminority-and-non-minority-businesses.html. 

590Fed. Reserve Bank of Atlanta, Report on 

Minority Owned Firms: Small Business Credit 

Survey (Dec. 2019), https://www.fedsmall

business.org/medialibrary/fedsmallbusiness/files/ 

2019/20191211-ced-minority-owned-firmsreport.pdf. 

591Alicia Robb, Financing Patterns and Credit 

Market Experiences: A Comparison by Race and 

Ethnicity for U.S. Employer Firms, at 47 (2018) 

(prepared for Off. of Advocacy, Small Bus. Admin.), 

https://www.sba.gov/sites/default/files/Financing_

Patterns_and_Credit_Market_Experiences_

report.pdf. 

592However, the survey noted that online lenders 

tended to receive applications with lower credit 

scores so applicant risk could play a role in higher 

interest rates for nonbank lenders. See 2020 Small 

Business Credit Survey at 15. 

593SBREFA Panel Report at 47. 

594 Id. at 31–32. 

disparities. The Bureau, however, 

believes that including denial reasons in 

1071 data might actually reduce this 

risk, as it would allow financial 

institutions to point to potentially 

legitimate reasons for disparities. 

The Bureau seeks comment on its 

proposed approach to this data point, 

including regarding whether the denial 

reason categories listed and explained 

in proposed comment 107(a)(11)–1 

sufficiently cover the common credit 

denial reasons in the small business 

lending industry. If not, the Bureau 

seeks input on other denial reason 

categories to consider including in the 

proposed list of denial reasons. The 

Bureau also requests further comment 

on the potential utility of denial reason 

data as well as on the potential burdens 

to industry in reporting denial reasons, 

in light of the denial reason categories 

it is proposing and the data’s ability to 

aid in fulfilling the purposes of section 

1071. 

107(a)(12) Pricing Information 

Background 

ECOA section 704B(e)(2)(H) 

authorizes the Bureau to require 

financial institutions to compile and 

maintain ‘‘any additional data that the 

Bureau determines would aid in 

fulfilling the purposes of [section 

1071].’’ The Bureau believes that pricing 

data would serve to further both the fair 

lending purpose and the business and 

community development purpose of 

1071. The majority of small businesses 

are run by a single owner without 

extensive financial experience or expert 

staff to navigate the commercial credit 

marketplace, which lacks many of the 

Federal protections found in consumer 

lending.588 Heightened risks to fair 

lending and small business 

development may arise from different 

pricing for the same products and the 

selective marketing of higher-priced or 

even predatory and unsustainable 

products. Because price-setting is 

integral to the functioning of any 

market, any analysis of the small 

business lending market—including to 

enforce fair lending laws or identify 

community and business development 

opportunities—would be less 

meaningful without this information. 

Research conducted for the 

Department of Commerce has found that 

minority-owned businesses tend to pay 

higher interest rates on business loans 

than those that are not minorityowned,589 and a recent report by the 

Federal Reserve Bank of Atlanta found 

that minority-owned firms more 

frequently applied for potentially 

higher-cost credit products, and were 

also more likely to report challenges in 

applying for credit such as being offered 

high interest rates.590 In addition, 

research conducted for the SBA has 

found that Black- and Hispanic-owned 

businesses were less likely to have 

business bank loans and more likely to 

use more expensive credit card 

financing.591 The 2020 Small Business 

Credit Survey by a collaboration of 

Federal Reserve Banks found that small 

business applicants to nonbank lenders, 

such as online lenders and finance 

companies, were more likely to report 

high interest rates or unfavorable terms 

than applicants to depository 

institutions.592 To the extent that the 

recovery from the COVID–19 pandemic 

and resulting economic crisis is still 

ongoing when the Bureau’s final 1071 

rule becomes effective, and in regard to 

economic emergencies affecting small 

business access to credit that may occur 

in the future, tracking pricing in this 

segment of the market is particularly 

important. 

The Bureau believes pricing data are 

important because the statutory data 

points alone offer (1) limited insight 

into underwriting disparities and (2) no 

insight into predatory prices or pricing 

disparities. For example, they might 

show that a particular market segment is 

expanding and apparently filling an 

important need, but this could actually 

be an area with predatory conduct. 

Pricing information would allow the 

Bureau and others to understand the 

situation more accurately. Data 

collection without pricing information 

could have the unintended consequence 

of incentivizing irresponsible lending, 

as providers seeking to increase 

representation of underserved groups 

could be encouraged to adopt high-cost 

models of lending. 

Without information on pricing, data 

users would be unable to screen for fair 

lending pricing risks, and regulators 

would be less able to focus their 

enforcement and supervision resources 

appropriately on situations of greater 

possibility for questionable activities. In 

addition, if potential discriminatory 

conduct is monitored effectively in 

regard to loan approvals, but not in 

regard to pricing, industry compliance 

systems may focus solely on approvals 

and denials and ignore potential pricing 

disparities. Having pricing data 

available under 1071 would also 

increase transparency and help 

demonstrate to lenders where business 

opportunities exist to offer credit to 

underserved markets. In addition, it 

could demonstrate to small businesses 

the availability of more affordable 

credit. 

SBREFA Proposal Under Consideration 

and Feedback Received 

At SBREFA, the Bureau stated that it 

was considering proposing to include 

pricing of originated credit and credit 

that is approved but not accepted as a 

discretionary data point because it 

could further the fair lending purpose of 

section 1071 by enhancing the ability to 

effectively and efficiently enforce fair 

lending laws. In addition, the Bureau 

stated that pricing data could add value 

in promoting market transparency and 

new product development 

opportunities, thus furthering the 

business and community development 

purpose of section 1071. The Bureau 

also stated that a pricing data point 

could be reported on the basis of annual 

percentage rate (APR), total cost of 

credit (TCC), interest rate and total fees, 

or some other pricing metric. The 

SBREFA Panel recommended that, if 

pricing were to be part of this proposal, 

the Bureau seek comment on potential 

methods for avoiding misinterpretations 

of disparities in pricing data.593

During the SBREFA process, SERs 

provided various comments on the 

inclusion of pricing data in the rule.594

Feedback relevant to a specific pricing 

data point is discussed in the sectionby-section analysis of proposed 

§ 1002.107(a)(12)(i) through (vi) below. 

Immediately below, the Bureau 


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595 Id. at 47. 

addresses feedback relevant to reporting 

pricing information in general. 

Some SERs urged the Bureau to 

require submission of a pricing metric, 

stating, for example, that pricing data 

are essential to understanding the 

operation of the market and the nature 

of credit extended. Some SERs 

supported use of APR as a pricing 

metric, including several who stated 

that they currently calculate APR. One 

SER (a CDFI) stated that they disclose 

APR to applicants now, and that if they 

are able to easily collect and report this 

data point without additional cost and 

burden, other FIs should be able to do 

the same. Several SERs supported the 

use of APR to enable comparisons of 

pricing across various small business 

lending products, and suggested the 

Bureau look to State-mandated and 

Truth in Lending Act APR disclosures 

for guidance on methodologies. One 

SER supported the use of APR as the 

metric if lenders and not the Bureau did 

the calculation. Another SER suggested 

the Bureau collect detailed pricing 

information, including APR, but ‘‘hold 

harmless’’ the reporting financial 

institutions to ensure the accuracy of 

the data. Conversely, at least two SERs 

opposed using APR as a pricing metric; 

one cited the burden associated with 

making that calculation and the other 

said pricing information based on APR 

would be confusing to small business 

owners. Several SERs supported 

reporting pricing information as interest 

rate and fees. Two SERs preferred using 

TCC. One SER suggested that the Bureau 

consider allowing financial institutions 

to choose which pricing metric they 

prefer to report. 

A large majority of industry 

stakeholders opposed inclusion of any 

discretionary data points, and they were 

particularly concerned about a pricing 

data point. Several stakeholders stated 

that a pricing data point would be 

complex and costly to implement across 

various product types. One stakeholder 

was concerned about contracts that 

bundle services with credit, stating that 

pricing data would not capture the true 

economics of the transaction. Several 

stakeholders were worried about 

reputational risk because pricing could 

be publicly reported without contextual 

information such as the nature of the 

collateral, credit scores, size of down 

payment, compensating deposit 

balances, bundled services, etc., that 

would explain the pricing variations. 

One commenter opposed including 

pricing data, but said that if the Bureau 

chose to do so it should also allow 

voluntary submission of some of this 

contextual information. One stakeholder 

stated that pricing of commercial loans 

is often complex and cannot be 

adequately analyzed with the limited 

factors proposed, which may lead to 

erroneous conclusions and have severe 

negative impacts on the financial 

industry from regulatory and 

reputational risk standpoints. A 

community bank stakeholder 

commented that community banks price 

risk on a case-by-case basis and asserted 

that if this ability to price risk 

appropriately is restricted by 

uninformed fair lending guidelines, the 

Bureau risks removing a large number of 

community banks from existence. The 

bank went on to opine that this could 

further reduce the ability of thousands 

of small businesses to access credit. 

Another bank stated that pricing data 

alone would provide an incomplete 

picture that could be easily distorted to 

suit the political agenda of the user. 

That bank was also concerned about 

disparate impact analysis or similar 

tools being used because this could be 

unfair to the bank or its borrowers 

considering the small data set that the 

reported data of this small bank 

represents. Another stakeholder 

summed up these industry concerns, 

stating that pricing is simply too varied 

across the spectrum of the industry to 

include in the 1071 process without 

sowing confusion among lenders, 

borrowers, and the general public, 

stifling lending activity, and introducing 

numerous unintended consequences. 

Several SERs, along with industry 

stakeholders, were concerned about the 

Bureau potentially making public 

pricing data and felt that this choice 

could be costly and challenging to carry 

out. They further asserted that bad 

outcomes could result from unjustified 

fair lending concerns, such as 

distortions to the market through 

interference with risk-based pricing. 

Many SERs, along with other industry 

stakeholders, noted that pricing is 

complex, often unique to the applicant’s 

situation, and may involve extra 

services bundled with the loan. Without 

adequate context, therefore, pricing data 

could lead to inaccurate interpretations 

of the collected data and unfair 

reputational damage. One SER stated 

that the market for small business credit 

is price competitive and accordingly 

pricing information is unnecessary for 

section 1071. Another SER said that 

pricing for some products may reflect 

more than just the cost of the loan and 

may be high relative to other credit 

products if the covered financial 

institution is a supportive lender 

working with less established or higher 

credit risk applicants over a period of 

time. Similarly, the SBREFA Panel 

Report recommended that the Bureau 

seek comment in the proposed rule on 

potential methods for avoiding 

misinterpretations of disparities in 

pricing.595

Community groups, as well as some 

community development lenders, 

strongly favored inclusion of 

discretionary data points in general, and 

were particularly interested in having 

pricing data reported to help achieve 

1071’s purposes. One stakeholder stated 

that pricing information is a critical fair 

lending tool and would allow 

regulators, advocates, and industry to 

conduct fair lending reviews and 

monitor the market for emerging highcost products. That commenter also 

stated that the eventual inclusion of 

pricing data in HMDA has been critical 

in identifying disparate pricing among 

protected classes. Another stakeholder 

suggested that a data collection regime 

designed to further fair lending 

enforcement cannot ignore information 

about whether high-cost lenders are 

targeting business owners of color or 

women-owned businesses, or if lenders 

are charging more to their female 

borrowers or customers of color. One 

community group stated that without 

pricing data lenders flooding 

neighborhoods of color with high-cost 

loans would be seen as adequately 

serving otherwise underserved markets. 

Another commenter stated that MCAs 

have extremely high effective APRs, and 

added that if section 1071 data 

collection indicates that access to 

capital is improving but is blind to 

whether that capital is provided at 30 

percent APR or 300 percent APR, 

Congress’s intent will not be 

accomplished. 

Regarding 1071’s business and 

community development purpose 

specifically, one stakeholder stated that 

merely by providing price transparency 

the Bureau could encourage the 

development of successful lending 

models because policymakers, 

community organizations, investors, 

banks seeking partnerships, and others 

would be able to see, for the first time, 

which business models are successful at 

reaching minority-owned, womenowned, and other underserved small 

businesses. That commenter went on to 

state that transparency would also 

attract investment capital and 

partnerships into models that work, and 

could lead to a market-based model and 

a pro-innovation approach to regulation. 

One community development lender 

that supported inclusion of a pricing 

data point encouraged the Bureau to 

identify one consistent pricing metric 


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that financial institutions must report 

on and added that because this could 

create reporting challenges, especially 

for smaller institutions, the Bureau 

should ensure there is clear guidance 

and consistency on the pricing data 

point. Of the pricing metrics asked 

about in the SBREFA Outline, a majority 

of the community groups and 

community development lenders who 

supported inclusion of a pricing data 

point preferred use of APR, though 

some suggested the Bureau also require 

reporting of rate and fees with the APR, 

as well as rate spread as reported under 

HMDA. One community development 

lender stated that APR is the only 

established metric that enables informed 

comparisons of the cost of capital over 

time and between products of different 

dollar amounts and term lengths. That 

lender went on to state that APR is the 

metric that people know and expect, 

because it is the legally required 

standard for mortgages, auto loans, 

credit cards, student loans and personal 

loans, including short-term loans. The 

lender further explained that small 

businesses seeking financing from 

CDFIs or mission-based lenders are 

informed about their true cost of capital 

through an APR disclosure, and if it can 

easily collect and report this data point 

without additional burdens and costs, 

other small business lenders should be 

able to. Some commenters who favored 

APR suggested that the Bureau start 

with the recent disclosure methods 

adopted in California and New York, 

and that the Bureau use those methods 

for pricing of MCAs and factoring 

specifically. 

Industry stakeholders stated that APR 

would be complicated and costly to 

implement, and that if it is used the 

Bureau should provide clear guidance, 

with one stakeholder suggesting the 

Bureau follow the Regulation Z method, 

which sets out instructions for 

calculating APR. Another stakeholder 

stated that for some products, such as 

inventory financing, APR would be 

meaningless. Some industry 

stakeholders suggested the Bureau use 

other metrics—one requested TCC, 

another requested rate and fees, and a 

third asked that the Bureau allow 

reporting of a single fixed fee as an 

option. 

Finally, some SERs and industry 

stakeholders also expressed privacyrelated concerns regarding public 

disclosure of pricing information. The 

Bureau addresses these comments in 

part VI below regarding privacy 

considerations involving publication of 

the 1071 data. 

Proposed Rule 

The Bureau is proposing, in 

§ 1002.107(a)(12), to require financial 

institutions to report certain pricing 

information for covered credit 

transactions. Specifically, proposed 

§ 1002.107(a)(12)(i)(A) would require 

financial institutions to report the 

interest rate that is or would be 

applicable to the covered credit 

transaction; proposed 

§ 1002.107(a)(12)(ii) would require 

financial institutions to report the total 

origination charges for a covered credit 

transaction; proposed 

§ 1002.107(a)(12)(iii) would require 

financial institutions to report the 

broker fees for a covered credit 

transaction; proposed 

§ 1002.107(a)(12)(iv) would require 

financial institutions to report the total 

amount of all non-interest charges that 

are scheduled to be imposed over the 

first annual period of the covered credit 

transaction; proposed 

§ 1002.107(a)(12)(v) would require 

financial institutions to report, for an 

MCA or other sales-based financing 

transactions, the difference between the 

amount advanced and the amount to be 

repaid; and proposed 

§ 1002.107(a)(12)(vi) would require 

financial institutions to report 

information about any prepayment 

penalties applicable to the covered 

credit transaction. 

Proposed comment 107(a)(12)–1 

would clarify that, for applications that 

the financial institution reports as 

denied, withdrawn by the applicant, or 

incomplete, the financial institution 

reports pricing information as ‘‘not 

applicable.’’ Proposed § 1002.107(a)(12) 

would apply only to credit transactions 

that either have been originated or have 

been approved by the financial 

institution but not accepted by the 

applicant. The Bureau believes that 

pricing information is generally 

available for these transactions because 

the financial institution would generally 

have to determine the price to approve 

(or originate) the transaction. But other 

applications—like those that are denied, 

withdrawn by the applicant, or 

incomplete—would likely have 

terminated too early in the application 

process for pricing information to be 

generally available. 

The Bureau is proposing to require 

financial institutions to report pricing 

data generally as interest rate and fees 

rather than APR, TCC, or another single 

pricing metric that attempts to combine 

multiple aspects of the cost of credit. 

The Bureau believes that interest rate 

and fees provide greater utility to data 

users than the formula-based pricing 

metrics described above, which will aid 

in fulfilling the purposes of section 

1071. Separately enumerating the 

interest rate and certain general 

categories of fees will allow 1071 data 

users to more precisely analyze the 

components of a credit transaction’s 

price. For example, 1071 data users 

could identify potentially 

discriminatory price disparities within 

upfront fees charged to borrowers at 

origination that may not be visible in a 

single pricing metric. Similarly, 

information about which components of 

a transaction’s price may be relatively 

more expensive would allow users to 

better identify business and community 

development initiatives because they 

would be able to target their initiative at 

the particular component, such as the 

interest rate, that appears to be most 

responsible for the relatively high price 

of the transaction. 

The diversity of products in the 

commercial lending space may also 

undermine the utility of APR or other 

single pricing metrics. Many MCAs, for 

example, lack either a defined term or 

a periodic payment amount. Thus, 

financial institutions would have to 

estimate these terms to calculate an 

APR. 

The Bureau also believes that the 

interest rate and fees may be less 

burdensome for financial institutions to 

report than other single pricing metrics. 

These alternative pricing metrics 

involve complex calculations that may 

be difficult for financial institutions to 

perform accurately. And, as noted 

above, certain types of commercial 

financing would require financial 

institutions to assume or estimate parts 

of the pricing formula, further 

increasing complexity. The interest rate 

and fees, in contrast, are typically listed 

in the credit contract for a particular 

transaction. 

The Bureau acknowledges that some 

financial institutions currently calculate 

APR for commercial financing 

transactions, or will do so in the future, 

either as a best practice or to comply 

with State disclosure laws. In 

developing the pricing data points in 

proposed § 1002.107(a)(12), the Bureau 

has reviewed definitions and concepts 

found in Regulation Z, such as the 

definition of ‘‘finance charge’’ in 

§ 1026.4. Regulation Z also forms the 

basis for many parts of State commercial 

financing disclosure laws. The Bureau 

does not intend to achieve a wholesale 

incorporation of § 1026.4 into proposed 

§ 1002.107(a)(12), with interpretations 

of one regulation necessarily controlling 

the meaning of the other regulation. In 

fact, as discussed below, in many places 

perfect alignment between proposed 


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596Cal. S.B. 1235 (Sept. 30, 2018), https://leginfo.

legislature.ca.gov/faces/billTextClient.xhtml?bill_

id=201720180SB1235; 2020 N.Y. Sess. Laws ch. 

369. The New York and California commercial 

financing disclosure laws are discussed in more 

detail below in relevant provisions. 

597For example, the FFIEC cautions users of 

HMDA data that ‘‘HMDA data are generally not 

used alone to determine whether a lender is 

complying with fair lending laws.’’ Bureau of 

Consumer Fin. Prot., FFIEC Announces Availability 

of 2020 Data on Mortgage Lending (2021), https:// 

www.consumerfinance.gov/about-us/newsroom/ 

ffiec-announces-availability-of-2020-data-onmortgage-lending/; see also Bureau of Consumer 

Fin, Prot., Data Point: 2019 Mortgage Market 

Activity and Trends, at 36 (2020), https://

files.consumerfinance.gov/f/documents/cfpb_2019- 

mortgage-market-activity-trends_report.pdf 

(explaining that when examiners for the Federal 

banking agencies evaluate an institution’s fair 

lending risk, they analyze HMDA price data, loan 

application outcomes, and explanatory factors, in 

conjunction with other information and risk factors, 

which can be drawn directly from loan files or 

electronic records maintained by lenders, in 

accordance with the Interagency Fair Lending 

Examination Procedures). 

598 It should be noted that not all covered credit 

transactions include an interest rate. Proposed 

§ 1002.107(a)(12)(v) would apply to certain covered 

credit transactions that do not include an interest 

rate. The discussion of proposed 

§ 1002.107(a)(12)(iv) below also addresses other 

covered credit transactions that may not include an 

interest rate. 

599Cal. S.B. 1235 (Sept. 30, 2018), https://leginfo.

legislature.ca.gov/faces/billTextClient.xhtml?bill_

id=201720180SB1235; 2020 N.Y. Sess. Laws ch. 

369. 

§ 1002.107(a)(12) and Regulation Z 

would not be feasible or desirable. But 

proposed § 1002.107(a)(12) adopts many 

concepts from Regulation Z. The Bureau 

believes that this similarity may limit 

burden for financial institutions that are 

calculating APR for other purposes. 

Regarding State commercial financing 

disclosures, the Bureau understands 

that the disclosures under development 

in New York and California 596 rely 

upon Regulation Z definitions, such as 

the finance charge. These States have 

not fully implemented their disclosures 

at the time of this notice and may 

change their standards in the future. In 

addition, other States might adopt new 

commercial financing disclosures with 

different definitions and methodologies. 

The Bureau will continue to monitor 

regulatory developments in the small 

business lending market, and seeks 

comment on ways to reduce burden on 

financial institutions with respect to 

overlaps or conflicts between State law 

disclosure requirements and the 

Bureau’s proposal. 

As a general matter, the Bureau 

believes that 1071 data can provide 

value to users without reflecting every 

factor that influences pricing. For 

comparison, HMDA data have a long 

history of utility for fair lending 

purposes even though they alone 

generally do not offer proof of 

compliance with fair lending laws.597

This proposed rule includes several 

important factors that influence pricing, 

such as the credit product, the type of 

guarantee, and the credit purpose. These 

data points will help users avoid 

improper comparisons when examining 

the 1071 data. The Bureau seeks 

comment on its proposed approach to 

this data point, as well as regarding 

additional information that could help 

reduce misinterpretations of disparities 

in pricing, including modifications to 

the pricing information in proposed 

§ 1002.107(a)(12). For example, the 

Bureau seeks comment on whether more 

information about the nature of the 

collateral securing the loan is necessary 

to understanding pricing data, such as 

total origination charges, applicable to a 

particular transaction. 

Proposed Rule—107(a)(12)(i) Interest 

Rate 

Proposed § 1002.107(a)(12)(i)(A) 

would require financial institutions to 

report the interest rate that is or would 

be applicable to the covered credit 

transaction. If the interest rate is 

adjustable, proposed 

§ 1002.107(a)(12)(i)(B) would require the 

submission of the margin, index value, 

and index name that is or would be 

applicable to the covered credit 

transaction at origination.598

Proposed comment 107(a)(12)(i)–1 

would clarify that if a covered credit 

transaction includes an initial period 

with an introductory interest rate, after 

which the interest rate adjusts, a 

financial institution complies by 

reporting information about the interest 

rate applicable after the introductory 

period. Proposed comment 

107(a)(12)(i)–2 would explain that a 

financial institution reports the interest 

rate applicable to the amount of credit 

approved or originated reported in 

proposed § 1002.107(a)(8) if a covered 

credit transaction includes multiple 

interest rates applicable to different 

credit features. Lastly, proposed 

comment 107(a)(12)(i)–3 lists a number 

of indices to report and directs that if 

the index used does not appear on the 

list of indices provided, the financial 

institution reports ‘‘other’’ and provides 

the name of the index via free-form text. 

The Bureau believes that allowing 

financial institutions to choose ‘‘other’’ 

when an index that does not appear on 

the provided list is used would facilitate 

compliance. In addition, collecting this 

information on ‘‘other’’ indices would 

assist the Bureau in monitoring trends 

in this area and key developments in the 

small business lending market, which 

the Bureau could use to inform any 

future iterations of the list. 

The Bureau is proposing to collect the 

interest rate on the covered credit 

transaction because this information 

furthers both the fair lending purpose 

and the business and community 

development purpose of section 1071 by 

allowing regulators, advocates, and 

industry to conduct fair lending reviews 

and monitor the market for emerging 

high-cost products. In addition, the 

availability of this pricing metric would 

provide pricing transparency and could 

encourage the development of 

successful lending models because 

policymakers, community 

organizations, investors, banks seeking 

partnerships, and others would be able 

to see which business models are 

successful at reaching minority-owned, 

women-owned, and other underserved 

small businesses. 

As discussed above, research has 

found that minority-owned businesses 

tend to obtain, or be offered, higher 

interest rates on business credit. The 

collection of interest rate (along with 

fees) will allow the Bureau, other 

government agencies, and other data 

users to have insight into the existing 

market, monitor the market for 

potentially troubling trends, and 

conduct fair lending analyses that 

adequately take into account this 

important metric. 

As discussed above, during the 

SBREFA process, several SERs 

supported the use of APR as a pricing 

metric. The Bureau notes that certainState level commercial lending 

disclosures, notably California and New 

York, require the disclosure of APR.599

Because the interest rate must be known 

to calculate APR, the Bureau believes 

that proposed § 1002.107(a)(12)(i) may 

impose little burden on financial 

institutions that already include the 

interest rate on such disclosures 

required by State law, as well as on the 

contract between the financial 

institution and the applicant. 

Proposed § 1002.107(a)(12)(i)(B) 

would provide that, for adjustable 

interest rates based upon an index, a 

financial institution must report the 

margin, index value, and index name 

that is or would be applicable to the 

covered credit transaction at origination. 

Just as the disclosure of the interest rate 

for fixed rate transactions will allow 

data users to ascertain the interest rate 

applicable to the covered credit 

transaction throughout its cycle, the 

Bureau believes that these three 

elements will allow data users to do the 

same for adjustable rate transactions 

based upon an index and improve the 


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600For more information on broker fees, see the 

section-by-section analysis of proposed 

§ 1002.107(a)(12)(iii) below. 

601See, e.g., Minority Bus. Dev. Agency, U.S. 

Dep’t of Com., Disparities in Capital Access 

between Minority and Non-Minority-Owned 

Businesses: The Troubling Reality of Capital 

Limitations Faced by MBEs, at 3, 5, 21, 36–37 

(2010), https://archive.mbda.gov/page/executivesummary-disparities-capital-access-betweenminority-and-non-minority-businesses.html. 

602See, e.g., Opportunity Fund, Unaffordable and 

Unsustainable: The New Business Lending on Main 

Street (2016), https://aofund.org/news/ 

unaffordable-and-unsustainable-new-businesslending/ (analyzing 150 alternative loans (i.e., from 

nondepository lenders or marketplaces, generally 

obtained online) to small businesses and finding an 

average APR of 94 percent). 

603See Regulation Z § 1026.38(o)(2). 

604See appendix J to Regulation Z. 

605Compare proposed comment 107(a)(12)(ii)–1, 

with Regulation Z comment 4(a)–1. 

606Compare proposed comment 107(a)(12)(ii)–2, 

with Regulation Z § 1026.4(a)(1). 

607Compare proposed comment 107(a)(12)(ii)–3, 

with Regulation Z § 1026.4(a)(3). 

608Regulation Z § 1026.4(d)(1) and (3). 

utility of such data. Proposed comment 

107(a)(12)(i)–4 would clarify that a 

financial institution complies with 

proposed § 1002.107(a)(12)(i)(B) by 

reporting the index value at the time the 

application is approved by the financial 

institution. The Bureau seeks comment 

on whether the index value should be 

reported based on a different time 

period or if at the time of approval is the 

most appropriate measure. 

The Bureau seeks comment on 

proposed § 1002.107(a)(12)(i) and its 

commentary, including whether a 

different measure of pricing would 

provide more accurate data, whether 

additional information about pricing 

(for example, amortization type or 

adjustment frequency) would provide 

beneficial data to help ascertain fair 

lending risk and further the business 

and community development purpose 

of section 1071, and whether there are 

additional indices that should be 

included in the list from which 

financial institutions choose to report 

the applicable index on adjustable rate 

transactions. 

The Bureau also seeks comment on 

whether there may be covered credit 

transactions where the interest rate may 

change after origination based on factors 

such as if the borrower maintains an 

account at the financial institution or if 

some other condition is met, and if so, 

whether additional commentary would 

be helpful to provide more guidance on 

which rate to report in that 

circumstance. 

Proposed Rule—107(a)(12)(ii) Total 

Origination Charges 

Proposed § 1002.107(a)(12)(ii) would 

require financial institutions to report 

the total origination charges for a 

covered credit transaction. Total 

origination charges are the total amount 

of all charges payable directly or 

indirectly by the applicant and imposed 

directly or indirectly by the financial 

institution at or before origination as an 

incident to or a condition of the 

extension of credit, expressed in dollars. 

Proposed comment 107(a)(12)(ii)–1 

would clarify that charges imposed 

uniformly in cash and credit 

transactions are not reportable. 

Proposed comment 107(a)(12)(ii)–2 

would provide guidance on reporting 

charges imposed by third parties. 

Proposed comment 107(a)(12)(ii)–3 

would clarify that broker fees are 

included in the total origination 

charges.600 Proposed comment 

107(a)(12)(ii)–4 would provide guidance 

on reporting charges for other products 

or services paid at or before origination. 

And proposed comment 107(a)(12)(ii)–5 

would list examples of reportable 

charges. 

The Bureau understands that financial 

institutions charge a variety of fees 

when originating credit for small 

business applicants. For example, 

financial institutions may charge fees 

for processing an application, for 

underwriting, for filing a UCC–1 

statement, for obtaining an appraisal, for 

obtaining a guarantee through a Federal 

agency program, and for other activities 

related to origination. Depending on the 

financial institution and the credit 

product, similar fees may take different 

names. One financial institution may 

describe a charge as an origination fee, 

while another describes a similar charge 

as an underwriting or documentation 

fee. Proposed § 1002.107(a)(12)(ii) 

would provide information about the 

total amount of all upfront fees charged 

for originating and extending credit, 

regardless of how such fees are 

denominated. 

Information about the total origination 

charges would benefit 1071 data users 

by giving them relatively granular 

pricing data. Much of the research on 

access to credit in the small business 

lending environment has lacked 

information about upfront fees,601 or has 

used less granular pricing metrics.602

Proposed § 1002.107(a)(12)(ii) would 

enable users to examine the 

contribution upfront costs make to the 

price of credit in the small business 

lending market. For example, users 

could analyze pricing disparities 

specifically in upfront costs charged to 

borrowers or borrowers in certain 

communities. Users could also look at 

total origination charges to better 

understand the relationship between the 

elements of credit pricing such as by 

examining the trade-offs between the 

interest rate and the upfront charges. 

Empowering users to engage in this 

level of analysis would aid in fulfilling 

the fair lending and business and 

community development purposes of 

the statute. 

In developing the total origination 

charges data point, the Bureau 

considered definitions and concepts in 

existing regulations. In particular, 

Regulation Z § 1026.4 contains a 

measure of the cost of credit: The 

finance charge. Regulation Z § 1026.4 

defines the finance charge as ‘‘any 

charge payable directly or indirectly by 

the consumer and imposed directly or 

indirectly by the creditor as an incident 

to or a condition of the extension of 

credit.’’ The finance charge appears in 

numerous regulatory provisions 

governing consumer financial services, 

such as disclosures to borrowers in 

certain mortgage transactions,603 and 

calculation of the APR.604

Proposed § 1002.107(a)(12)(ii)’s 

description of total origination charges 

is similar to Regulation Z’s definition of 

the finance charge. As with the finance 

charge, proposed § 1002.107(a)(12)(ii) 

would exclude charges imposed 

uniformly in cash and credit 

transactions.605 Proposed 

§ 1002.107(a)(12)(ii) would use a similar 

test for including fees and amounts 

charged by someone other than the 

financial institution.606 And proposed 

§ 1002.107(a)(12)(ii) adopts the same 

approach toward including broker fees 

in the total origination charges that 

Regulation Z takes toward including 

mortgage broker fees in the finance 

charge.607 With respect to charges for 

other products or services that the 

applicant pays at or before origination, 

proposed comment 107(a)(12)(ii)–4 

would explain that such charges are 

included in the total origination charges 

only if the financial institution requires 

the purchase of such other product or 

service. Regulation Z does not adopt a 

uniform approach to services bundled 

with the credit transaction. But charges 

or premiums for credit insurance or debt 

cancellation coverage are included in 

the finance charge if the creditor 

requires the purchase of such additional 

services.608

Proposed § 1002.107(a)(12)(ii), 

however, differs in important ways from 

Regulation Z’s definition of the finance 

charge. First, proposed 

§ 1002.107(a)(12)(ii) is narrower than 

the finance charge. The finance charge 

includes certain credit costs that are 


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609 Id. § 1026.4(b)(1). 

610 Id. § 1026.4(c)(1) (application fees) and (7) 

(real-estate related fees). 

611The New York and California disclosure laws 

currently add various costs to the Regulation Z 

finance charge depending on the credit product. See 

Cal. Dep’t of Fin. Prot. & Innovation, Proposed 

Commercial Financing Disclosures (S.B. 1235) (Apr. 

7, 2021), https://dfpi.ca.gov/wp-content/uploads/ 

sites/337/2021/04/2021-04-07-SB-1235-WithRedlines-FINAL-for-Publication.pdf; 2020 N.Y. 

Sess. Laws ch. 369, 801(e). 

612Fed. Fin. Insts. Examination Council, 

Interagency Fair Lending Examination Procedures, 

at 3 (2009), https://www.ffiec.gov/PDF/fairlend.pdf 

(instructing examiners to consider an institution’s 

organization of its credit decision-making process, 

including identification of the delegation of 

separate lending authorities and the extent to which 

discretion in pricing or setting credit terms and 

conditions is delegated to various levels of 

managers, employees, or independent brokers or 

dealers and an institution’s loan officer or broker 

compensation program). 

613Regulation Z § 1026.36 (implementing TILA’s 

prohibition on basing loan originator compensation 

on loan terms). 

imposed after a financial institution 

originates a transaction, such as interest 

and time-price differential.609 Proposed 

§ 1002.107(a)(12)(ii), on the other hand, 

is limited to charges at or before 

origination, because other proposed 

pricing data points, such as the interest 

rate and initial annual charges, capture 

information about the cost of credit over 

the life of the transaction. Second, 

within its scope, proposed 

§ 1002.107(a)(12)(ii) is more 

comprehensive than the finance charge. 

The finance charge excludes many 

upfront costs of obtaining credit. For 

example, the finance charge excludes 

application fees charged to all 

applicants for credit, and numerous fees 

in transactions secured by real 

property.610 Proposed 

§ 1002.107(a)(12)(ii) contains no similar 

exclusions. The Bureau believes that 

many of the upfront fees omitted from 

the finance charge, such as application 

fees, are typical of small business credit 

transactions, and therefore including 

such charges helps data users to 

understand pricing in the small 

business lending market. Additionally, a 

measure of origination charges with 

numerous exclusions may encourage 

financial institutions to shift costs to the 

excluded fees, where they would be 

hidden from users of the 1071 data. 

Finally, proposed § 1002.107(a)(12)(ii) is 

simpler than the Regulation Z definition 

of finance charge, which the Bureau 

believes may improve the likelihood 

that the information is accurately 

reported. 

As discussed above, during the 

SBREFA process, some SERs supported 

use of APR as a pricing metric, 

including several who stated that they 

currently calculate APR. Several SERs 

supported the use of APR to enable 

comparisons of pricing across various 

small business lending products, and 

suggested the Bureau look to Statemandated and Truth in Lending Act 

APR disclosures for guidance on 

methodologies. Of the pricing metrics 

asked about in the SBREFA Outline, a 

majority of the community groups and 

community development lenders who 

supported inclusion of a pricing data 

point preferred use of APR, though 

some suggested the Bureau also require 

submission of rate and fees with the 

APR, as well as rate spread as reported 

under HMDA. Some commenters who 

favored APR suggested that the Bureau 

start with the recent disclosure methods 

adopted in California and New York, 

and that the Bureau use those methods 

for pricing of MCAs and factoring 

specifically. As discussed above, the 

Bureau is proposing to require financial 

institutions generally to report interest 

rate and fees, rather than APR. But in 

developing proposed 

§ 1002.107(a)(12)(ii)’s definition of total 

origination charges, the Bureau has 

adapted certain language and concepts 

from Regulation Z’s definition of the 

finance charge. Because the finance 

charge must be known to calculate APR, 

including the APR that would be 

disclosed under California and New 

York law,611 the Bureau believes that 

proposed § 1002.107(a)(12)(ii) may 

impose less burden on financial 

institutions and improve the likelihood 

that the information is accurately 

reported as compared to a measure of 

total origination charges that had no 

similarity to the finance charge. 

For the reasons given above, proposed 

§ 1002.107(a)(12)(ii) would require 

financial institutions to report the total 

amount of all charges payable directly 

or indirectly by the applicant and 

imposed directly or indirectly by the 

financial institution at or before 

origination as an incident to or a 

condition of the extension of credit, 

expressed in dollars. Proposed 

§ 1002.107(a)(12)(ii) would apply to 

credit transactions that either have been 

originated or have been approved by the 

financial institution but not accepted by 

the applicant. The Bureau seeks 

comment on proposed 

§ 1002.107(a)(12)(ii) and its 

commentary. For example, the Bureau 

seeks comment on whether concepts 

and guidance adapted from Regulation 

Z, such as proposed comment 

107(a)(12)(ii)–1 on comparable cash 

transactions, are applicable in the small 

business lending context such that they 

should be incorporated as drafted. The 

Bureau also seeks comment on whether 

to enumerate certain types of charges 

separately in the 1071 data, and whether 

to include or exclude certain types of 

charges in the total origination charges. 

Proposed Rule—107(a)(12)(iii) Broker 

Fees 

Proposed § 1002.107(a)(12)(iii) would 

require financial institutions to report 

the broker fees for a covered credit 

transaction. Broker fees are the total 

amount of all charges included in the 

total reportable origination charges that 

are fees paid by the applicant directly to 

a broker or to the financial institution 

for delivery to a broker, expressed in 

dollars. 

Proposed comment 107(a)(12)(iii)–1 

would provide an example of reporting 

different types of broker fees. Proposed 

comment 107(a)(12)(iii)–2 would clarify 

that financial institutions would use a 

‘‘best information readily available’’ 

standard regarding fees paid directly to 

a broker by an applicant. 

The Bureau believes that small 

business loan brokers are an important 

part of the small business lending 

market, and may feature more 

prominently in certain financing 

arrangements, such as MCAs. The 

existence of brokers creates 

opportunities for potential practices that 

inflate the cost of small business credit. 

For example, compensation that is tied 

to the terms of a loan may encourage 

brokers to steer applicants to financial 

institutions offering less favorable 

terms. Because of the potential risks 

involved in multi-party business 

arrangements, the FFIEC’s Interagency 

Fair Lending Examination Procedures 

emphasize the importance of 

understanding the role that brokers play 

in a financial institution’s lending 

process.612 These risks may be 

heightened in the small business 

lending market because applicants lack 

the substantive protections afforded to 

consumer credit applicants, such as the 

prohibition on basing loan originator 

compensation on the terms of a 

transaction.613

Accordingly, proposed 

§ 1002.107(a)(12)(iii) would provide 

information about the broker fees 

associated with a transaction. Although 

broker fees are included in proposed 

§ 1002.107(a)(12)(iii)’s definition of total 

origination charges, separately 

enumerating the total broker fees would 

allow users to better understand the role 

that brokers play in the price of small 

business credit. For example, users 

could analyze whether broker fees 

specifically appear to be creating fair 

lending risk or higher prices for certain 


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614See Regulation C comments 4(a)(31)–4 and 

4(a)(32)–5. 

615Proposed comment 107(a)(12)(iv)–2 would 

clarify that financial institutions should not report 

the interest scheduled to be imposed in the first 

year under proposed § 1002.107(a)(12)(iv). 

communities. Empowering users to 

engage in this level of analysis would 

aid in fulfilling the fair lending and 

business and community development 

purposes of the statute. 

The Bureau believes, however, that 

financial institutions may have 

difficulty reporting broker fees that an 

applicant pays directly to a broker. 

Proposed comment 107(a)(12)(iii)–2 

would clarify that a financial institution 

would rely on the best information 

readily available to the financial 

institution at the time final action is 

taken. Information readily available 

could include, for example, information 

provided by an applicant or broker that 

the financial institution reasonably 

believes regarding the amount of fees 

paid by the applicant directly to the 

broker. The ‘‘best information readily 

available’’ standard is used in reporting 

certain HMDA data under Regulation 

C,614 and the Bureau believes it may 

also be appropriate for reporting fees 

paid directly to a broker by an 

applicant. 

For the reasons given above, proposed 

§ 1002.107(a)(12)(iii) would require 

financial institutions to report the total 

amount of all charges included in 

proposed § 1002.107(a)(12)(ii) that are 

fees paid by the applicant directly to a 

broker or to the financial institution for 

delivery to a broker, expressed in 

dollars. Proposed § 1002.107(a)(12)(iii) 

would apply to credit transactions that 

either have been originated or have been 

approved by the financial institution but 

not accepted by the applicant. The 

Bureau seeks comment on proposed 

§ 1002.107(a)(12)(iii) and its 

commentary, including on the 

knowledge that financial institutions 

might have about direct broker fees and 

the challenges of reporting such 

information. 

Proposed Rule—107(a)(12)(iv) Initial 

Annual Charges 

Proposed § 1002.107(a)(12)(iv) would 

require financial institutions to report 

the total amount of all non-interest 

charges that are scheduled to be 

imposed over the first annual period of 

the covered credit transaction, 

expressed in dollars. 

Proposed comment 107(a)(12)(iv)–1 

would provide an example of how to 

calculate the amount to report. Proposed 

comment 107(a)(12)(iv)–2 would 

highlight that a financial institution 

should exclude interest expenses from 

the initial annual charges reported. 

Proposed comment 107(a)(12)(iv)–3 

would note that a financial institution 

should not include any charges for 

events that are avoidable by the 

applicant, including for example, 

charges for late payment, for exceeding 

a credit limit, for delinquency or 

default, or for paying items that 

overdraw an account. Proposed 

comment 107(a)(12)(iv)–4 would 

provide examples of initial annual 

charges that may be scheduled to be 

imposed during the initial annual 

period, including monthly fees, annual 

fees, and other similar charges. Finally, 

proposed comment 107(a)(12)(iv)–5 

would clarify that a financial institution 

complies with the provision by 

reporting as the default the highest 

amount for a charge scheduled to be 

imposed, and provides an example of 

how to calculate the amount reported 

when the scheduled fee to be imposed 

may be reduced based upon a specified 

occurrence. 

The Bureau understands that there are 

a variety of ways that small business 

loans may be structured. This could 

include whether there is an interest rate 

imposed on the transaction, whether 

there are finance charges, and whether 

there are a myriad of other fees that may 

be scheduled to be paid or are 

contingent upon some occurrence. In 

addition, the Bureau understands from 

its market monitoring activity that 

covered credit transactions may include 

scheduled fees that encompass a 

substantial part of the cost of the 

covered credit product, and without 

knowledge of those fees, the cost of the 

credit would be misleading. The Bureau 

believes that proposed 

§ 1002.107(a)(12)(iv) would enable data 

users to have a more accurate 

understanding of the cost of the covered 

credit transaction than if the data lacked 

information about scheduled fees. 

As noted above, the Bureau believes 

that there may be small business loans 

that do not include an interest rate, but 

do include a monthly finance charge 

that is imposed on the covered credit 

transaction.615 If the financial 

institution were only required to report 

the interest rate on these types of 

transactions, the true cost of credit 

would be wholly inaccurate because the 

monthly finance charge would not be 

reported. In addition, small business 

loans, like consumer loans, may include 

a number of other fees, such as annual 

fees and other similar charges. The 

information collected and reported 

under proposed § 1002.107(a)(12)(iv) 

would allow data users to have a more 

complete picture of the cost of the 

covered credit transaction and promote 

market transparency, thus furthering the 

business and community development 

purpose of section 1071. In addition, 

this pricing data could further the fair 

lending purpose of section 1071 as it 

could enhance the ability to effectively 

and efficiently enforce fair lending laws. 

Proposed § 1002.107(a)(12)(iv) would 

provide that a financial institution only 

report charges scheduled to be imposed 

over the first annual period of the 

covered credit transaction. The Bureau 

believes that by only requiring 

scheduled charges to be reported (rather 

than the submission of all potential 

charges, some of which could be 

speculative), the data reported will be 

more accurate than if a financial 

institution had to make an educated 

guess as to what charges will be 

imposed over the first annual period. 

Proposed § 1002.107(a)(12)(iv) would 

not require a financial institution to 

itemize the charges reported thereunder. 

The Bureau believes that requiring 

charges to be itemized could add a 

considerable amount of complexity for 

financial institutions in collecting and 

reporting the initial annual charges, 

given the range of fees that could be 

charged and the variations in how they 

might be imposed. The Bureau seeks 

comment on the likelihood that FIs 

would schedule charges in the second 

year of a covered credit transaction and 

beyond specifically in an effort to avoid 

reporting the charges for purposes of 

1071. 

A financial institution complies with 

proposed § 1002.107(a)(12)(iv) by not 

including charges for events that are 

avoidable by the applicant; this 

restriction is explained more fully in 

proposed comment 107(a)(12)(iv)–3, 

which would provide examples of types 

of avoidable charges. As noted above, 

the Bureau believes that the accuracy of 

the data reported is enhanced by only 

including charges that are scheduled to 

be imposed and not including potential 

charges that are contingent upon an 

action (or inaction) by the borrower. The 

Bureau also believes that only requiring 

financial institutions to report such 

charges for the first year, and not the life 

of the loan, will minimize any burden 

associated with reporting the data. This 

information should be included in the 

contract and, at most, would require a 

simple calculation to arrive at the total 

charges for the initial annual period. An 

example of how to calculate the initial 

annual charges for the first annual 

period is found in proposed comment 

107(a)(12)(iv)–1. The Bureau also seeks 

comment on how it should treat 

situations where the applicant has 


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informed the financial institution that it 

expects to regularly incur ‘‘avoidable 

charges,’’ for example where an 

applicant intends to pay late each 

month, such that a late fee, which 

would otherwise be an avoidable charge 

and not reportable under this provision, 

is in effect no longer contingent. 

Specifically, the Bureau seeks comment 

on whether such charges should be 

reported as a scheduled charge. 

Proposed comment 107(a)(12)(iv)–5 

would provide additional explanation 

about what amount to report when the 

financial institution provides a discount 

on the charge if certain conditions are 

met. The Bureau understands that some 

financial institutions may provide a 

discount on specific charges when 

certain conditions are met. For example, 

a financial institution may provide a 

discount on a monthly charge if the 

borrower maintains a checking account 

at the financial institution. In such a 

circumstance, proposed 

§ 1002.107(a)(12)(iv) would require the 

financial institution to report the nondiscounted amount to maintain 

consistency across the data that is 

reported by all financial institutions. 

The collection of initial annual 

charges was not discussed during the 

SBREFA process. However, during that 

process several SERs remarked that 

pricing is complex and often unique to 

the applicant’s situation, and may 

involve extra services bundled with the 

loan, and without adequate context 

pricing data could lead to inaccurate 

interpretations and reputational damage 

to financial institutions. The Bureau 

believes that the submission of initial 

annual charge data will help to decrease 

the likelihood of inaccurate 

interpretations and provide additional 

context by giving a more complete 

picture of the pricing of each covered 

credit transaction. 

For the reasons given above, proposed 

§ 1002.107(a)(12)(iv) would require 

submission of the total amount of all 

non-interest charges that are scheduled 

to be imposed over the first annual 

period of the covered credit transaction, 

expressed in dollars. The Bureau seeks 

comment on proposed 

§ 1002.17(a)(12)(iv) and its commentary, 

including whether to include or exclude 

certain types of charges as reportable 

under initial annual charges. 

Proposed Rule—107(a)(12)(v) 

Additional Cost for Merchant Cash 

Advances or Other Sales-Based 

Financing 

Proposed § 1002.107(a)(12)(v) would 

require financial institutions to report 

additional cost data for MCAs or other 

sales-based financing transactions. 

Specifically, this cost is the difference 

between the amount advanced and the 

amount to be repaid, expressed in 

dollars. Proposed comment 

107(a)(12)(v)–1 would provide an 

example of the difference between the 

amount advanced and the amount to be 

repaid for an MCA. 

As discussed above, the Bureau is 

proposing several data points to provide 

information on pricing in the small 

business lending market. These pricing 

data points would provide information 

about the interest rate and fees 

applicable to a covered credit 

transaction. Some types of commercial 

financing, however, contain pricing 

terms that are difficult to reflect in data 

points about a transaction’s interest rate 

and fees. For example, under a typical 

MCA, a merchant receives a cash 

advance and promises to repay it (plus 

some additional amount) to the MCA 

provider. MCA providers generally do 

not provide an interest rate, and while 

they may charge fees at origination or 

during the first year, the majority of an 

MCA’s cost comes from the additional 

amount repaid by the merchant on top 

of the cash advance. This additional 

amount may be expressed as a multiple 

of the amount advanced in the form of 

a factor rate or percentage, or it may be 

derived by comparing the total payback 

amount to the amount actually 

advanced. This additional amount is 

typically not characterized as interest, 

so it would not be reported under 

proposed § 1002.107(a)(12)(i). Nor is 

this additional amount characterized as 

a fee charged at origination or scheduled 

to be imposed during the first year after 

the transaction, so it would not be 

reported under proposed 

§ 1002.107(a)(12)(ii) or (iv). Without an 

additional pricing data point to capture 

this additional amount due, users 

attempting to analyze MCA pricing for 

fair lending or business and community 

development purposes would miss most 

of the cost of credit associated with 

these transactions. Therefore, the 

inclusion of this data point would aid 

in fulfilling the fair lending and 

business and community development 

purposes of the statute. 

At the same time, the Bureau believes 

that information about the additional 

amount repaid by the merchant would 

impose relatively low burden on 

financial institutions. A typical MCA 

contract lists the amount of future 

revenue purchased and the purchase 

price. A financial institution could 

determine the additional amount repaid 

by computing the difference between 

these two numbers. 

For the reasons discussed above, 

proposed § 1002.107(a)(12)(v) would 

require financial institutions to report, 

for an MCA or other sales-based 

financing transaction, the difference 

between the amount advanced and the 

amount to be repaid, expressed in 

dollars. Proposed § 1002.107(a)(12)(v) 

would apply to credit transactions that 

either have been originated or have been 

approved by the financial institution but 

not accepted by the applicant. The 

Bureau seeks comment on proposed 

§ 1002.107(a)(12)(v) and proposed 

comment 107(a)(12)(v)–1, including 

whether to require additional pricing 

information for MCAs, and whether 

MCAs could be structured in ways that 

evade the proposed reporting 

requirement, such as by omitting or 

making variable the amount to be 

repaid. 

Proposed Rule—107(a)(12)(vi) 

Prepayment Penalties 

Proposed § 1002.107(a)(12)(vi)(A) 

would require financial institutions to 

report whether the financial institution 

could have included a prepayment 

penalty under the policies and 

procedures applicable to the covered 

credit transaction. Proposed 

§ 1002.107(a)(12)(vi)(B) would require 

financial institutions to report whether 

the terms of the covered credit 

transaction include a charge imposed 

for paying all or part of the transaction’s 

principal before the date on which the 

principal is due. Proposed comment 

107(a)(12)(vi)–1 would provide 

additional information on how to 

determine whether the applicable 

policies and procedures allow a 

financial institution to include 

prepayment penalties in the loan 

agreement. 

The Bureau understands, through its 

market monitoring function, that small 

business loan contracts may include 

prepayment penalties and the penalties 

can be sizable and structured as a 

percent of the remaining outstanding 

balance. The Bureau also understands 

that there may be concern among 

stakeholders, including community 

groups, that certain small business 

applicants may be steered toward loans 

containing prepayment penalty terms. 

The collection of data regarding which 

contracts contain a prepayment penalty 

and whether a prepayment penalty 

could have been imposed on specific 

contract types allows the data to be 

analyzed for fair lending purposes to see 

if certain groups may be steered into 

contracts containing prepayment 

penalties. Assuming that prepayment 

penalty data would be part of the 

publicly available data, from a market 

competition standpoint, financial 

institutions may want to know how 


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616ECOA section 704B(e)(2)(E). 

617Regulation C § 1003.4(a)(9)(ii)(C). Regulation C 

also requires reporting of the property address for 

all applications. 

618See 2015 FFIEC CRA Guide at 16. 

619SBREFA Outline at 30–31. 620SBREFA Panel Report at 29. 

frequently their competitors are 

utilizing prepayment penalties. Thus, 

these data could help further the 

business and community development 

purpose of section 1071 by promoting 

market transparency and new product 

development opportunities. 

Proposed § 1002.107(a)(12)(vi)(A) 

would require financial institutions to 

report whether the financial institution 

could have included a prepayment 

penalty under the policies and 

procedures applicable to the covered 

credit transaction, while proposed 

§ 1002.107(a)(12)(vi)(B) would require 

financial institutions to report whether 

the terms of the covered credit 

transaction actually include a 

prepayment penalty term. The 

provisions would allow data users to 

determine what percentage of covered 

credit transactions could contain a 

prepayment penalty term, what 

percentage of such transactions actually 

contain the term, and, together with 

other data points, the demographic 

profile of borrowers whose contracts do 

and do not include the term. The 

Bureau believes the two provisions 

work together to allow data users to 

better determine whether certain 

borrowers are being steered towards 

covered credit transactions containing 

prepayment penalty terms. 

Proposed comment 107(a)(12)(vi)–1 

would elaborate on the requirement to 

report whether financial institutions 

could have included a prepayment 

penalty in the covered credit transaction 

to clarify that the applicable policies 

and procedures are those that the 

financial institutions follows when 

evaluating applications for the specific 

credit type and credit purpose 

requested. The Bureau believes this 

provision will ensure that similar credit 

products are being analyzed together 

and minimize the possibility that 

potential fair lending risk is incorrectly 

identified. 

For the reasons given above, proposed 

§ 1002.107(a)(12)(vi)(A) would require 

financial institutions to report whether 

the financial institution could have 

included a prepayment penalty under 

the policies and procedures applicable 

to the covered credit transaction. 

Proposed § 1002.107(a)(12)(vi)(B) would 

require financial institutions to report 

whether the terms of the covered credit 

transaction include a charge imposed 

for paying all or part of the transaction’s 

principal before the date on which the 

principal is due. 

The Bureau seeks comment on 

proposed § 1002.107(a)(12)(vi) and its 

commentary, including whether to 

enumerate other types of contingent 

charges separately in the 1071 data to 

more accurately reflect the cost of 

covered credit transactions. The Bureau 

also seeks comment on whether there 

are alternative data that would provide 

similar insight into whether certain 

borrowers are being steered into covered 

credit transactions containing 

prepayment penalty terms or other 

similar contingent terms. 

107(a)(13) Census Tract 

Background 

Section 1071 requires financial 

institutions to collect and report ‘‘the 

census tract in which is located the 

principal place of business of the . . . 

applicant.’’ 616 This provision is similar 

to Regulation C, which requires 

reporting of the census tract in certain 

circumstances if the property securing 

the loan (or proposed to secure the loan, 

if the transaction was not originated) is 

in a county with a population of more 

than 30,000.617 Under Regulation C, the 

financial institution generally finds the 

census tract by geocoding using the 

address of the property. Geocoding is 

the process of using a particular 

property address to locate its 

geographical coordinates and the 

corresponding census tract. 

CRA reporting of business loans by 

depository institutions also requires 

reporting of census tract. The Bureau 

understands that CRA allows reporting 

of a census tract based on the address 

or location where the proceeds of the 

credit will be principally applied.618

SBREFA Proposals Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

explained that it was considering 

proposing that financial institutions 

report a census tract based on an 

address collected in the application, or 

during review or origination of the 

loan.619 The financial institution would 

use the address where the loan proceeds 

will principally be applied, if that 

address is known to the financial 

institution, which the Bureau believes 

would be more useful to carry out the 

community development and fair 

lending purposes of section 1071. For 

example, if a financial institution makes 

a loan to a small business to buy or 

improve commercial real estate, the 

location of the real estate is more 

relevant to section 1071’s statutory 

purposes than the location of the main 

office. If the financial institution does 

not possess that information, the 

financial institution would use the 

location of the small business 

borrower’s main office or headquarters. 

If that, too, is unknown, the financial 

institution could use another business 

address associated with the application. 

The financial institution would also 

report which of these address types it is 

using, unless that information is 

unknown: (1) The address where the 

loan proceeds will principally be 

applied; or (2) the location of the small 

business borrower’s main office or 

headquarters; or (3) some other business 

address, including those for which the 

financial institution is unsure about the 

nature of the address. 

In response to the SBREFA Outline, 

SERs explained that they generally 

capture the main office address of small 

business applicants, which for sole 

proprietors is frequently a home 

address; the address where the loan 

proceeds will be used is typically 

captured for commercial real estate 

transactions.620 Some of the SERs stated 

that they do not know the proceeds 

address, and one suggested that for 

simplicity the Bureau should use the 

business address only. 

A number of SERs explained that they 

have experience geocoding addresses to 

obtain census tract information—such 

as for CDFI Fund reporting, voluntary 

CRA reporting, or for reporting mortgage 

loans under HMDA—though some did 

not. Some SERs suggested that a 

requirement to report a geocoded census 

tract for financial institutions that do 

not do so now would impose costs on 

the financial institution and possibly 

the borrower. One SER stated that few 

nondepository institutions collect or are 

even familiar with census tract data. 

One SER recommended following the 

format used for CRA reporting of census 

tract information, rather than the 

slightly different format used under 

HMDA. Another SER suggested that the 

Bureau provide simple instructions for 

reporting census tract and employ less 

burdensome geocoding requirements 

than exist for HMDA. Several SERs 

explained that they use a free service 

available through the FFIEC to convert 

addresses they receive from applicants 

to census tract data. A few SERs 

suggested that the Bureau should 

provide or support a Federal 

government-sponsored system for the 

secure batch processing of address data 

to convert to census tract information 

that could be used to satisfy geocoding 

requirements across multiple reporting 

regimes including 1071. 


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621 Id. at 46. 

622As explained above, the Bureau understands 

that CRA allows reporting of a census tract based 

on the address or location where the proceeds of the 

credit will be principally applied. The Bureau also 

believes that CRA reporting on this data point is 

reasonably flexible, and a financial institution 

would be able to coordinate the two compliance 

regimes to report the same census tract. 

The SBREFA Panel recommended 

that the Bureau seek comment on the 

feasibility and ease of using existing 

Federal services to geocode addresses in 

order to determine census tract for 1071 

reporting purposes (such as what is 

offered by the FFIEC for use in reporting 

HMDA data).621

Stakeholders commenting on the 

SBREFA Outline explained that 

financial institutions do not currently 

collect census tract information unless 

they need to report it as a CDFI, or for 

CRA or HMDA. Some commenters 

stated that they use the free FFIEC tool 

for geocoding, though one commenter 

pointed out that this service does not 

allow batch processing. One commenter 

requested that financial institutions be 

given a safe harbor if the tool used 

provides an incorrect coding. The 

comments, like the SER feedback, did 

not suggest a problem with the waterfall 

approach in the SBREFA Outline. There 

were concerns about proceeds locations 

not having addresses, and proceeds 

addresses being unknown to the 

financial institution, but the waterfall 

would allow them to simply use another 

address. One commenter stated that not 

requiring a specific type of address 

would help avoid burdening financial 

institutions. Another commenter stated 

that it had no reason to ask applicants 

about the proceeds address, and one 

requested that the Bureau make clear 

that a financial institution has no 

obligation to ask about the proceeds or 

headquarters address if it does not do so 

now. Several commenters stated that 

allowing use of the proceeds address 

was helpful, and would further section 

1071’s purposes and reduce burden by 

allowing use of the same data as 

reported under CRA. Two commenters 

stated that the Bureau should align this 

data point with the CRA, and one of 

these, a community development 

organization, stated that the CRA 

method for reporting census tract was 

easier than the HMDA method. This 

commenter provided statistical evidence 

suggesting that the CRA method also 

yielded more complete data than the 

HMDA method. 

Proposed Rule 

The Bureau is proposing 

§ 1002.107(a)(13) to require financial 

institutions to collect and report the 

census tract data point using a 

‘‘waterfall’’ approach, which closely 

aligns with the Bureau’s proposal under 

consideration in the SBREFA Outline. 

The proposed rule would require a 

financial institution to collect and 

report the census tract in which is 

located: (i) The address or location 

where the proceeds of the credit applied 

for or originated will be or would have 

been principally applied; or (ii) If the 

information in (i) is unknown, the 

address or location of the main office or 

headquarters of the applicant; or (iii) If 

the information in both (i) and (ii) is 

unknown, another address or location 

associated with the applicant. In 

addition, the proposed rule would 

require that the financial institution also 

indicate which one of the three types of 

addresses or locations listed in (i), (ii), 

or (iii) the census tract is based on. 

Although the proposed rule does not 

specifically require it, the Bureau 

assumes that financial institutions or 

their vendors would generally use a 

geocoding tool to convert the 

appropriate address to a census tract 

number. 

The Bureau believes that its proposed 

reporting method for the census tract 

data point leverages existing industry 

information collection practices and 

would result in useful information to 

further section 1071’s purposes while 

avoiding imposing much additional 

burden on financial institutions. The 

waterfall method in the proposed 

regulation would achieve these goals by 

allowing a financial institution to report 

an address it already has, with no 

further investigation; allowing a 

financial institution to avoid further 

investigation when it is unsure about 

the nature of the address reported; and 

allowing CRA reporters to report the 

same address for 1071 as they do for 

CRA; 622 while also increasing the 

likelihood of the proceeds address being 

reported. The Bureau considers the 

census tract of the proceeds address to 

be particularly useful for both the fair 

lending and business and community 

development purposes of 1071. 

First, the proposed approach would 

require a financial institution to report 

the census tract of the proceeds address 

if it is available, but would not require 

a financial institution to ask about it 

specifically. Financial institutions 

would be able to apply the waterfall 

approach to the addresses they are 

currently collecting; they would not be 

required to specifically ask for the 

proceeds or headquarters addresses. In 

addition, the proposed method would 

allow a financial institution to report 

that it is unsure about the nature of the 

address if it has no information as to the 

nature or function of the business 

address it possesses. This provision 

should address potential concerns about 

reporters spending time on complex, 

fact-specific questions and 

unintentionally misreporting this data 

point when financial institution staff 

have to determine what kind of address 

they are reporting based on insufficient 

information. The Bureau believes that 

this option would be particularly 

helpful if the application were denied or 

withdrawn early in the application 

process before the nature of any address 

provided by the applicant is clear. 

Proposed comment 107(a)(13)–1 

would provide general instructions on 

using the waterfall reporting method, 

with examples for guidance. The Bureau 

believes that this comment would 

facilitate compliance and seeks 

comment on whether any additional 

instructions or examples would be 

useful. 

Proposed comment 107(a)(13)–2 

would explain that a financial 

institution complies with proposed 

§ 1002.107(a)(13) by identifying the 

appropriate address or location and the 

type of that address or location in good 

faith, using appropriate information 

from the applicant’s credit file or 

otherwise known by the financial 

institution. The comment would also 

make clear that a financial institution is 

not required to investigate beyond its 

standard procedures as to the nature of 

the addresses or locations it collects. 

The Bureau believes that this guidance 

strikes the right balance by allowing 

flexibility in reporting, and also 

requiring appropriate good faith 

compliance in exercising that flexibility, 

thereby yielding quality data. 

Proposed comment 107(a)(13)–3 

would explain that pursuant to 

proposed § 1002.107(c)(1), a financial 

institution shall maintain procedures 

reasonably designed to collect 

applicant-provided information, which 

includes at least one address or location 

for an applicant for census tract 

reporting. However, the comment would 

further explain that if a financial 

institution is nonetheless unable to 

collect or otherwise determine any 

address or location for an application, 

the financial institution reports that the 

census tract information is ‘‘not 

provided by applicant and otherwise 

undetermined.’’ Based on the Bureau’s 

understanding of how financial 

institutions currently define an 

application under their internal 

procedures, the Bureau believes it is 

highly unlikely that a financial 

institution would not obtain some type 

of address for the applicant. 


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623Proposed comment 112(c)(1)–1 would explain 

that ‘‘this safe harbor provision does not extend to 

a financial institution’s failure to provide the 

correct census tract number for a covered 

application on its small business lending 

application register, as required by 

§ 1002.107(a)(13), because the FFIEC or Bureau 

geocoding tool did not return a census tract for the 

address provided by the financial institution. In 

addition, this safe harbor provision does not extend 

to a census tract error that results from a financial 

institution entering an inaccurate address into the 

FFIEC or Bureau geocoding tool.’’ 

624ECOA section 704B(e)(2)(E). 

625According to U.S. Census 2017 SUSB data, 

there are 5,976,761 firms with fewer than 500 

employees (which will be used, for this purpose, as 

a rough proxy for a ‘‘small business’’); those firms 

collectively have 6,512,802 establishments (i.e., 

locations). This means that, at most, approximately 

9 percent of firms with fewer than 500 employees 

could have more than one location. See U.S. Census 

Bureau, 2017 SUSB Annual Datasets by 

Establishment Industry, https://www.census.gov/ 

programs-surveys/susb/data/tables.html (last 

visited Aug. 27, 2021). According to the U.S. 

Census Bureau’s Non-employer Statistics, there are 

25,701,671 non-employer firms (regardless of 

revenue size). Non-employer firms account for 

fewer than 4 percent of all sales, though, and the 

vast majority are sole proprietorships. While not 

impossible, the Bureau believes it is very unlikely 

that non-employer firms would have more than one 

location. See U.S. Census Bureau, All Sectors: 

Nonemployer Statistics by Legal Form of 

Organization and Receipts Size Class for the U.S., 

States, and Selected Geographies: 2017 (2017), 

https://data.census.gov/cedsci/table?q=

NONEMP2017.NS1700NONEMP&tid=

NONEMP2017.NS1700NONEMP&hidePreview=

true. 

Nonetheless, the Bureau is proposing to 

permit financial institutions to report 

this data point using the ‘‘not provided 

by applicant and otherwise 

undetermined’’ response in order to 

facilitate compliance in those rare 

instances when the financial institution 

does not have the data requested. The 

reference in the comment to proposed 

§ 1002.107(c)(1) would make clear, 

however, that a financial institution 

must maintain procedures reasonably 

designed to collect at least one address. 

As with the previous comment, the 

Bureau believes that this comment 

would strike the right balance by 

facilitating compliance and also 

emphasizing the requirement to collect 

appropriate data. 

The Bureau is proposing a safe harbor 

in § 1002.112(c)(1), which would state 

that an incorrect entry for census tract 

is not a violation of ECOA or subpart B 

if the financial institution obtained the 

census tract by correctly using a 

geocoding tool provided by the FFIEC or 

the Bureau. Proposed comment 

107(a)(13)–4 would cross-reference that 

provision.623 See the section-by-section 

analysis of proposed § 1002.112(c)(1) 

below for additional discussion of this 

safe harbor. 

The Bureau notes that section 1071’s 

description of the census tract data 

point refers to the census tract for the 

applicant’s ‘‘principal place of 

business.’’ 624 The Bureau considers the 

waterfall approach in proposed 

§ 1002.107(a)(13) to be a reasonable 

interpretation of the undefined statutory 

term ‘‘principal place of business,’’ 

which the Bureau understands not to 

have a standard definition, and thus 

believes to be ambiguous. First, the 

Bureau believes that the address or 

location of the main office or 

headquarters of the applicant fits easily 

into one of the common meanings of 

‘‘principal place of business.’’ In 

addition, the Bureau expects that, 

generally, the address where the loan 

proceeds will be applied will also be the 

main office or headquarters address.625

The primary exception to this principle 

would be in the case of credit intended 

for purchase, construction/, or 

refinancing of real estate; under these 

circumstances, the Bureau reasonably 

interprets the term ‘‘principal place of 

business’’ to mean, in essence, the 

principal location for business activities 

relating to the extension of credit at 

issue. Although ‘‘another address or 

location associated with the applicant’’ 

may not always be the principal place 

of business of the applicant, the Bureau 

considers this information to be the 

financial institution’s best option for 

reporting data on the principal place of 

business when the nature of a location 

is unknown. 

In the alternative, section 1071 

authorizes the Bureau to include any 

‘‘additional data that the Bureau 

determines would aid in fulfilling the 

purposes of [section 1071].’’ The Bureau 

has determined that requiring reporting 

of the proceeds address would aid in 

fulfilling both the fair lending and 

business and community development 

purposes of section 1071 by providing 

more useful information on the location 

of the credit activity for fair lending 

analysis and understanding where the 

business and community development 

is occurring. Requiring reporting of 

another address or location associated 

with the applicant when both the 

proceeds address and the main office or 

headquarters address are not available 

would provide location data when 

otherwise none would be present, thus 

also aiding in fulfilling both the fair 

lending and business and community 

development purposes of section 1071 

by providing more useful information 

on the location of the lending for fair 

lending analysis and understanding 

where the business and community 

development is likely occurring. In 

addition, requiring data on the nature of 

the address reported would aid in 

fulfilling both the fair lending and 

business and community development 

purposes of section 1071 by facilitating 

accurate analyses of the data reported. 

Also, in the alternative, the Bureau 

believes it would be appropriate to use 

its exception authority under 704B(g)(2) 

to provide that financial institutions 

would not report the ‘‘main office or 

headquarters address’’ in certain 

situations because the Bureau believes 

that the proceeds address and ‘‘another 

address or location associated with the 

applicant’’ would carry out the purposes 

of section 1071 more appropriately than 

requiring the main office or 

headquarters address in every situation. 

As discussed above, some SERs 

explained that they generally collect the 

main office address of the small 

business, which for sole proprietorships 

will often be a home address, and are 

generally not aware of the proceeds 

address. The Bureau’s proposed 

waterfall approach accommodates this 

situation by allowing financial 

institutions to report census tract using 

the address that they have. In regard to 

SERs’ concerns about the potential 

burden of geocoding addresses to obtain 

census tract, the Bureau notes that there 

does not appear to be a viable 

alternative to collecting and reporting 

the statutorily required census tract data 

without geocoding. While several SERs 

are already geocoding applicants’ 

addresses, some SERs were concerned 

about the burden associated with 

geocoding for HMDA and one expressed 

a preference for the CRA method of 

geocoding, as did several other 

stakeholders. Accordingly, the Bureau 

seeks comment on the difference 

between geocoding for HMDA and for 

CRA, and any specific advantages or 

disadvantages associated with 

geocoding under either method. In 

regard to a Federal government tool 

capable of batch processing for 

geocoding of addresses, the Bureau is 

considering the utility of such a tool. 

The Bureau notes that the proposed rule 

would provide a safe harbor for use of 

such a Bureau tool, if created, as well as 

for the currently existing FFIEC tool. As 

the SBREFA Panel recommended, the 

Bureau seeks comment on the feasibility 

and ease of using existing Federal 

services to geocode addresses in order to 

determine census tract for 1071 

reporting purposes (such as what is 

offered by the FFIEC for use in reporting 

HMDA data). 

The Bureau seeks comment on its 

proposed approach to the census tract 

data point. In addition to the specific 

requests for input above, the Bureau 

notes that the waterfall method is 

intended to allow CRA reporters to 


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626ECOA section 704B(e)(2)(F). 

627SBREFA Outline at 31. 

628SBREFA Panel Report at 29. 629 Id. at 46. 

provide the same data for both reporting 

regimes, but requests comment on 

whether the proposed method would 

achieve this goal and, if not, whether 

and how this data point should be 

further coordinated with CRA. 

107(a)(14) Gross Annual Revenue 

Background 

Section 1071 requires financial 

institutions to collect and report ‘‘the 

gross annual revenue of the business in 

the last fiscal year of the . . . applicant 

preceding the date of the 

application.’’ 626

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated that it was considering proposing 

that financial institutions report the 

gross annual revenue of the applicant 

during its last fiscal year.627 The Bureau 

stated that if a financial institution 

verifies gross annual revenue and bases 

its credit decision on that amount, the 

financial institution would report the 

verified amount. If the financial 

institution does not verify gross annual 

revenue, it would report the amount 

provided by the applicant. 

Many SERs indicated that they collect 

gross annual revenue information, 

although they differed in how much 

they seek to verify this information.628

Several SERs requested clarification 

regarding how gross annual revenue 

would be reported for startups and other 

young businesses. A few SERs stated 

that they do not capture gross annual 

revenue at all or collect it only in 

limited circumstances. One of these 

SERs stated that collecting gross annual 

revenue would be challenging; others 

suggested they could likely estimate 

gross annual revenue based on 

information they do collect. 

Several SERs explained that they 

collect gross annual revenue using 

different methods and forms of 

verification for different types of credit. 

SERs advocated for allowing gross 

annual revenue to be reported as 

provided by the applicant, without an 

obligation for the financial institution to 

verify that information. A few SERs 

suggested that applicants often cannot 

provide accurate gross annual revenue 

information, although one SER 

suggested that in its experience 

applicants are generally able to provide 

reasonable estimates of gross annual 

revenue. Several SERs preferred 

reporting ranges rather than precise 

values. Several SERs also remarked that 

most businesses take advantage of tax 

filing extensions and thus typically do 

not have complete financial information 

for the prior year until many months 

later, and asked how that situation 

should be addressed when requesting 

applicants’ gross annual revenue for the 

prior fiscal year. 

The SBREFA Panel recommended 

that, in light of SER feedback supporting 

the Bureau’s proposal under 

consideration to not require financial 

institutions to verify gross annual 

revenue information, the Bureau 

proceed with that approach in the 

proposal. The SBREFA Panel also 

recommended that the Bureau explore 

the timing of tax and revenue reporting 

and seek comment in the proposal on 

how that timing can best be coordinated 

with the collection and reporting of this 

data point.629

The Bureau also received feedback 

from other stakeholders. Although one 

stakeholder commented that gross 

annual revenue is a consistent measure, 

simple to define, and easily computed, 

other stakeholders were concerned 

about the complexity and difficulty of 

reporting a specifically defined revenue 

number. One stakeholder stated that 

gross annual revenue was difficult to 

precisely define given differences in 

accounting and tax practices both across 

and within business subsectors. Two 

commenters suggested that reporting 

this data point would be complicated by 

the question of whether a business uses 

cash flow or accrual accounting. Other 

stakeholders requested the reporting of 

revenue ranges rather than specific 

values, and one of these commenters 

suggested that reporting a specific 

number may discourage some borrowers 

from applying. Another stakeholder 

explained that sometimes an application 

is denied or withdrawn before the 

revenue information is collected. One 

stakeholder stated that allowing 

flexibility in the collection and 

reporting of this data point would be 

very important. 

With regard to whether the revenue of 

affiliates is included in the gross annual 

revenue they collect and whether that 

information is used for underwriting 

purposes, stakeholders reported that 

some collect this information and some 

do not, depending on the application 

and specific product. One commenter 

stated that it does not collect such 

information unless the affiliate will be 

liable on the loan. Two stakeholders 

stated that the Bureau must require 

inclusion of affiliate revenue to make 

sure that a given business truly is small. 

Many stakeholders stated that they 

generally verify the income information 

using profit and loss statements, taxes, 

bank statements, and ‘‘third-party 

technology solutions.’’ Some stated that 

they do not verify revenue information 

for specific products, such as credit 

cards, and that sometimes it is difficult 

to verify the revenue of a particular 

applicant, as tax information can be 

complex or dated. Stakeholders 

overwhelmingly supported the Bureau’s 

proposal under consideration not to 

require verification of revenue, and one 

stakeholder objected to requiring the 

reporting of verified information even 

when the lender has verified the 

revenue. 

Stakeholders also expressed concern 

about collecting gross annual revenue 

for start-ups and very small businesses 

that might not have useable or clear 

information. One stakeholder explained 

that its members may obtain and rely on 

applicant bank statements for a 

specified time period, and so should be 

permitted to extrapolate annual revenue 

based on partially reported revenue. 

Proposed Rule 

Proposed § 1002.107(a)(14) would 

require reporting of the gross annual 

revenue of the applicant for its 

preceding full fiscal year prior to when 

the information is collected. The Bureau 

is proposing to require reporting of a 

specific value for gross annual 

revenue—rather than a range, for which 

some SERs and stakeholders expressed 

a preference—to simplify the reporting 

of gross annual revenue information for 

financial institutions and because it 

believes that a precise value would be 

more useful for 1071 data users, 

including the Bureau. 

Consistent with the SBREFA Panel’s 

recommendation and feedback from 

SERs and other stakeholders, proposed 

comment 107(a)(14)–1 would clarify 

that a financial institution need not 

verify gross annual revenue information 

provided by the applicant to comply 

with proposed § 1002.107(a)(14). The 

proposed comment would explain that 

the financial institution may rely on 

statements of or information provided 

by the applicant in collecting and 

reporting gross annual revenue. The 

proposed comment would also state, 

however, that if the financial institution 

verifies the gross annual revenue 

provided by the applicant it must report 

the verified information. The Bureau 

believes that a requirement to verify 

gross annual revenue could be 

operationally difficult for many 

financial institutions, particularly in 

situations in which the financial 

institution does not collect gross annual 


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630SBREFA Outline at 35. 

revenue currently. The Bureau also does 

not believe, at this time, that such a 

requirement is necessary in fulfilling 

either of section 1071’s statutory 

purposes. However, the Bureau does 

believe that reporting verified revenue 

when the financial institution already 

possesses that information would not be 

operationally difficult, and would 

enhance the accuracy of the information 

collected. 

Proposed comment 107(a)(14)–1 

would also provide specific language 

that a financial institution could use to 

ask about an applicant’s gross annual 

revenue and would explain that a 

financial institution could rely on the 

applicant’s answer. The Bureau believes 

this language would facilitate 

compliance for financial institutions 

that currently do not collect gross 

annual revenue, collect it only in 

limited circumstances, or would 

otherwise find its collection 

challenging, as some SERs and other 

stakeholders suggested. 

Overall, the Bureau believes that this 

approach in proposed comment 

107(a)(14)–1—clarifying that a financial 

institution need not verify applicantprovided gross annual revenue 

information, and providing language 

that a financial institution may use to 

ask for such information—should 

reduce the complexity and difficulty of 

collecting gross annual revenue 

information that some SERs and 

stakeholders expressed concern about. 

The Bureau believes that situations 

could arise in which the financial 

institution has identified that an 

applicant is a small business for the 

purposes of proposed § 1002.106(b) 

through, for example, an initial 

screening question asking whether the 

applicant’s gross annual revenue is 

below $5 million, but then the specific 

gross annual revenue amount could not 

be collected. Therefore, the Bureau is 

proposing comment 107(a)(14)–2, which 

would first clarify that pursuant to 

proposed § 1002.107(c)(1), a financial 

institution shall maintain procedures 

reasonably designed to collect 

applicant-provided information, 

including the gross annual revenue of 

the applicant. The proposed comment 

would then state that if a financial 

institution is nonetheless unable to 

collect or determine the specific gross 

annual revenue of the applicant, the 

financial institution reports that the 

gross annual revenue is ‘‘not provided 

by applicant and otherwise 

undetermined.’’ The Bureau believes 

that permitting this reporting flexibility 

would reduce the complexity and 

difficulty of reporting gross annual 

revenue information, particularly when 

an application has been denied or 

withdrawn early in the process and the 

gross annual revenue could not be 

collected. 

Proposed comment 107(a)(14)–3 

would clarify that a financial institution 

is permitted, but not required, to report 

the gross annual revenue for the 

applicant that includes the revenue of 

affiliates as well. The proposed 

comment would state that, for example, 

if the financial institution does not 

normally collect information on affiliate 

revenue, the financial institution reports 

only the applicant’s revenue and does 

not include the revenue of any affiliates 

when it has not collected that 

information. The Bureau believes that 

permitting, but not requiring, a financial 

institution to include the revenue of 

affiliates will carry out the purposes of 

section 1071 while reducing undue 

burden on financial institutions in 

collecting gross annual revenue 

information. Proposed comment 

107(a)(14)–3 would conclude by 

explaining that in determining whether 

the applicant is a small business under 

proposed § 1002.106(b), a financial 

institution may rely on an applicant’s 

representations regarding gross annual 

revenue, which may or may not include 

affiliates’ revenue. The Bureau notes 

that proposed comment 106(b)–3 would 

follow the same approach to affiliate 

revenue for purposes of determining 

whether an applicant is a small business 

under proposed § 1002.106(b). The 

Bureau believes that this operational 

equivalence between proposed 

§ 1002.107(a)(14) and proposed 

§ 1002.106(b) would facilitate 

compliance and enhance the 

consistency of 1071 data. 

As mentioned above, some SERs 

suggested they might be able to estimate 

gross annual revenue using information 

that they now collect, and one 

stakeholder suggested that it could 

extrapolate annual revenue based on 

partially reported revenue. The Bureau 

does not currently believe that 

estimation or extrapolation would be 

likely to result in sufficiently accurate 

data for reporting under proposed 

§ 1002.107(a)(14). For example, a 

seasonal business’s bank statements for 

its busy season would likely yield an 

inflated gross annual revenue when 

extrapolated to a full year. In addition, 

the Bureau believes that the language 

presented in proposed comment 

107(a)(14)–1 would provide a 

manageable method for collecting full 

gross annual revenue when a financial 

institution does not do so now. 

Nonetheless, the Bureau seeks comment 

on whether financial institutions should 

be permitted to estimate or extrapolate 

gross annual revenue from partially 

reported revenue or other information, 

and how such estimation or 

extrapolation would be carried out. The 

Bureau also notes that estimation or 

extrapolation of gross annual revenue is 

sufficient for the purposes of 

determining small business status under 

proposed § 1002.106(b), subject to the 

requirement under proposed comment 

107(a)(14)–1 that a financial institution 

must report verified gross annual 

revenue information if available. 

The Bureau seeks comment on its 

proposed approach to the gross annual 

revenue data point, as well as the 

specific requests for comment above. As 

the SBREFA Panel recommended, the 

Bureau also seeks comment on how the 

timing of tax and revenue reporting can 

best be coordinated with the collection 

and reporting of gross annual revenue. 

In addition, the Bureau seeks comment 

on the effect of cash flow versus accrual 

accounting on reporting of gross annual 

revenue. 

107(a)(15) NAICS Code 

ECOA section 704B(e)(2)(H) 

authorizes the Bureau to require 

financial institutions to compile and 

maintain ‘‘any additional data that the 

Bureau determines would aid in 

fulfilling the purposes of [section 

1071].’’ The Bureau is proposing in 

§ 1002.107(a)(15) to require that 

financial institutions collect and report 

an applicant’s 6-digit NAICS code. The 

Bureau believes that 6-digit NAICS code 

data would aid in fulfilling the purposes 

of section 1071, as explained below. 

As described above, the SBA 

customizes its size standards on an 

industry-by-industry basis using 1,057 

6-digit NAICS codes. The first two digits 

of a NAICS code broadly capture the 

industry sector of a business. The third 

digit captures the industry’s subsector, 

the fourth captures the industry group, 

the fifth captures the industry code, and 

the sixth captures the national industry. 

The NAICS code thus becomes more 

specific as digits increase and the 6-digit 

code is the most specific. In its SBREFA 

Outline, the Bureau stated that it was 

considering proposing that financial 

institutions collect and report NAICS 

code as an important metric for fair 

lending analysis (allowing separation of 

dissimilar types of businesses to limit 

misinterpretations of the data) and 

assessing community development 

impacts (allowing better measurement 

of community development impact).630

As described in detail in the sectionby-section analysis of proposed 

§ 1002.106(b) above, SERs and other 


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631SBREFA Panel Report at 31. 

632 Id. at 46. 

stakeholders expressed concern about 

the difficulties in determining the 

appropriate NAICS code for businesses 

and in applying the NAICS-based 

standards in determining whether a 

business loan applicant is a small 

business.631 In addition, several SERs 

stated that correctly classifying an 

applicant’s NAICS code can be difficult, 

as the business may change over time, 

codes may have overlapping definitions, 

small businesses often do not know 

their NAICS code or may operate in 

multiple NAICS sectors, and 

classifications may be prone to human 

error. Another SER noted that NAICS 

codes classifications could be subject to 

change based on SBA rulemaking, and 

thus financial institutions would need 

to track such developments. Other SERs 

stated that the 2-digit NAICS code is 

significantly less complex and prone to 

less human error than the SBA 

definition using 6-digit NAICS codes. 

The SBREFA Panel recommended 

that the Bureau continue to explore 

ways to minimize burden on both the 

small financial institutions collecting 

NAICS code information as well as the 

small business applicants who need to 

provide it, for example the possibility of 

collecting the 2–NAICS code rather than 

the 6-digit code.632

Proposed § 1002.107(a)(15) would 

require financial institutions to collect 

and report a 6-digit NAICS code 

appropriate for the applicant’s business. 

Proposed comment 107(a)(15)–1 would 

provide general background on NAICS 

codes and would state that a financial 

institution complies with proposed 

§ 1002.107(a)(15) if it uses the NAICS 

codes in effect on January 1 of the 

calendar year covered by the small 

business lending application register 

that it is reporting. Proposed comment 

107(a)(15)–2 would clarify that, when a 

financial institution is unable to collect 

or determine the applicant’s NAICS 

code, it reports that the NAICS code is 

‘‘not provided by applicant and 

otherwise undetermined.’’ 

The Bureau is also proposing that 

financial institutions be permitted to 

rely on NAICS codes obtained from the 

applicant or certain other sources, 

without having to verify that 

information itself. Specifically, 

proposed comment 107(a)(15)–3 would 

clarify that, consistent with proposed 

§ 1002.107(b), a financial institution 

may rely on applicable applicant 

information or statements when 

compiling and reporting the NAICS 

code and would provide an example of 

an applicant providing a financial 

institution with the applicant’s tax 

return that includes the applicant’s 

reported NAICS code. Proposed 

comment 107(a)(15)–4 would provide 

that a financial institution may rely on 

a NAICS code obtained through the 

financial institution’s use of business 

information products, such as company 

profiles or business credit reports, 

which provide the applicant’s NAICS 

code. 

The Bureau believes that NAICS 

codes would considerably aid in 

fulfilling both section 1071’s fair 

lending purpose and its business and 

community development purpose, even 

if having NAICS code is not necessary 

for determining whether an applicant is 

a small business under the Bureau’s 

proposed alternative size standard. The 

Bureau believes that capturing 6-digit 

NAICS codes in the 1071 data would 

facilitate enforcement of fair lending 

laws. For example, financial institutions 

often designate certain industries as 

high-risk, such as industries that have 

high rates of businesses leaving the 

market or that deal primarily in cash 

transactions. The 6-digit NAICS codes 

would help ensure that users are 

comparing applicants with similar 

profiles, thereby controlling for factors 

that might provide non-discriminatory 

explanations for disparities in credit 

and pricing decisions. Moreover, NAICS 

codes would be useful for identifying 

business and community development 

needs and opportunities of small 

businesses, which may differ widely 

based on industry, even controlling for 

other factors. For example, 6-digit 

NAICS codes would help data users 

identify industries where small 

businesses face challenges accessing 

credit and understand how small 

businesses in different industries use 

credit. Furthermore, disclosing NAICS 

codes would provide for consistency 

and compatibility with other public 

datasets related to small business 

lending activity, which generally use 

NAICS codes. This ability to synthesize 

1071 data with other datasets would 

help the public use the data in ways that 

advance both the business and 

community development and fair 

lending purposes of section 1071. 

The Bureau believes that collecting 

the full 6-digit NAICS code (as opposed 

to the 2-digit sector code) would better 

enable the Bureau and other 

stakeholders to drill down and identify 

whether disparities arise at a sector 

level or more specifically at a U.S. 

National Industry level and would also 

enable the collection of better 

information on the specific types of 

businesses that are accessing, or 

struggling to access, credit. For example, 

a wide variety of businesses, including 

those providing car washes, footwear 

and leather goods repair, and nail 

salons, all fall under the 2-digit sector 

code 81: Other Services (except Public 

Administration). Without 6-digit NAICS 

codes, all of these business types would 

be combined into one analysis, 

potentially masking different 

characteristics and different outcomes 

across these business types. 

The Bureau recognizes that, under its 

proposal, all financial institutions 

subject to reporting would need to gain 

familiarity with the NAICS code system, 

refer to NAICS classifications for all 

relevant applications, and report NAICS 

codes to the Bureau. To address 

commenter concerns related to the 

complexity of determining a correct 

NAICS code, the Bureau is proposing (1) 

a safe harbor to indicate that an 

incorrect NAICS code entry is not a 

violation of subpart B if the first two 

digits of the NAICS code are correct and 

the financial institution maintains 

procedures reasonably adapted to 

correctly identify the subsequent four 

digits (see proposed § 1002.112(c)(2)); 

(2) permitting a financial institution to 

rely on applicable applicant information 

or statements when compiling and 

reporting the NAICS code (see proposed 

comment 107(a)(15)–3); and (3) 

permitting a financial institution to rely 

on a NAICS code obtained through the 

financial institution’s use of business 

information products, such as company 

profiles, business credit reports, or 

NAICS identification tools (see 

proposed comment 107(a)(15)–4). The 

proposed NAICS-specific safe harbor 

would be available to financial 

institutions in addition to the general 

bona fide error exemption under 

proposed § 1002.112(b). See the sectionby-section analysis of proposed 

§ 1002.112(c)(2) below for a detailed 

discussion of the proposed safe harbor. 

The Bureau seeks comment on its 

proposal to collect 6-digit NAICS codes 

together with the safe harbor described 

in proposed § 1002.112(c)(2). The 

Bureau also seeks comment on whether 

requiring a 3-digit NAICS code with no 

safe harbor would be a better 

alternative. 

107(a)(16) Number of Workers 

Background 

ECOA section 704B(e)(2)(H) 

authorizes the Bureau to require 

financial institutions to compile and 

maintain ‘‘any additional data that the 

Bureau determines would aid in 

fulfilling the purposes of [section 

1071].’’ The Bureau believes that data 

providing the number of persons 


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633 Id. at 31. 

634 Id. at 46. 635See 13 CFR 121.106(a). 

working for a small business applicant 

would aid in fulfilling the business and 

community development purpose of 

section 1071. These data would allow 

users to better understand the job 

maintenance and creation that small 

business credit is associated with and 

help track that aspect of business and 

community development. 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated that it was considering proposing 

that financial institutions collect and 

report the number of employees of the 

applicant. The Bureau stated that it was 

considering proposing that if the 

financial institution verifies the number 

of employees provided by the applicant, 

the financial institution would report 

the verified number. On the other hand, 

if the financial institution does not 

verify the number of employees, it 

would report the number provided by 

the applicant. 

Many SERs indicated that they do not 

collect number of employees.633 One of 

these SERs stated that they do not 

support the inclusion of this data point 

in an eventual 1071 rule, although they 

could collect this information. Several 

SERs suggested that there could be 

particular complexities in accurately 

capturing this information, particularly 

regarding how part-time and seasonal 

employees and contractors should be 

counted. Some SERs stated that they 

collect number of employees but do not 

verify that information. 

The SBREFA Panel recommended 

(with respect to both the time in 

business and number of employees data 

points), that if these data points become 

part of the proposal, the Bureau 

continue to explore ways to minimize 

the burden to small financial 

institutions of collecting and reporting 

these data points.634

A large majority of industry 

stakeholders commenting on the 

SBREFA Outline opposed the inclusion 

of any of the discretionary data points, 

including number of employees. One 

trade association stated that this data 

point would frustrate small business 

applicants, particularly if they have to 

apply full-time employee calculation 

formulas. Several stakeholders 

discussed the difficulty of defining a 

number of employees data point, 

suggesting that complex rules would be 

necessary for how to count part-time 

and seasonal employees, as well as 

contractors. Another commenter 

suggested that verifying this information 

would be extremely difficult. Industry 

commenters also explained that most 

financial institutions do not collect this 

information now, and several pointed 

out that these data are not useful for 

evaluating credit risk. Another stated 

that number of employees is not a 

meaningful figure across industries, 

given the use of contractors and parttime employees. One commenter 

pointed out that the many sole 

proprietorships and non-employee firms 

mean that this number will often be 

zero. One financial institution stated 

that it does collect this information 

now, but does not verify it. 

Community groups were strongly in 

favor of including a number of 

employees data point. One group stated 

that the number of employees data 

would help provide a greater 

understanding of microbusinesses, 

typically defined in terms ranging from 

less than five to ten employees, one or 

more of whom is the owner. Another 

suggested that the Bureau collect the 

total number of employees and number 

of owners separately, which it said 

would avoid the problem found in PPP 

data where owners mistakenly reported 

themselves as employees. This same 

commenter stated that user testing and 

guidance would be necessary to ensure 

that the number of employees is 

reported accurately and consistently. 

However, one community development 

fund that supported the collection of the 

other discretionary data points opposed 

collection of the number of employees. 

This stakeholder stated that there is 

little research support for direct job 

creation/retention as the primary impact 

of small business assistance, and that 

the scholarly consensus suggests the 

economic impacts of small firms are 

related to their capacity to improve local 

entrepreneurial networks and create 

ecosystems that are desired and sought 

out by bigger firms. The commenter 

then stated that by having covered 

financial institutions report on job 

counts, the Bureau would be implicitly 

reinforcing the inaccurate notion that 

employment is a key dimension of small 

business assistance. 

Proposed Rule 

Proposed § 1002.107(a)(16) would 

require financial institutions to report 

the number of non-owners working for 

the applicant. Although some SERs and 

other stakeholders questioned the 

usefulness of employment data for 

1071’s purposes, the Bureau continues 

to believe that this information would 

be particularly helpful in fulfilling the 

business and community development 

purpose of section 1071. Information on 

the number of workers should help data 

users assess community development 

impacts by allowing better 

understanding of the number of jobs 

affected. In addition, in order to avoid 

mistaken over-reporting of workers, the 

proposed regulation would make clear 

that only non-owners would be reported 

as workers. 

Proposed comment 107(a)(16)–1 

would discuss the collection of the 

number of workers. As discussed above, 

several SERs and other stakeholders 

suggested that there could be particular 

complexities in accurately capturing 

this information, particularly regarding 

how part-time and seasonal workers and 

contractors should be counted. To help 

alleviate these concerns, the proposed 

comment would state that in collecting 

the number of workers from an 

applicant, the financial institution 

would explain that full-time, part-time, 

and seasonal workers, as well as 

contractors who work primarily for the 

applicant, would be counted as workers, 

but principal owners of the business 

would not. If asked, the financial 

institution would explain that 

volunteers would not be counted as 

workers. This treatment of part-time, 

seasonal, contract, and volunteer 

workers would follow the SBA’s method 

for counting employees,635 with minor 

simplifications. The Bureau believes 

that this guidance would allow financial 

institutions that originate SBAguaranteed loans to use the same 

number of workers data for both the 

loan guarantee program and 1071 

reporting. The Bureau seeks comment 

on whether further modifications to the 

number of workers data point are 

needed to facilitate this operational 

simplification. 

Proposed comment 107(a)(16)–1 

would also explain that workers for 

affiliates of the applicant would only be 

counted if the financial institution were 

also collecting the affiliates’ gross 

annual revenue. The Bureau believes 

that this coordination between these 

two data points would facilitate 

compliance and yield more consistent 

data. 

The proposed comment would further 

explain that the financial institution 

may rely on statements of or 

information provided by the applicant 

in collecting and reporting number of 

workers, but if the financial institution 

verifies the number of workers provided 

by the applicant, it must report the 

verified information. This guidance 

would address the concerns raised 

about the difficulty of verification. The 

Bureau believes that allowing financial 

institutions to rely on applicantVerDate Sep<11>2014 19:49 Oct 07, 2021 Jkt 256001 PO 00000 Frm 00114 Fmt 4701 Sfmt 4702 E:\FR\FM\08OCP2.SGM 08OCP2

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636SBREFA Outline at 34–35. 

637SBREFA Panel Report at 31. 638 Id. at 46. 

provided information will sufficiently 

safeguard accuracy such that the 

resulting data will aid in fulfilling the 

purposes of 1071. However, the Bureau 

also believes that reporting the verified 

number of workers when the financial 

institution already possesses that 

information would not be operationally 

difficult, and would enhance the 

accuracy of the information collected. 

Finally, proposed comment 

107(a)(16)-1 would also provide sample 

language that a financial institution 

could use to ask about the number of 

workers, if it does not collect the 

number of workers by another method. 

The Bureau understands that, as 

discussed above, financial institutions 

engaged in SBA lending are already 

collecting employee information to 

apply the SBA’s size standards. 

However, SBA lending represents only 

a small percentage of the small business 

credit market. Given the difficulty for 

financial institutions in potentially 

requesting this information of all 

applicants, the Bureau provides the 

sample language in the proposed 

comment, which implements the 

simplified version of the SBA definition 

presented earlier in the proposed 

comment. The Bureau believes that 

permitting use of the model question 

would facilitate compliance. The 

Bureau seeks comment on this method 

of collection, and on the specific 

language proposed. 

Proposed comment 107(a)(16)–2 

would first clarify that a financial 

institution shall maintain procedures 

reasonably designed to collect 

applicant-provided information, 

including the number of workers of the 

applicant. The proposed comment 

would then state that if a financial 

institution is nonetheless unable to 

collect or determine the number of 

workers of the applicant, the financial 

institution reports that the number of 

workers is ‘‘not provided by applicant 

and otherwise undetermined.’’ The 

Bureau believes that this approach 

would reduce the burden on financial 

institutions that are unable to collect or 

determine the number of workers of the 

applicant, particularly when an 

application is denied or withdrawn 

early in the application process. 

The Bureau seeks comment on its 

proposed approach to the number of 

workers data point, as well as on the 

specific requests for comment above. 

The Bureau also seeks comment on 

whether financial institutions collect 

information about the number of 

workers from applicants using 

definitions other than the SBA’s, and 

how the collection of this data point 

could best be integrated with those 

collections of information. 

107(a)(17) Time in Business 

Background 

ECOA section 704B(e)(2)(H) 

authorizes the Bureau to require 

financial institutions to compile and 

maintain ‘‘any additional data that the 

Bureau determines would aid in 

fulfilling the purposes of [section 

1071].’’ The Bureau believes that data 

providing the time in business of a 

small business applicant would aid in 

fulfilling both the business and 

community development and fair 

lending purposes of section 1071, as 

explained below. 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated that it was considering proposing 

to include as a discretionary data point 

time in business of the applicant (as of 

the date of application), expressed in 

years, or months if less than one year.636

The Bureau stated that time-in-business 

information could help explain 

differences in underwriting risk among 

small business applicants and thus 

avoid misinterpretation of the section 

1071 dataset by distinguishing 

potentially riskier new businesses from 

less risky established businesses. Timein-business information could also 

provide a better measurement of 

community development effects, in 

terms of number of start-ups or other 

relatively new businesses seeking and 

obtaining financing. The Bureau stated 

that a financial institution may choose 

to verify the time in business provided 

by an applicant as part of its normal 

course of business. If the financial 

institution does not verify the time in 

business provided by the applicant, the 

financial institution would report the 

time in business provided by the 

applicant. If the financial institution 

does verify the time in business 

provided by the applicant, it would 

report the verified information. 

Many SERs currently collect time-inbusiness information, explaining that 

time-in-business information is valuable 

for measuring risk in underwriting.637

However, some SERs collect this 

information on their application forms 

or keep it as part of a general narrative 

in a credit memorandum about the 

application, but do not retain it as a 

specific data field in their systems. 

Some SERs capture time-in-business 

information by recording the year, or 

month/day/year, of incorporation; 

others capture it as the number of years 

the applicant has been in business. One 

SER stated that they do not support the 

inclusion of time in business as a data 

point in the NPRM, although they could 

collect this information. 

Several SERs stated that they use 

State incorporation filings to determine 

or verify time in business. Some SERs 

explained that they view a business as 

a start-up if it has been in business 

either less than two or less than three 

years. For one SER, time in business is 

relevant for the specific line of business 

for which financing is sought, rather 

than the length of time the applicant has 

been in some business generally. 

Another SER suggested that the Bureau 

use ranges for time-in-business 

reporting, similar to a suggested method 

for collecting and reporting gross annual 

revenue. 

The SBREFA Panel recommended 

(with respect to both the time in 

business and number of employees data 

points), that if these data points become 

part of the proposal, the Bureau 

continue to explore ways to minimize 

the burden to small financial 

institutions of collecting and reporting 

these data points.638

Community group stakeholders 

supported the inclusion of the time-inbusiness data point, stating that startups and younger businesses often face 

challenges accessing credit, and having 

time-in-business data would be 

especially critical to exploring gender 

and racial disparities and fostering 

equitable access to affordable loan 

capital. Two industry stakeholders 

supported inclusion, stating that time in 

business is a key underwriting factor 

and could explain credit disparities. 

One community group stakeholder 

agreed, stating that time in business and 

other discretionary data points must be 

accounted for so credit providers 

cannot, as they said HMDA reporters 

have done for years, hide behind data 

not collected as justification for their 

lending disparities. 

A large majority of industry 

stakeholders opposed all discretionary 

data points, including time in business. 

One industry stakeholder focused 

specifically on the time-in-business data 

point, stating that there are too many 

variables in the data point to be easily 

and clearly defined for collection. That 

stakeholder provided examples of 

complications in collection of the data 

point, such as (1) the time the entity has 

existed or existed under the current 

ownership, (2) how much experience 

the owners have had in this business or 

closely related fields, (3) if the 


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639See, e.g., Small Bus. Admin., 2018 Small 

Business Profiles, at 1–2 (2018), https://

www.sba.gov/advocacy/2018-small-businessprofiles-states-and-territories?utm_

medium=email&utm_source=govdelivery; John 

Haltiwanger et al., Who Creates Jobs? Small versus 

Large versus Young, The Review of Economics and 

Statistics, 95(2), at 347–61 (2013), https://

direct.mit.edu/rest/article/95/2/347/58100/WhoCreates-Jobs-Small-versus-Large-versus-Young. 

640For example, a Federal Reserve Bank of New 

York report, based on data from the 2016 Small 

Business Credit Surveys that included information 

from 12 Federal Reserve Banks, provides statistics 

on how start-ups are less likely to receive credit as 

compared to mature businesses, even with 

comparable credit scores. See Fed. Reserve Bank of 

N.Y., Small Business Credit Survey: Report on Startup Firms, at iv (2017), https://www.newyorkfed.org/ 

medialibrary/media/smallbusiness/2016/SBCSReport-StartupFirms-2016.pdf. 

641 J.P. Morgan Chase, Small Business Owner 

Race, Liquidity and Survival (July 2020), https://

www.jpmorganchase.com/content/dam/jpmc/ 

jpmorgan-chase-and-co/institute/pdf/institutesmall-business-owner-race-report.pdf. 

642Of a limited sample of application forms the 

Bureau reviewed from a variety of types of financial 

institutions, a majority of forms contained some 

type of time-in-business field. When the Bureau 

experience is in closely related fields 

how close must they be, (4) whether the 

entity has history but is being purchased 

using loan funds by ownership with 

little experience, and (5) whether 

industry should report how long the 

existing management structure has been 

in place. It then requested that the 

Bureau drop this data point or make the 

options very simple. 

Industry stakeholders reported 

different ways that they currently 

collect and use time-in-business 

information. Stakeholders report that 

the information is not universally 

collected and may be collected using 

different formats, even within a single 

institution. A trade association 

suggested that reporting time in 

business should be optional. One 

stakeholder said that it verifies the data 

using Secretary of State or other thirdparty information, and that an applicant 

that does not meet the time-in-business 

requirement for a product may be 

automatically rejected. Two other 

stakeholders stated that they focus on 

the overall experience of the ownership 

or management, rather than the age of 

the business. 

Proposed Rule 

Proposed § 1002.107(a)(17) would 

require a financial institution to collect 

and report the time the applicant has 

been in business, described in whole 

years, as relied on or collected by the 

financial institution. Proposed 

§ 1002.107(a)(17) would require the data 

be reported in whole years, rather than 

ranges of time, as suggested by a SER 

and a stakeholder, because a financial 

institution would have a definite 

number of years if it collects this 

information, and the Bureau believes 

that would make the data more granular 

and useful. 

The Bureau continues to believe that 

time in business would likely advance 

both statutory purposes of 1071. 

Research illustrates, and commenters 

have emphasized, the role that start-ups 

and new businesses play in the business 

ecosystem and in promoting important 

community development aims, such as 

creating new jobs.639 Financial 

institutions often have special credit 

policies regarding start-ups and other 

young businesses, including whether 

the institution will extend credit to 

start-ups at all, the type(s) of credit 

products start-ups and new businesses 

can apply for, and the amount of credit 

for which they can be approved. Studies 

generally show that start-ups experience 

greater difficulty in accessing credit,640

and one community group stakeholder 

made the same point. In addition, one 

study suggested that Black- and 

Hispanic-owned firms are underrepresented in terms of firms that have 

external financing, have lower levels of 

liquidity in their early years, and have 

higher rates of exiting the market within 

the first three years.641 In regard to the 

facilitation of fair lending analyses, 

time-in-business data would provide a 

useful control in fair lending analyses to 

identify similarly situated applicants 

and eliminate some false positives, 

while also allowing monitoring of 

potential disparate treatment of 

minority- and women-owned start-ups 

and relatively new businesses. In 

addition, many SERs reported that timein-business information is valuable for 

measuring risk in underwriting, and 

they did not limit this observation to 

start-ups and new businesses. The 

Bureau also believes that collecting 

time-in-business information generally, 

rather than in the first few years, would 

provide useful data for understanding 

the relative maturity of small businesses 

in different communities. 

The Bureau believes that time-inbusiness data would benefit data users, 

including financial institutions, 

policymakers, and communities. Such 

data would allow data users to better 

identify the proportion of small 

businesses seeking credit that are startups or relatively new businesses, the 

type(s) of credit that is offered and 

provided to start-ups and newer 

businesses, the geographic makeup of 

those businesses, the types of financial 

institutions that are reaching such 

businesses, and where communities 

might focus business development 

efforts. The data may also aid 

policymakers in addressing issues 

impacting the growth of small start-ups. 

The data, particularly as to unmet 

demand, could help interested financial 

institutions identify lending 

opportunities to reach more start-ups 

and new businesses, promoting both 

business and community development. 

In addition, as some of the 

stakeholders suggested, the Bureau 

believes that the inclusion of time-inbusiness data could help mitigate the 

concerns of data misrepresentation. For 

example, data indicating that a small 

business applicant is a start-up with 

little experience or financial history 

could provide a legitimate business 

explanation for why the financial 

institution denied the application or 

approved it for less credit than was 

applied for. Therefore, time-in-business 

data may help to explain the credit 

decision made by a financial institution, 

which may address any concerns of data 

misrepresentation. 

The Bureau is not proposing to make 

this data field optional, as suggested by 

a trade association. The Bureau is 

concerned that, if it were to do so, very 

little data would be reported. 

As explained above, the SBREFA 

Panel recommended that the Bureau 

explore ways to minimize the burden on 

small financial institutions of collecting 

and reporting the time-in-business data 

point. SERs and industry stakeholders 

reported different ways that they 

currently collect and use time-inbusiness information, reporting that the 

information is not universally collected 

and may be collected using different 

formats, even within a single institution. 

The Bureau believes that by allowing 

financial institutions to report the time 

in business that they relied on in 

making their credit decisions, the 

burden on the financial institution (of 

any size) could be reduced, while the 

resulting information would still aid in 

fulfilling the purposes of section 1071. 

Although industry commenters 

overwhelmingly expressed concern 

about the burden associated with any 

discretionary data points as a general 

matter, the Bureau believes that time-inbusiness information can be made 

relatively easy for financial institutions 

to collect if the Bureau leverages the 

methods currently in use by individual 

financial institutions. As the SERs and 

stakeholders explained, many or 

possibly most financial institutions 

already collect time-in-business 

information for underwriting purposes 

or to determine general eligibility, 

though the format and specific 

information collected vary by 

institution 642 and may relate to owner 


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looked at lenders that have undergone a small 

business fair lending exam from the Bureau, a few 

(but not the majority) maintained data on time in 

business in their existing systems. Examples of 

time-in-business reference points include time of 

formation or registration, time under current 

ownership, and history of financial records, 

recorded as either month and year or just year. 

or management experience rather than 

business longevity. Therefore, the 

Bureau is proposing that financial 

institutions that collect time-in-business 

information be required to report the 

time in business that they relied on (or 

would have relied on, for applications 

that were withdrawn prior to a credit 

decision) in making the credit decision. 

If the financial institution collects timein-business information that reflects 

owner or management experience rather 

than business longevity, the financial 

institution would report time in 

business using the number it collects 

and relies on reflecting owner or 

management experience. If the financial 

institution relies on verified 

information, it reports the verified 

information. If it does not verify the 

information, it reports the unverified 

information. Requiring reporting of time 

in business ‘‘relied on’’ should avoid 

requiring financial institutions that 

collect some version of this information 

to change their practices or add extra 

procedures to collect the Bureau’s 

version of time in business. In addition, 

the Bureau believes that collecting the 

actual information used by the financial 

institution to evaluate the application 

would aid fair lending analysis. 

Furthermore, the Bureau does not 

believe that the variations among the 

data collected by individual institutions 

would interfere with the business and 

community development purpose of 

1071, because the information would 

still be useful in identifying new 

ownership, management, and 

businesses that may face credit 

challenges. 

In addition to providing some 

financial institutions with the ability to 

avoid duplicative information gathering 

by simply reporting the time in business 

relied on, the proposed data point 

would also facilitate compliance for 

financial institutions that do not 

currently collect or rely on time-inbusiness information by allowing them 

to use the specific question provided in 

proposed comment 107(a)(17)–4, as 

explained below. The Bureau believes 

that permitting these two proposed 

methods for collection and reporting 

should accommodate different 

institutional practices and reduce 

operational difficulty for financial 

institutions in reporting this data point. 

In order to clarify the potential use of 

the two methods (relied on or collected) 

of reporting for the time-in-business 

data point, proposed comment 

107(a)(17)–1 would provide guidance on 

how to report using either method. The 

proposed comment would explain that, 

regardless of which method is used, the 

financial institution must report the 

time in business in whole years, or 

indicate if a business has not begun 

operating yet, or has been in operation 

for less than a year. The Bureau believes 

that this reporting format would inform 

data users of the maturity of the 

applicant businesses and signal which 

are start-ups. 

Proposed comment 107(a)(17)–1 

would further explain that when the 

financial institution relies on an 

applicant’s time in business as part of a 

credit decision, it reports the time in 

business relied on in making the credit 

decision. However, the comment would 

further explain that proposed 

§ 1002.107(a)(17) would not require the 

financial institution to rely on an 

applicant’s time in business in making 

a credit decision. The Bureau believes 

that this guidance would make clear 

that the requirement to collect and 

report applicants’ time in business 

would not change the financial 

institution’s internal business practices. 

A financial institution would only be 

required to report the time in business 

relied on in making the credit decision 

if the financial institution actually does 

rely on an applicant’s time in business 

in making its credit decision. 

Proposed comment 107(a)(17)–1 

would also explain that the financial 

institution may rely on statements or 

information provided by the applicant 

in collecting and reporting time in 

business; however, pursuant to 

proposed § 1002.107(b), if the financial 

institution verifies the time in business 

provided by the applicant, it must 

report the verified information. This 

guidance would apply whether the 

financial institution relies on the time in 

business in making its credit decision or 

not, although the Bureau believes that 

verification would be very uncommon 

when the financial institution is not 

relying on the information. The Bureau 

believes that allowing financial 

institutions to rely on applicantprovided information will sufficiently 

safeguard accuracy such that the 

resulting data will aid in fulfilling the 

purposes of 1071. However, the Bureau 

also believes that reporting the verified 

time in business when the financial 

institution already possesses that 

information would not be operationally 

difficult, and would enhance the 

accuracy of the information collected 

and ensure that it was the information 

that the financial institution relied on in 

making the credit decision. 

Proposed comment 107(a)(17)–2 

would provide instructions on how to 

report the time in business relied on in 

making the credit decision. The 

proposed comment would state that 

when a financial institution evaluates 

an applicant’s time in business as part 

of a credit decision, it reports the time 

in business relied on in making the 

credit decision. For example, the 

proposed comment would further 

explain, if the financial institution relies 

on the number of years of experience 

the applicant’s owners have in the 

current line of business, the financial 

institution reports that number of years 

as the time in business. Similarly, if the 

financial institution relies on the 

number of years that the applicant has 

existed, the financial institution reports 

the number of years that the applicant 

has existed as the time in business. 

Proposed comment 107(a)(17)–2 would 

then conclude by stating that a financial 

institution reports the length of business 

existence or experience duration that it 

relies on in making its credit decision, 

and is not required to adopt any 

particular definition of time in business. 

The Bureau believes that this proposed 

comment would provide useful 

guidance on how a financial institution 

complies with § 1002.107(a)(17) when it 

relies on time in business and would 

help such financial institutions avoid 

unnecessary compliance difficulties by 

reporting information that they already 

possess. 

Proposed comment 107(a)(17)–3 

would state that a financial institution 

relies on an applicant’s time in business 

in making a credit decision if the time 

in business was a factor in the credit 

decision, even if it was not a dispositive 

factor. The comment would provide the 

example that if the time in business is 

one of multiple factors in the financial 

institution’s credit decision, the 

financial institution has relied on the 

time in business even if the financial 

institution denies the application 

because one or more underwriting 

requirements other than the time in 

business are not satisfied. The Bureau 

believes that this guidance would help 

financial institutions to understand how 

to comply correctly with proposed 

§ 1002.107(a)(17). 

Proposed comment 107(a)(17)–4 

would clarify that if the financial 

institution does not rely on time in 

business in considering an application, 

pursuant to proposed § 1002.107(c)(1) it 

shall still maintain procedures 

reasonably designed to collect 

applicant-provided information, which 


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643SBREFA Outline at 25–26. 

644SBREFA Panel Report at 26. 

includes the applicant’s time in 

business. The proposed comment would 

explain that in collecting time in 

business from an applicant, the 

financial institution complies with 

proposed § 1002.107(a)(17) by asking for 

the number of years that the applicant 

has been operating the business it 

operates now. The proposed comment 

would further explain that when the 

applicant has multiple owners with 

different numbers of years operating 

that business, the financial institution 

collects and reports the greatest number 

of years of any owner. As discussed 

above, the Bureau believes that 

providing this clear instruction on how 

to collect the time in business when a 

financial institution does not do so now 

would avoid the potential complications 

and difficulties described by the SERs 

and industry stakeholders in collecting 

this data point. In addition, the Bureau 

notes that, as would be made clear in 

proposed comment 107(a)(17)–1, a 

financial institution would not need to 

verify an applicant’s response to the 

inquiry. Proposed comment 107(a)(17)– 

4 would then conclude by making clear 

that the financial institution does not 

need to comply with the instruction if 

it collects and relies on the time in 

business by another method in making 

the credit decision. 

Proposed comment 107(a)(17)–5 

would explain that pursuant to 

proposed § 1002.107(c)(1) a financial 

institution shall maintain reasonable 

procedures to collect information 

provided by the applicant, which 

includes the time in business of the 

applicant, but if the financial institution 

is unable to collect or determine the 

time in business of the applicant, the 

financial institution reports that the 

time in business is ‘‘not provided by 

applicant and otherwise 

undetermined.’’ The Bureau believes 

that permitting use of this response 

would facilitate compliance, 

particularly in situations in which the 

application is denied or withdrawn 

early in the application process. 

The Bureau seeks comment on its 

proposed approach to this data point. 

The Bureau also seeks comment on 

whether time-in-business information 

may be less relevant or collectable for 

certain products or situations (such as 

retailer-branded credit cards acquired at 

point of sale) and whether reporting 

‘‘not applicable’’ should be allowed in 

those instances. In addition, the Bureau 

seeks comment on whether there should 

be an upper limit on time in business— 

for example, to allow reporting of ‘‘over 

20 years’’ for any applicant of that 

duration, rather than requiring reporting 

of a specific number of years. 

107(a)(18) Minority-Owned Business 

Status 

Background 

ECOA section 704B(b) requires 

financial institutions to inquire whether 

applicants for credit are minority-owned 

businesses and to maintain a record of 

the responses to that inquiry separate 

from the applications and 

accompanying information. Section 

704B(c) provides that applicants for 

credit may refuse to provide information 

requested pursuant to 704B(b). The 

Bureau is proposing § 1002.107(a)(18) to 

address how a financial institution 

would collect and report an applicant’s 

minority-owned business status. 

SBREFA Proposal Under Consideration 

and Feedback 

In the SBREFA Outline, the Bureau 

stated that it was considering proposing 

that financial institutions be permitted 

to collect and report minority-owned 

business status solely based on 

applicant self-reporting and that the 

Bureau was not considering requiring 

reporting based on visual observation 

and/or surname.643 The Bureau also 

stated that it was considering proposing 

that the right to refuse under ECOA 

section 704B(c) apply to the financial 

institution’s specific inquiries regarding 

minority-owned business status as well 

as women-owned status and the 

principal owners’ race, sex, and 

ethnicity 

Several SERs supported this approach 

and urged the Bureau to require 

collection and reporting of minorityowned business status based only on the 

information the applicant provides (i.e., 

self-reporting).644 SERs also expressed 

concerns about the difficulties and costs 

that may be associated with collecting 

minority-owned business status on 

some basis other than applicant selfreporting. For example, although many 

SERs indicated that they review some 

ownership information about applicants 

in order to obtain guarantees or for other 

reasons, most of those SERs said that 

they do not review the accrual of net 

profits and losses and some said that 

they do not review information related 

to who controls an applicant. One SER 

said that determining ownership is 

relatively straightforward, but the issue 

of control can be subjective. One SER 

said that it would not be able to 

determine who controlled an applicant 

and that an applicant would need to 

self-report that information. Another 

SER noted that some small business 

applicants do not have simple 

ownership structures. A different SER 

stated that some financial institutions 

do not meet in person with all of the 

owners of small business applicants. 

Other industry stakeholders providing 

feedback on the SBREFA Outline also 

supported collection and reporting of 

minority-owned business status based 

only on applicant self-reporting and 

noted several challenges with reporting 

this data point based on visual 

observation and/or surname. Some 

industry commenters stated that it 

would not be possible to report 

minority-owned business status based 

on visual observation and/or surname in 

at least some circumstances. Others 

expressed concerns about the cost and 

time required to do so. One industry 

commenter noted that the tracking of 

ownership and other information 

needed to report based on visual 

observation and/or surname would be 

laborious. Another commenter noted 

that some financial institutions do not 

obtain the information necessary to 

make the determinations that would 

underlie a visual observation 

requirement (i.e., information about 

ownership, control, etc.). One 

commenter specifically noted that the 

statute only requires financial 

institutions to ‘‘inquire’’ about minorityowned business status. Conversely, a 

community group opposed reporting 

based only on applicant self-reporting. 

Some commenters stated that 

financial institutions should not be 

required to collect or report this 

information at all, or that they should 

not be required to collect or report it in 

certain situations, such as when a trust 

or other entity owns or controls an 

applicant. 

Some SERs and a few other 

commenters said that the Bureau should 

create a tool or otherwise arrange for 

applicants to self-report, at least, 

demographic information (namely, 

minority-owned business status and 

women-owned business status as well 

as the ethnicity, race, and sex of 

principal owners) directly to the Bureau 

or to a third-party that maintains a 

database of such information. 

Some SERs were concerned that, if 

notified of their right to refuse, 

applicants may not provide protected 

demographic information, thus limiting 

the usefulness of 1071 data. One SER 

and several other commenters similarly 

agreed with the Bureau’s proposal under 

consideration to limit the right to refuse 

to applicants’ protected demographic 

information only. However, three 

commenters opined that the Bureau’s 

approach was too limited and that the 

right to refuse should apply to small 

business status as well as other data 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56473 

645 Id. at 45. 

646Proposed appendix G would include a similar 

requirement to notify applicants that they are not 

required to provide information regarding principal 

owners’ ethnicity, race, and sex and a similar 

prohibition on financial institutions requiring that 

applicants provide such information. 

647The Bureau seeks additional comment 

regarding foreign language forms and notices in the 

section-by-section analysis of proposed appendix E 

below. 

points. Several SERs requested that the 

Bureau provide sample language for use 

in any disclosure and collection forms 

in which an applicant’s right to refuse 

is stated, so that applicants understand 

why lenders are requesting protected 

demographic information and how the 

information will be used. Two SERs 

asked that the Bureau provide sample 

language in English as well as in other 

languages, such as Spanish. 

The SBREFA Panel recommended 

that the Bureau consider creating 

sample data collection forms that, to the 

extent possible, simply and clearly 

explain the information being requested 

for purposes of this data point. The 

SBREFA Panel recommended that the 

Bureau consider developing sample 

disclosure language that financial 

institutions may use to provide some 

context as to why applicants are being 

asked to provide protected demographic 

information, in order to encourage 

applicants to respond. It also said that 

the Bureau should additionally consider 

providing these sample data collection 

forms in other languages, such as 

Spanish.645

Proposed Rule 

Consistent with its approach during 

the SBREFA process, proposed 

§ 1002.107(a)(18) would require 

financial institutions to collect and 

report whether an applicant is a 

minority-owned business. Proposed 

§ 1002.107(a)(18) would also require 

financial institutions to collect and 

report whether minority-owned 

business status is being reported based 

on previously collected data pursuant to 

proposed § 1002.107(c)(2). It would also 

require that when the financial 

institution requests minority-owned 

business status from an applicant, the 

financial institution inform the 

applicant that the financial institution 

cannot discriminate on the basis of the 

applicant’s minority-owned business 

status, or on whether the applicant 

provides this information. Finally, 

proposed § 1002.107(a)(18) would refer 

to proposed appendix F for additional 

details regarding how financial 

institutions are required to collect and 

report minority-owned business status. 

Proposed appendix F would include a 

requirement that a financial institution 

inform an applicant that the applicant is 

not required to respond to the financial 

institution’s questions regarding the 

applicant’s minority-owned business 

status and women-owned business 

status, and a prohibition on financial 

institutions requiring applicants to 

provide this information.646 Consistent 

with the SBREFA Panel’s 

recommendation, proposed appendix E, 

which is a sample data collection form, 

would include a question about 

minority-owned business status and 

related information to assist applicants 

with responding to the question.647

Proposed comment 107(a)(18)–1 

would clarify that a financial institution 

would be required to ask an applicant 

if it is a minority-owned business for 

each covered application unless the 

financial institution is permitted to 

report minority-owned business status 

based on previously collected data. 

Additionally, the financial institution 

would be required to permit an 

applicant to refuse to answer the 

financial institution’s inquiry and to 

inform the applicant that it is not 

required to provide the information. The 

financial institution would report the 

applicant’s response, its refusal to 

answer the inquiry (such as when the 

applicant indicates that it does not wish 

to provide the requested information), 

or its failure to respond (such as when 

the applicant fails to submit a data 

collection form) to the inquiry. See 

proposed appendix F for additional 

instructions on how the Bureau 

proposes that financial institutions 

collect and report minority-owned 

business status. 

Proposed comment 107(a)(18)–2 

would explain that a financial 

institution must inform the applicant 

that the financial institution cannot 

discriminate on the basis of an 

applicant’s minority-owned business 

status or on whether the applicant 

provides the information. It would also 

clarify that a financial institution may 

combine this non-discrimination notice 

regarding minority-owned business 

status with the similar nondiscrimination notices that a financial 

institution is required to provide when 

requesting women-owned business 

status and a principal owner’s ethnicity, 

race, and sex if a financial institution 

requests minority-owned business 

status, women-owned business status, 

and/or a principal owner’s ethnicity, 

race, and sex in the same data collection 

form or at the same time. 

Proposed comment 107(a)(18)–3 

would explain how, pursuant to 

proposed § 1002.111(b), financial 

institutions must record an applicant’s 

response regarding minority-owned 

business status pursuant to proposed 

§ 1002.107(a)(18) separate from the 

application and accompanying 

information. This proposed comment 

would also provide examples of how 

responses could be recorded separately 

from the application and accompanying 

information. 

Proposed comment 107(a)(18)–4 

would state that pursuant to proposed 

§ 1002.107(c)(1), a financial institution 

shall maintain procedures reasonably 

designed to collect applicant-provided 

information, which includes the 

applicant’s minority-owned business 

status. However, if a financial 

institution does not receive a response 

to its inquiry, the financial institution 

would report that the applicant’s 

minority-owned business status is ‘‘not 

provided by applicant.’’ 

Proposed comment 107(a)(18)–5 

would state that notwithstanding 

proposed § 1002.107(b) (regarding 

verification of applicant-provided 

information), a financial institution 

would report the applicant’s response, 

its refusal to answer the inquiry, or its 

failure to respond to the inquiry 

pursuant to proposed § 1002.107(a)(18), 

even if the financial institution verifies 

or otherwise obtains an applicant’s 

minority-owned business status for 

other purposes. Moreover, as proposed 

in the instructions in appendix F, a 

financial institution would not be 

required or permitted to verify the 

applicant’s response to the financial 

institution’s inquiry pursuant to 

proposed § 1002.107(a)(18) regarding 

minority-owned business status. 

Proposed comment 107(a)(18)–6 

would clarify that a financial institution 

does not report minority-owned 

business status based on visual 

observation, surname, or any basis other 

than the applicant’s response to the 

inquiry that the financial institution 

makes to satisfy § 1002.107(a)(18) or, if 

the financial institution is permitted to 

report based on previously collected 

data, on the basis of the applicant’s 

response to the inquiry that the 

financial institution previously made to 

satisfy § 1002.107(a)(18). 

Proposed comment 107(a)(18)–7 

would clarify that a financial institution 

may report minority-owned business 

status based on previously collected 

data if the financial institution is 

permitted to do so pursuant to proposed 

§ 1002.107(c)(2) and its commentary. 

Consistent with its approach during 

the SBREFA process, the Bureau is not 

proposing that financial institutions 

collect or report minority-owned 


jspears on DSK121TN23PROD with PROPOSALS2
56474 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

648SBREFA Outline at 25–26. 

649SBREFA Panel Report at 26. 

business status based on visual 

observation, surname, or any method 

other than an applicant-provided 

response to a specific inquiry asked for 

purposes of proposed § 1002.107(a)(18). 

Similarly, the Bureau is not proposing 

that financial institutions be permitted 

or required to verify an applicant’s 

response. Although the Bureau is 

proposing that financial institutions 

collect and report a principal owner’s 

ethnicity and race based on visual 

observation and/or surname in certain 

circumstances, the Bureau believes that 

there would be additional complexities 

and difficulties with attempting to 

collect and report minority-owned 

business status based on visual 

observation and/or surname. Some of 

these additional difficulties arise 

because the financial institution may 

need to determine who controls the 

applicant as well as who owns the 

applicant and who realizes the net 

profits and losses. Other difficulties 

arise from the fact that the financial 

institution would need to know how 

each natural person it meets with in 

person fits into the ownership structure 

of the applicant as well as its control 

and profit structures. For example, it 

would not be sufficient to know 

whether a natural person is an owner. 

The financial institution also would 

need to know what percentage of the 

ownership interest and control the 

natural person held and, if that 

ownership was not more than 50 

percent, the institution would need to 

know who owned and controlled the 

remainder of the applicant. An 

additional complication, specific to this 

data point, arises when the financial 

institution is not able to visually 

observe absent owners. In these cases, 

the financial institution may not be able 

to determine if the business is a 

minority-owned business. Thus, even if 

a financial institution has an in-person 

meeting with one or more natural 

persons associated with an applicant, it 

may be difficult or impossible for the 

financial institution to determine if an 

applicant is a minority-owned business. 

The Bureau seeks comment on its 

proposed approach to this data point, 

including the proposed methods of 

collecting and reporting the data. The 

Bureau also requests comment on 

whether additional clarification 

regarding any aspect of this data point 

is needed. In particular, the Bureau 

seeks comment on whether applicants 

are likely to have difficulty 

understanding and determining the 

information they are being asked to 

provide and, if so, how the Bureau may 

mitigate such difficulties. 

107(a)(19) Women-Owned Business 

Status 

Background 

ECOA section 704B(b) requires 

financial institutions to inquire whether 

applicants for credit are women-owned 

businesses and to maintain a record of 

the responses to that inquiry separate 

from the applications and 

accompanying information. Section 

704B(c) provides that applicants for 

credit may refuse to provide information 

requested pursuant to 704B(b). The 

Bureau is proposing § 1002.107(a)(19) to 

address how a financial institution 

would collect and report an applicant’s 

women-owned business status. 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated that it was considering proposing 

that financial institutions be permitted 

to collect and report women-owned 

business status solely based on 

applicant self-reporting and that the 

Bureau was not considering requiring 

reporting based on visual observation 

and/or surname.648 The Bureau also 

stated that it was considering proposing 

that the right to refuse under ECOA 

section 704B(c) apply to the financial 

institution’s specific inquiries regarding 

minority-owned business status as well 

as women-owned status and the 

principal owners’ race, sex, and 

ethnicity. 

As with collecting and reporting 

minority-owned business status, several 

SERs supported this approach and 

urged the Bureau to require collection 

and reporting of women-owned 

business status based only on the 

information the applicant provides (i.e., 

self-reporting).649 SERs also expressed 

concerns about the difficulties and costs 

that may be associated with collecting 

women-owned business status on some 

basis other than applicant self-reporting. 

For example, although many SERs 

indicated that they review some 

ownership information about applicants 

in order to obtain guarantees or for other 

reasons, most of those SERs said that 

they do not review the accrual of net 

profits and losses and some said that 

they do not review information related 

to who controls an applicant. One SER 

said that determining ownership is 

relatively straightforward, but the issue 

of control can be subjective. One SER 

said that it would not be able to 

determine who controlled an applicant 

and that an applicant would need to 

self-report that information. Another 

SER noted that some small business 

applicants do not have simple 

ownership structures. A different SER 

stated that some financial institutions 

do not meet in person with all of the 

owners of small business applicants. 

As with collecting and reporting 

minority-owned business status, other 

industry stakeholders providing 

feedback on the SBREFA Outline also 

supported collection and reporting of 

women-owned business status based 

only on applicant self-reporting and 

noted several challenges with reporting 

this data point based on visual 

observation and/or surname. Some 

industry commenters stated that it 

would not be possible to report womenowned business status based on visual 

observation and/or surname in, at least, 

some circumstances. Others expressed 

concerns about the cost and time 

required to do so. One industry 

commenter noted that the tracking of 

ownership and other information 

needed to report based on visual 

observation and/or surname would be 

laborious. Another commenter noted 

that some financial institutions do not 

obtain the information necessary to 

make the determinations that would 

underlie a visual observation 

requirement (i.e., information about 

ownership, control, etc.). One 

commenter specifically noted that the 

statute only requires financial 

institutions to ‘‘inquire’’ about womenowned business status. Conversely, a 

community group opposed reporting 

based only on applicant self-reporting. 

Some commenters stated that 

financial institutions should not be 

required to collect or report this 

information at all, or that they should 

not be required to collect or report it in 

certain situations, such as when a trust 

or other entity owns or controls an 

applicant. 

Some SERs and a few other 

commenters said that the Bureau should 

create a tool or otherwise arrange for 

applicants to self-report, at least, 

demographic information (namely 

women-owned business status and 

minority-owned business status as well 

as the ethnicity, race, and sex of 

principal owners) directly to the Bureau 

or to a third-party that maintains a 

database of such information. 

Some SERs were concerned that, if 

notified of their right to refuse, 

applicants may not provide protected 

demographic information, thus limiting 

the usefulness of 1071 data. One SER 

and several other commenters similarly 

agreed with the Bureau’s proposal under 

consideration to limit the right to refuse 

to applicants’ protected demographic 

information only. However, three 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56475 

650 Id. at 45. 

651 Id. 

652 Id. 

commenters opined that the Bureau’s 

approach was too limited and that the 

right to refuse should apply to small 

business status as well as other data 

points. Several SERs requested that the 

Bureau provide sample language for use 

in any disclosure and collection forms 

in which an applicant’s right to refuse 

is stated, so that applicants understand 

why lenders are requesting protected 

demographic information and how the 

information will be used. Two SERs 

asked that the Bureau provide sample 

language in English as well as in other 

languages, such as Spanish. 

The SBREFA Panel recommended 

that the Bureau consider creating 

sample data collection forms that, to the 

extent possible, simply and clearly 

explain the information being requested 

for purposes of this data point.650 The 

SBREFA Panel recommended that the 

Bureau consider developing sample 

disclosure language that financial 

institutions may use to provide some 

context as to why applicants are being 

asked to provide protected demographic 

information, in order to encourage 

applicants to respond.651 It also 

recommended that the Bureau should 

consider providing these sample data 

collection forms in other languages, 

such as Spanish.652

Proposed Rule 

Consistent with its approach during 

the SBREFA process, proposed 

§ 1002.107(a)(19) would require 

financial institutions to collect and 

report whether an applicant is a womenowned business. Proposed 

§ 1002.107(a)(19) would also require 

financial institutions to collect and 

report whether women-owned business 

status is being reported based on 

previously collected data pursuant to 

proposed § 1002.107(c)(2). It would also 

require that when the financial 

institution requests women-owned 

business status from an applicant, the 

financial institution inform the 

applicant that the financial institution 

cannot discriminate on the basis of the 

applicant’s women-owned business 

status, or on whether the applicant 

provides this information. Finally, 

proposed § 1002.107(a)(19) would refer 

to proposed appendix F for additional 

details regarding how financial 

institutions are required to collect and 

report women-owned business status. 

Proposed appendix F would include a 

requirement that a financial institution 

inform an applicant that the applicant is 

not required to respond to the financial 

institution’s questions regarding the 

applicant’s women-owned business 

status and minority-owned business 

status, and a prohibition on financial 

institutions requiring applicants to 

provide this information. Consistent 

with the SBREFA Panel’s 

recommendation, proposed appendix E, 

which is a sample data collection form, 

would include a question about womenowned business status and related 

information to assist applicants with 

responding to the question. 

Proposed comment 107(a)(19)–1 

would clarify that a financial institution 

would be required to ask an applicant 

if it is a women-owned business for 

each covered application unless the 

financial institution is permitted to 

report women-owned business status 

based on previously collected data. 

Additionally, the financial institution 

would be required to permit an 

applicant to refuse to answer the 

financial institution’s inquiry and to 

inform the applicant that it is not 

required to provide the information. The 

financial institution would report the 

applicant’s response, its refusal to 

answer the inquiry (such as when the 

applicant indicates that it does not wish 

to provide the requested information), 

or its failure to respond (such as when 

the applicant fails to submit a data 

collection form) to the inquiry. See 

proposed appendix F for additional 

instructions on how the Bureau 

proposes that financial institutions 

collect and report women-owned 

business status. 

Proposed comment 107(a)(19)–2 

would explain that a financial 

institution must inform the applicant 

that the financial institution cannot 

discriminate on the basis of an 

applicant’s women-owned business 

status or on whether the applicant 

provides the information. It would also 

clarify that a financial institution may 

combine this non-discrimination notice 

regarding women-owned business status 

with the similar non-discrimination 

notices that a financial institution is 

required to provide when requesting 

minority-owned business status and a 

principal owner’s ethnicity, race, and 

sex if a financial institution requests 

minority-owned business status, 

women-owned business status, and/or a 

principal owner’s ethnicity, race, and 

sex in the same data collection form or 

at the same time. 

Proposed comment 107(a)(19)–3 

would explain how, pursuant to 

proposed § 1002.111(b), financial 

institutions must record an applicant’s 

response regarding women-owned 

business status pursuant to proposed 

§ 1002.107(a)(19) separate from the 

application and accompanying 

information. This proposed comment 

would also provide examples of how 

responses could be recorded separately 

from the application and accompanying 

information. 

Proposed comment 107(a)(19)–4 

would state that pursuant to proposed 

§ 1002.107(c)(1), a financial institution 

shall maintain procedures reasonably 

designed to collect applicant-provided 

information, which includes the 

applicant’s women-owned business 

status. However, if a financial 

institution does not receive a response, 

the financial institution would report 

that the applicant’s women-owned 

business status is ‘‘not provided by 

applicant.’’ 

Proposed comment 107(a)(19)–5 

would state that notwithstanding 

proposed § 1002.107(b) (regarding 

verification of applicant-provided 

information), a financial institution 

would report the applicant’s response, 

its refusal to answer the inquiry, or its 

failure to respond to the inquiry 

pursuant to proposed § 1002.107(a)(19), 

even if the financial institution verifies 

or otherwise obtains an applicant’s 

women-owned business status for other 

purposes. Moreover, as proposed in the 

instructions in appendix F, a financial 

institution would not be required or 

permitted to verify the applicant’s 

response to the financial institution’s 

inquiry pursuant to proposed 

§ 1002.107(a)(19) regarding womenowned business status. Thus, for 

example, under the principle articulated 

in proposed comment 107(a)(19)–5, a 

financial institution could not second 

guess an applicant’s decision to 

determine whether it is a women-owned 

business for purposes of proposed 

§ 1002.107(a)(19) based on the gender 

identity of the principal owners. The 

Bureau seeks comment on whether it 

would be useful to expressly codify this 

application of the principle in the 

commentary. 

Proposed comment 107(a)(19)–6 

would clarify that a financial institution 

does not report women-owned business 

status based on visual observation, 

surname, or any basis other than the 

applicant’s response to the inquiry that 

the financial institution makes to satisfy 

proposed § 1002.107(a)(19) or, if the 

financial institution is permitted to 

report based on previously collected 

data, on the basis of the applicant’s 

response to the inquiry that the 

financial institution previously made to 

satisfy proposed § 1002.107(a)(19). 

Proposed comment 107(a)(19)–7 

would clarify that a financial institution 

may report women-owned business 

status based on previously collected 


jspears on DSK121TN23PROD with PROPOSALS2
56476 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

653SBREFA Outline at 32. 

654SBREFA Panel Report at 29–30. 655SBREFA Outline at 32. 

data if the financial institution is 

permitted to do so pursuant to proposed 

§ 1002.107(c)(2) and its commentary. 

Consistent with its approach during 

the SBREFA process, the Bureau is not 

proposing that financial institutions 

collect or report women-owned business 

status based on visual observation, 

surname, or any method other than an 

applicant-provided response to a 

specific inquiry asked for purposes of 

proposed § 1002.107(a)(19). Similarly, 

the Bureau is not proposing that 

financial institutions be permitted or 

required to verify an applicant’s 

response. Although the Bureau is 

proposing that financial institutions 

collect and report a principal owner’s 

ethnicity and race based on visual 

observation and/or surname in certain 

circumstances, the Bureau believes that 

there would be additional complexities 

and difficulties with attempting to 

collect and report women-owned 

business status based on visual 

observation and/or surname. Some of 

these additional difficulties arise 

because the financial institution may 

need to determine who controls the 

applicant as well as who owns the 

applicant and who realizes the net 

profits and losses. Other difficulties 

arise from the fact that the financial 

institution would need to know how 

each natural person it meets with in 

person fits into the ownership structure 

of the applicant as well as its control 

and profit structures. For example, it 

would not be sufficient to know 

whether a natural person is an owner. 

The financial institution also would 

need to know what percentage of the 

ownership interest and control the 

natural person held and, if that 

ownership was not more than 50 

percent, the institution would need to 

know who owned and controlled the 

remainder of the applicant. An 

additional complication, specific to this 

data point, arises when the financial 

institution is not able to visually 

observe absent owners. In these cases, 

the financial institution may not be able 

to determine if the business is a womenowned business. Thus, even if a 

financial institution has an in-person 

meeting with one or more natural 

persons associated with an applicant, it 

may be difficult or impossible for the 

financial institution to determine if an 

applicant is a women-owned business. 

The Bureau seeks comment on its 

proposed approach to this data point, 

including the proposed methods of 

collecting and reporting the data. The 

Bureau also requests comment on 

whether additional clarification 

regarding any aspect of this data point 

is needed. In particular, the Bureau 

seeks comment on whether applicants 

are likely to have difficulty 

understanding and determining the 

information they are being asked to 

provide and, if so, how the Bureau may 

mitigate such difficulties. 

107(a)(20) Ethnicity, Race, and Sex of 

Principal Owners 

Background 

ECOA section 704B(e)(2)(G) requires 

financial institutions to compile and 

maintain certain information, including 

the race, sex, and ethnicity of an 

applicant’s principal owners. However, 

section 1071 does not set out what 

categories should be used when 

collecting and reporting this 

information. The Bureau is proposing 

§ 1002.107(a)(20) to address how a 

financial institution would collect and 

report the ethnicity, race, and sex of an 

applicant’s principal owners. See the 

section-by-section analysis of proposed 

§ 1002.102(o) above for a discussion of 

the definition of a principal owner. 

SBREFA Proposal Under Consideration 

and Feedback 

In the SBREFA Outline, the Bureau 

stated that it was considering proposing 

that financial institutions use the 

aggregate race, sex, and ethnicity 

categories from Regulation C when 

requesting that applicants provide race, 

sex, and ethnicity information of 

principal owners.653

SERs were generally supportive of 

aligning the race, sex, and ethnicity 

categories used for reporting 

demographic information about 

principal owners in 1071 with the 

aggregate categories used in Regulation 

C for HMDA.654 However, one SER 

stated that the Bureau should consider 

revisiting the use of male and female as 

categories for sex because gender is not 

binary. Additionally, some other 

stakeholders, including community 

groups and a trade association, were 

opposed to using the HMDA aggregate 

categories for reporting race and 

ethnicity. Generally, these commenters 

opposed the use of the aggregate 

categories because, they said, those 

categories could mask discrimination 

and do not provide sufficient detail or 

context. These commenters generally 

supported use of the HMDA 

disaggregated subcategories for 

reporting a principal owner’s race and 

ethnicity. 

Additionally, in the SBREFA Outline, 

the Bureau stated that it was 

considering proposing that the 

collection and reporting of a principal 

owner’s race, sex, and ethnicity be 

based solely on applicant self-reporting. 

The Bureau stated in the SBREFA 

Outline that it anticipated that requiring 

reporting based on visual observation 

and/or surname could create 

unwarranted compliance burdens in the 

context of small business lending, 

although the Bureau sought feedback on 

the potential challenges, costs, and 

benefits of implementing such a 

requirement. The Bureau also stated in 

the SBREFA Outline that it was 

considering developing a sample data 

collection form to assist industry in 

collecting this information and to 

communicate an applicant’s right to 

refuse to provide such information.655

SERs generally supported applicants’ 

self-reporting of principal owners’ race, 

sex, and ethnicity and strongly preferred 

that financial institutions not be 

required to report based on visual 

observation and/or surname. Some SERs 

said financial institutions should not be 

required to ‘‘guess’’ the race, sex, and 

ethnicity of principal owners, 

remarking, among other things, that 

doing so is both extremely difficult and 

ineffective, and that collecting 

demographic information based on 

visual observation makes staff 

uncomfortable. Another SER said that 

reporting demographic information 

based on visual observation and/or 

surname is likely to introduce both error 

and bias to the process. One SER stated 

that financial institutions do not always 

meet with all principal owners of a 

business in person and that financial 

institutions occasionally meet with a 

manager or officer who might not be a 

principal owner. Conversely, another 

SER stated that when relying on 

applicants to self-report demographic 

information, there are higher rates of 

non-FEFF responses in the business 

lending context compared to consumer 

residential lending. This SER suggested 

that the Bureau will need to account for 

this disparity. 

Other industry and trade association 

stakeholders that commented on the 

SBREFA Outline also generally 

supported applicants’ self-reporting of 

principal owners’ race, sex, and 

ethnicity and strongly preferred that 

financial institutions not be required to 

report this information based on visual 

observation and/or surname. Some of 

these commenters noted that some 

financial institutions might not know 

who a business’s principal owners are, 

might not collect the information 

necessary to determine who they are, or 

might not meet in person with principal 

owners. Others asserted that reporting 


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656For additional information related to SBREFA 

feedback on the right to refuse, see the section-bysection analyses of proposed § 1002.107(a)(18) and 

(19) above. 

657SBREFA Panel Report at 46. 

658While ECOA section 704B(e)(2)(G) uses ‘‘race, 

sex, and ethnicity,’’ the Bureau has reordered them 

to ‘‘ethnicity, race, and sex’’ for purposes of this 

proposal, so that they appear alphabetically and for 

consistency with how they appear in Regulation C. 

based on visual observation and/or 

surname increases the cost and time to 

process a small business loan, may 

result in inaccurate data, and may create 

awkward situations or customer 

disputes. One trade association argued 

that the statute only requires financial 

institutions to ‘‘inquire’’ about a 

principal owner’s race, sex, and 

ethnicity. However, two community 

groups stated that financial institutions 

should be permitted or required to 

report based on visual observation and/ 

or surname when an applicant does not 

provide the information, and a CDFI 

stated that financial institutions should 

be required to report race, sex, and 

ethnicity based on visual observation 

and/or surname only when an applicant 

does not provide the information and 

does not refuse to provide the 

information. 

Two industry commenters suggested 

that the Bureau create a tool or 

otherwise arrange for applicants to selfreport, at least, demographic 

information (namely minority-owned 

business status and women-owned 

business status as well as the race, sex, 

and ethnicity of principal owners) 

directly to the Bureau or to a third-party 

that maintains a database of such 

information. 

Some SERs were concerned that, if 

notified of their right to refuse, 

applicants may not provide protected 

demographic information, thus limiting 

the usefulness of 1071 data. One SER 

and several other commenters similarly 

agreed with the Bureau’s proposal under 

consideration to limit the right to refuse 

to applicants’ protected demographic 

information only. However, three 

commenters opined that the Bureau’s 

approach was too limited and that the 

right to refuse should apply to small 

business status as well as other data 

points. Several SERs requested that the 

Bureau provide sample language for use 

in any disclosure and collection forms 

in which an applicant’s right to refuse 

is stated, so that applicants understand 

why lenders are requesting protected 

demographic information and how the 

information will be used. Two SERs 

asked that the Bureau provide sample 

language in English as well as in other 

languages, such as Spanish. 

One trade association requested that 

reporting of a principal owner’s race, 

sex, and ethnicity not be required in 

certain situations, such as when a 

principal owner is a trust or another 

entity. 

Some SERs and other commenters 

requested that the Bureau develop a 

form to assist financial institutions with 

collecting the race, sex, and ethnicity of 

principal owners. One SER suggested 

developing a sample data collection 

form similar to the one used for HMDA 

data collection and including the same 

disclosures. One commenter noted that 

the use of a model form may increase 

the uniformity and consistency of 

reporting such demographic 

information. Another commenter 

suggested that any model form should 

include an explanation of why the 

financial institution is requesting the 

information and a statement of the 

applicant’s right to refuse to provide the 

information.656

The SBREFA Panel recommended 

that, in order to assist both small 

financial institutions and small business 

applicants, the Bureau consider creating 

sample data collection forms that, to the 

extent possible, simply and clearly 

explain the information being requested 

for purposes of this data point. The 

Panel also recommended that the 

Bureau additionally consider providing 

such sample data collection forms in 

other languages, such as Spanish.657

Proposed Rule 

Proposed § 1002.107(a)(20) would 

require financial institutions to collect 

and report the ethnicity, race, and 

sex 658 of the applicant’s principal 

owners as well as whether this 

information is being reported based on 

previously collected data pursuant to 

proposed § 1002.107(c)(2). It would also 

require financial institutions to report 

whether the ethnicity and race are being 

reported by the financial institution on 

the basis of visual observation or 

surname. Proposed § 1002.107(a)(20) 

would require financial institutions to 

collect and report ethnicity, race, and 

sex data as prescribed in proposed 

appendix G. Proposed appendix G 

would include a requirement that a 

financial institution inform an applicant 

that the applicant is not required to 

respond to the financial institution’s 

questions regarding its principal 

owners’ ethnicity, race or sex and would 

also include a prohibition on financial 

institutions requiring applicants to 

provide this information. Proposed 

§ 1002.107(a)(20) would also require 

that when the financial institution 

requests ethnicity, race, and sex 

information from an applicant, the 

financial institution inform the 

applicant that the financial institution 

cannot discriminate on the basis of a 

principal owner’s ethnicity, race, or sex, 

or on whether the applicant provides 

this information. Consistent with the 

SBREFA Panel’s recommendation, the 

Bureau is proposing a sample data 

collection form that financial 

institutions could use to collect 

ethnicity, race, and sex information. See 

proposed appendix E. 

Proposed Rule—Collecting Ethnicity, 

Race, and Sex, In General 

Proposed comment 107(a)(20)–1 

would clarify how a financial institution 

collects ethnicity, race, and sex 

information. It would state that unless a 

financial institution is permitted to 

report ethnicity, race, and sex 

information based on previously 

collected data pursuant to proposed 

§ 1002.107(c)(2), a financial institution 

must ask an applicant to report its 

principal owners’ ethnicity, race, and 

sex for each covered application and 

that the financial institution must 

permit an applicant to refuse to answer 

the financial institution’s inquiry. It 

would require financial institutions to 

inform the applicant that it is not 

required to provide the information. 

Proposed comment 107(a)(20)–1 would 

further clarify that the financial 

institution must report the applicant’s 

responses, its refusal to answer the 

inquiries, or its failure to respond to the 

inquiries, and explain that in certain 

situations, discussed in proposed 

comments 107(a)(20)–7 and –8 and in 

appendix G, a financial institution may 

also be required to report one or more 

principal owners’ ethnicity and race 

(but not sex) based on visual 

observation and/or surname. Proposed 

comment 107(a)(20)–1 would crossreference proposed appendix G for 

additional instructions. 

Proposed comment 107(a)(20)–2 

would explain that a financial 

institution must inform the applicant 

that the financial institution shall not 

discriminate on the basis of a principal 

owner’s ethnicity, race, or sex or on 

whether the applicant provides that 

information. It would also clarify that a 

financial institution may combine this 

non-discrimination notice with the 

similar non-discrimination notices that 

a financial institution would be required 

to provide when requesting minorityowned business status and womenowned business status if a financial 

institution requests minority-owned 

business status, women-owned business 

status, and/or a principal owner’s 

ethnicity, race, and sex in the same data 

collection form or at the same time. 


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659Off. of Mgmt. & Budget, Revisions to the 

Standards for the Classification of Federal Data on 

Race and Ethnicity, 62 FR 58782, 58782–90 (Oct. 

30, 1997) (OMB Federal Data Standards on Race 

and Ethnicity). 

660See id. 

661See id. 

Proposed comment 107(a)(20)–3 

would explain how, pursuant to 

proposed § 1002.111(b), financial 

institutions must record applicants’ 

responses regarding a principal owner’s 

ethnicity, race, and sex pursuant to 

§ 1002.107(a)(20) separate from the 

application and accompanying 

information. This proposed comment 

would also provide examples of how 

responses could be recorded separately 

from the application and accompanying 

information. 

Proposed comment 107(a)(20)–4 

would clarify that a financial institution 

would be required to maintain 

procedures reasonably designed to 

collect applicant-provided information, 

including the ethnicity, race, and sex of 

an applicant’s principal owners 

pursuant to proposed § 1002.107(c)(1). 

However, if a financial institution is 

nonetheless unable to collect the 

principal owners’ ethnicity, race, or sex 

from the applicant and if the financial 

institution is not required to report the 

principal owners’ ethnicity and race 

based on visual observation and/or 

surname, the financial institution would 

report that the principal owner’s 

ethnicity, race, or sex (as applicable) is 

‘‘not provided by applicant.’’ 

Proposed comment 107(a)(20)–12 

would clarify that a financial institution 

would neither be required nor permitted 

to verify the ethnicity, race, or sex 

information that the applicant provides 

for purposes of proposed 

§ 1002.107(a)(20), even if the financial 

institution verifies or otherwise obtains 

the ethnicity, race, or sex of the 

applicant’s principal owners for other 

purposes. Thus, for example, under the 

principle articulated in proposed 

comment 107(a)(20)–12, a financial 

institution could not second guess an 

applicant’s decision to provide sex 

information for the applicant’s principal 

owners for purposes of § 1002.107(a)(20) 

based on the gender identity of the 

principal owners. The Bureau solicits 

comment on whether it would be useful 

to expressly codify this application of 

the principle in the commentary. 

Additionally, the proposed comment 

would explain that, if an applicant 

refuses to respond to the inquiry 

pursuant to proposed § 1002.107(a)(20) 

or fails to respond to this inquiry, the 

financial institution would report that 

the applicant declined to provide the 

information or did not respond to the 

inquiry (as applicable), unless the 

financial institution is required to report 

ethnicity and race based on visual 

observation and/or surname. Finally, 

the proposed comment would explain 

that the financial institution does not 

report ethnicity, race, or sex pursuant to 

proposed § 1002.107(a)(20) based on 

information that the financial institution 

collects for other purposes. 

Proposed comment 107(a)(20)–5 

would explain that generally an 

applicant determines its principal 

owners and decides whether to provide 

information about principal owners. It 

would further state that, nonetheless, a 

financial institution may be required to 

report ethnicity and race information 

based on visual observation and/or 

surname and may need to determine if 

a natural person with whom the 

financial institution meets in person is 

a principal owner. It would explain how 

a financial institution determines who is 

a principal owner in the event that the 

financial institution may be required to 

report ethnicity and race information 

based on visual observation and/or 

surname. It would also provide 

examples of how the financial 

institution can make that determination 

and note that the financial institution is 

not required to verify any responses 

regarding whether a natural person is a 

principal owner. 

The Bureau seeks comment on these 

general aspects of collecting and 

reporting principal owners’ ethnicity, 

race, and sex, including comments on 

the challenges that financial institutions 

may have implementing them. 

Proposed Rule—Collecting Ethnicity 

and Race Using Aggregate Categories 

and Disaggregated Subcategories 

The Bureau is proposing that financial 

institutions request principal owners’ 

ethnicity and race using both aggregate 

categories as well as disaggregated 

subcategories. 

With respect to ethnicity data 

collection, the Bureau is proposing to 

use the same aggregate categories (i.e., 

Hispanic or Latino and Not Hispanic or 

Latino) and disaggregated subcategories 

as are used in Regulation C. With 

respect to race data collection, the 

Bureau is proposing to use the same 

aggregate categories as are used in 

Regulation C: American Indian or 

Alaska Native; Asian; Black or African 

American; Native Hawaiian or Other 

Pacific Islander; and White. Regulation 

C also has disaggregated subcategories 

for the Asian race category and the 

Native Hawaiian or Other Pacific 

Islander race category. In addition, with 

respect to the American Indian or 

Alaska Native race category, Regulation 

C invites an applicant to provide the 

name of a principal or enrolled tribe. 

Similar to HMDA, the Bureau is 

proposing to invite an applicant to 

provide the name of a principal or 

enrolled tribe for each principal owner 

with respect to the Indian or Alaska 

Native race category and to adopt the 

disaggregated subcategories used in 

HMDA for the Asian race category and 

the Native Hawaiian and Other Pacific 

Islander race category. In addition, the 

Bureau is proposing to add 

disaggregated subcategories for the 

Black or African American race 

category, which are not used when 

collecting data pursuant to Regulation 

C. 

OMB has issued standards for the 

classification of Federal data on 

ethnicity and race.659 OMB’s 

government-wide standards provide a 

minimum standard for maintaining, 

collecting, and presenting data on race 

and ethnicity for all Federal reporting 

purposes. These standards have been 

developed to provide ‘‘a common 

language for uniformity and 

comparability in the collection and use 

of data on race and ethnicity by Federal 

agencies.’’ 660The OMB standards 

provide the following minimum 

categories for data on ethnicity and race: 

Two minimum ethnicity categories 

(Hispanic or Latino; Not Hispanic or 

Latino) and five minimum race 

categories (American Indian or Alaska 

Native; Asian; Black or African 

American; Native Hawaiian or Other 

Pacific Islander; and White). The 

aggregate categories for ethnicity and 

race in Regulation C, which the Bureau 

is proposing to use in subpart B, 

conform to the OMB standards. 

In addition to the minimum data 

categories for ethnicity and race, the 

OMB Federal Data Standards on Race 

and Ethnicity provide additional key 

principles. First, self-identification is 

the preferred means of obtaining 

information about an individual’s 

ethnicity and race, except in instances 

where observer identification is more 

practical.661 Second, the collection of 

greater detail is encouraged as long as 

any collection that uses more detail is 

organized in such a way that the 

additional detail can be aggregated into 

the minimum aggregate categories for 

data on ethnicity and race. More 

detailed reporting, which can be 

aggregated to the minimum categories, 

may be used at the agencies’ discretion. 

Lastly, Federal agencies must produce 

as much detailed information on 

ethnicity and race as possible; however, 

Federal agencies shall not present data 

on detailed categories if doing so would 


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662See id. 

663 62 FR 58782 (Oct. 30, 1997). 

664 82 FR 12242 (Mar. 1, 2017). 

665See OMB Federal Data Standards on Race and 

Ethnicity. 

666See U.S. Census Bureau, 2010 Official 

Questionnaire, https://www.census.gov/history/pdf/ 

2010questionnaire.pdf (2010 Census Official 

Questionnaire), and U.S. Census Bureau, 2020 

Official Questionnaire, https://www2.census.gov/ 

programs-surveys/decennial/2020/technicaldocumentation/questionnaires-and-instructions/ 

questionnaires/2020-informationalquestionnaire.pdf (2020 Census Official 

Questionnaire). 

667See 2010 Census Official Questionnaire and 

2020 Census Official Questionnaire. 

668The questionnaire for the 2010 Census 

included ‘‘Guamanian or Chamorro,’’ but the 

questionnaire for the 2020 Census included only 

‘‘Chamorro.’’ 

669See 2010 Census Official Questionnaire and 

2020 Census Official Questionnaire. 

670See id. 

671U.S. Census Bureau, 2015 National Content 

Test: Race and Ethnicity Analysis Report, Executive 

Summary, at ix (Feb. 28, 2017), https://

www2.census.gov/programs-surveys/decennial/ 

2020/program-management/final-analysis-reports/ 

2015nct-race-ethnicity-analysis.pdf. 

672 Id. at 83–85. 

673See 2020 Census Official Questionnaire. 

compromise data quality or 

confidentiality standards.662

Although OMB received comments 

requesting the creation of a separate 

Arab or Middle Eastern ethnicity 

category prior to the adoption of the 

OMB Federal Data Standards on Race 

and Ethnicity in 1997, OMB accepted 

the Interagency Committee’s 

recommendation not to include one in 

the 1997 minimum standards for 

reporting of Federal data on race and 

ethnicity. OMB noted that while it was 

adopting the Interagency Committee’s 

recommendation, it believed additional 

research was needed to determine the 

best way to improve data on this 

population group.663

In 2017, OMB requested comment on 

the Federal Interagency Working Group 

for Research on Race and Ethnicity’s 

(Working Group’s) proposals to update 

the OMB Federal Data Standards on 

Race and Ethnicity.664 The Working 

Group proposed adding a Middle 

Eastern or North African classification 

to the Federal Data Standards on Race 

and Ethnicity and to issue specific 

guidelines for the collection of detailed 

data for American Indian or Alaska 

Native, Asian, Black or African 

American, Hispanic or Latino, Native 

Hawaiian or Other Pacific Islander, and 

White groups.665 The Working Group 

also considered whether race and 

ethnicity should be collected using 

separate questions versus a combined 

question. 

In considering what to propose that 

financial institutions collect and report 

with respect to the ethnicity and race of 

the applicant’s principal owners, the 

Bureau believes it is also important to 

consider the data standards that the U.S. 

Census Bureau (Census Bureau) uses in 

the Decennial Census. The definition of 

Hispanic or Latino origin used in the 

2010 and 2020 Census questionnaire 

refers to a person of Cuban, Mexican, 

Puerto Rican, South or Central 

American, or other Spanish culture or 

origin regardless of race.666 The 2010 

and 2020 Census disaggregated the 

Hispanic or Latino ethnicity into four 

categories (Mexican, Mexican American, 

or Chicano; Puerto Rican; Cuban; and 

Another Hispanic, Latino or Spanish 

origin) and included an area where 

respondents could provide (i.e., write 

in) a specific Hispanic, Latino, or 

Spanish origin group as additional 

information.667

The 2010 and 2020 Census 

questionnaires listed three of OMB’s 

five aggregate race categories (American 

Indian or Alaska Native; Black or 

African American; and White). 

Although the questionnaires do not list 

the aggregate race categories for Asian or 

for Native Hawaiian or Other Pacific 

Islander, they do list the related 

disaggregated subcategories for the 

Asian race category (i.e., Asian Indian, 

Chinese, Filipino, Japanese, Korean, 

Vietnamese, Other Asian), and for the 

Native Hawaiian and Other Pacific 

Islander race category (i.e., Native 

Hawaiian, Chamorro,668 Samoan, Other 

Pacific Islander). These questionnaires 

also included three areas where 

respondents could write in a specific 

race: A specific Other Asian race, a 

specific Other Pacific Islander race, or 

the name of an enrolled or principal 

tribe in the American Indian or Alaska 

Native category.669 Additionally, the 

2020 Census allowed respondents to 

write in a specific origin for the White 

category and for the Black or African 

American category. For respondents 

who did not identify with any of the 

five minimum OMB race categories, the 

Census Bureau included a sixth race 

category—Some Other Race—on the 

2010 and 2020 Census questionnaires. 

Respondents could also select one or 

more race categories and write-in 

options.670

On February 28, 2017, the Census 

Bureau released its 2015 National 

Content Test: Race and Ethnicity 

Analysis Report. The National Content 

Test (NCT) provided the U.S. Census 

Bureau with empirical research to 

contribute to the planning for the 

content of the 2020 Census’ race/ 

ethnicity questions. The report 

presented findings to the Census Bureau 

Director and executive staff on research 

conducted to assess optimal design 

elements that could be used in 

question(s) on race and ethnicity. It 

noted that Americans view ‘‘race’’ and 

‘‘ethnicity’’ differently than in decades 

past and that a growing number of 

people find the current race and 

ethnicity categories confusing, or they 

wish to see their own specific group 

reflected on the Census questionnaire. 

The NCT’s research found that there 

have been a growing number of people 

who do not identify with any of the 

official OMB race categories, and that an 

increasing number of respondents have 

been racially classified as ‘‘Some Other 

Race.’’ This was primarily because of 

reporting by Hispanics who did not 

identify with any of the OMB race 

categories, but it also noted that 

segments of other populations, such as 

Afro-Caribbean and Middle Eastern or 

North African populations, did not 

identify with any of the OMB race 

categories.671 The 2015 National 

Content Test: Race and Ethnicity 

Analysis Report concluded that optimal 

design elements that may increase 

reporting, decrease item non-response, 

and improve data accuracy and 

reliability include: (1) A combined race 

and ethnicity question with detailed 

checkbox options; (2) a separate 

‘‘Middle Eastern or North African’’ 

response category; and (3) instructions 

to ‘‘Mark all that apply’’ or ‘‘Select all 

that apply’’ (instead of ‘‘Mark [X] one or 

more boxes’’).672

As discussed above, the Census 

Bureau did not ultimately incorporate 

these design elements into the 

questionnaire for the 2020 Decennial 

Census. Instead, the questionnaire 

continued to ask about ethnicity and 

race in two separate questions. While 

the questionnaire did not provide 

detailed check box options for the White 

race category or for the Black or African 

American race category, the 

questionnaire did add write-in options 

and noted examples. For White, it noted 

examples of German, Irish, English, 

Italian, Lebanese, and Egyptian. For 

Black or African American, it noted 

examples of African American, 

Jamaican, Haitian, Nigerian, Ethiopian, 

and Somali.673 Nonetheless, as 

discussed below, the Bureau is 

requesting comment on whether the 

approach and design elements set forth 

in the 2015 National Content Test: Race 

and Ethnicity Report Analysis (whether 

in whole or in part) would improve data 

collection that otherwise furthers 

section 1071’s purposes, improve selfidentification of race and ethnicity by 

applicants and response rates, or impose 


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56480 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

674 31 CFR 1010.230(h)(1)(i). The CDD exclusion 

for certain POS transactions is based on the ‘‘very 

low risk posed by opening such accounts at [a] 

brick and mortar store.’’ Fin. Crimes Enf’t Network, 

U.S. Dep’t of Treasury, Guidance: Frequently Asked 

Questions Regarding Customer Due Diligence 

Requirements for Financial Institutions, at Q 29 

(Apr. 3, 2018), https://www.fincen.gov/sites/default/ 

files/2018-04/FinCEN_Guidance_CDD_FAQ_

FINAL_508_2.pdf. 

675FinCEN’s CIP rule does not include a point of 

sale exclusion. While the rule permits verification 

of customer identity information within a 

reasonable time after an account is opened, the 

collection of required customer information must 

occur prior to account opening. See 31 CFR 

1020.220(a)(2)(i)(A) and (ii). For credit card 

accounts, a bank may obtain identifying 

information about a customer from a third-party 

source prior to extending credit to the customer. 31 

CFR 1020.220(a)(2)(i)(C). 

burdens on financial institutions 

collecting and reporting this 

information. 

Consistent with its approach during 

the SBREFA process, the Bureau is 

proposing that financial institutions 

must permit applicants to provide a 

principal owner’s ethnicity and race 

using the aggregate categories used for 

HMDA data collection. The Bureau also 

believes that aligning the aggregate 

ethnicity and race categories for 1071 

data collection with the HMDA data 

collection will promote consistency and 

may reduce potential confusion for 

applicants, financial institutions, and 

other users of the data. As noted above, 

the feedback received on the SBREFA 

Outline generally showed that SERs and 

commenters favored such consistency. 

However, the Bureau is also 

proposing that applicants must be 

permitted to provide a principal owner’s 

ethnicity and race using the 

disaggregated subcategories used in 

HMDA data collection. With respect to 

ethnicity data collection, the Bureau is 

proposing that applicants must be 

permitted to provide a principal owner’s 

ethnicity using the disaggregated 

subcategories used in HMDA data 

collection. For race data collection, the 

Bureau is proposing that applicants 

must be permitted to provide a principal 

owner’s race using the disaggregated 

subcategories for the Asian race category 

and the Native Hawaiian or Other 

Pacific Islander race category. Unlike 

HMDA, the Bureau is also proposing 

that applicants must be permitted to 

provide a principal owner’s race using 

disaggregated subcategories for the 

Black or African American race 

category. Lastly, similar to HMDA, the 

Bureau is proposing to invite an 

applicant to provide the name of a 

principal or enrolled tribe for each 

principal owner with respect to the 

American Indian or Alaska Native race 

category. 

This portion of proposed 

§ 1002.107(a)(20) differs from the 

Bureau’s SBREFA approach. The Bureau 

is proposing use of disaggregated 

subcategories for 1071 data collection, 

in part, for consistency with existing 

HMDA reporting requirements. 

Moreover, based on feedback received 

during the SBREFA process from SERs 

and other stakeholders, the Bureau 

believes that collection and reporting 

using disaggregated subcategories could 

be beneficial when attempting to 

identify potential discrimination or 

business and community development 

needs in particular communities. While 

the Bureau recognizes that disaggregated 

data may not be useful in analyzing 

potential discrimination where financial 

institutions do not have a sufficient 

number of applicants or borrowers 

within particular subgroups to permit 

reliable assessments of whether 

unlawful discrimination may have 

occurred, disaggregated data on 

ethnicity and race may help identify 

potentially discriminatory lending 

patterns in situations in which the 

numbers are sufficient to permit such 

fair lending assessments. Additionally, 

as suggested in the 2015 National 

Content Test: Race and Ethnicity Report 

Analysis, the use of disaggregated 

subcategories may increase response 

rates. 

Nonetheless, the Bureau 

acknowledges the concerns that some 

SERs and other stakeholders raised 

regarding the collection and reporting of 

disaggregated data. In particular, the 

Bureau understands that including the 

disaggregated subcategories for four 

principal owners may make data 

collection more difficult in certain 

situations, such as for applications 

taken solely by telephone or for paper 

applications taken at retail locations. 

Given these concerns, the Bureau seeks 

comment on whether an 

accommodation should be made for 

certain application scenarios, for 

example by permitting financial 

institutions to collect ethnicity and race 

information using only the aggregate 

categories or to permit financial 

institutions to collect ethnicity, race, 

and sex information on only one 

principal owner in those scenarios. 

Additionally, the Bureau notes that 

FinCEN’s CDD rule excludes from 

certain of its requirements point-of-sale 

transactions for the purchase of retail 

goods or services up to a limit of 

$50,000.674 For the reasons discussed in 

more detail in the section-by-section 

analysis of proposed § 1002.107(c)(1) 

below, the Bureau is not proposing to 

take this approach for the 1071 rule 

given the different purposes and 

requirements of the CDD rule (as well as 

FinCEN’s related customer 

identification program (CIP) rule) 675

and section 1071. Nonetheless, the 

Bureau seeks comment on whether 

covered applications taken at retail 

locations, such as credit cards and lines 

of credit with a credit limit under a 

specified amount (such as $50,000), 

should be excepted from some or all of 

the requirement to obtain principal 

owners’ ethnicity, race, and sex 

information. For example, should 

financial institutions only be required to 

ask about principal owners’ sex along 

with aggregate race and ethnicity 

categories (but not disaggregated 

subcategories), or to ask about only one 

principal owner’s ethnicity, race, and 

sex for such applications? 

The Bureau seeks comment on its 

proposed use of the HMDA aggregate 

categories, the HMDA disaggregated 

subcategories (including the ability to 

provide additional information if an 

applicant indicates that a principal 

owner is Other Hispanic or Latino, 

Other Asian, or Other Pacific Islander), 

and the addition of disaggregated 

subcategories for the Black or African 

American category. Additionally, the 

Bureau seeks comment regarding 

whether it would be helpful or 

appropriate to provide additional 

clarification or to pursue a different 

approach regarding the ability of a 

principal owner to identify as Other 

Hispanic or Latino, Other Asian, or 

Other Pacific Islander or to provide 

additional information if a principal 

owner is Other Hispanic or Latino, 

Other Asian, or Other Pacific Islander. 

The Bureau also seeks comment on 

whether any additional or different 

categories or subcategories should be 

used for 1071 data collection, and 

whether the collection and reporting of 

race and ethnicity should be combined 

into a single question for purposes of 

1071 data collection and reporting. The 

Bureau further seeks comment on 

whether an additional category for 

Middle Eastern or North African should 

be added and, if so, how this category 

should be included and defined. In 

addition, the Bureau seeks comment on 

whether disaggregated subcategories 

should be added for the aggregate White 

category, and if so, what disaggregated 

subcategories should be added and 

whether the applicant should be 

permitted to write in or otherwise 

provide other disaggregated 

subcategories or additional information. 

The Bureau seeks comment on whether 

the approach and design elements set 

forth in the 2015 National Content Test: 

Race and Ethnicity Report Analysis 


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676See U.S. Dep’t of State, Proposing Changes to 

the Department’s Policies on Gender on U.S. 

Passports and Consular Reports of Birth Abroad 

(June 30, 2021), https://www.state.gov/proposingchanges-to-the-departments-policies-on-gender-onu-s-passports-and-consular-reports-of-birthabroad/. 

677See Food & Drug Admin., MedWatch forms 

FDA 3500 and 3500A (Sept. 12, 2018) (approved 

under OMB No. 0910–0291), https://www.fda.gov/ 

media/76299/download and https://www.fda.gov/ 

media/69876/download. 

678See, e.g., Cal. S.B. 179, Gender identity: 

female, male or nonbinary (Oct. 16, 2017), https:// 

leginfo.legislature.ca.gov/faces/ 

billTextClient.xhtml?bill_id=201720180SB179; 

State of California Dep’t of Motor Vehicles, Driver’s 

License or ID Card Updates, https://

www.dmv.ca.gov/portal/driver-licensesidentification-cards/updating-information-on-yourdriver-license-or-identification-dl-id-card/ (last 

visited July 23, 2021); Colo. Dep’t of Revenue, 

Change of Sex Designation, https://

drive.google.com/file/d/1PeYZd7U43

ar6Flg8lFAT1Etg1EPdLVUy/view; State of 

Connecticut Dep’t of Motor Vehicles, Gender 

Designation on a License or Identification Card, 

https://portal.ct.gov/-/media/DMV/20/29/B-385.pdf; 

District of Columbia Dep’t of Motor Vehicles, 

Procedure For Establishing or Changing Gender 

Designation on a Driver License or Identification 

Card (June 13, 2017), https://dmv.dc.gov/sites/ 

default/files/dc/sites/dmv/publication/attachments/ 

DC%20DMV%20Form%20Gender%20SelfDesignation%20English.pdf, DC Driver License or 

Identification Card Application (Jan. 2019), https:// 

dmv.dc.gov/sites/default/files/dc/sites/dmv/ 

publication/attachments/DMV%20BOE

%20Application_2-25-19.pdf; Maine Bureau of 

Motor Vehicles, Gender Designation Form (Nov. 4, 

2019), https://www1.maine.gov/sos/bmv/forms/ 

GENDER%20DESIGNATION%20FORM.pdf; State 

of Nevada Dep’t of Motor Vehicles, Name Changes, 

https://dmvnv.com/namechange.htm; State of New 

Jersey Dep’t of Health, Off. of Vital Statistics and 

Registry, Request Form and Attestation (REG–L2) to 

Amend Sex Designation to Reflect Gender Identity 

on a Birth Certificate—Adult (Feb. 2019), https://

www.nj.gov/health/forms/reg-l2_1.pdf; 2019 N.J. 

Sess. Law Serv. ch. 271; New Mexico Motor Vehicle 

Div., Request for Sex Designation Change, http://

realfile.tax.newmexico.gov/mvd10237.pdf; New 

Mexico Dep’t of Health, Request to Change Gender 

Designation on a Birth Certificate (Oct. 2019), 

https://www.nmhealth.org/publication/view/form/ 

5429/; Virginia Dep’t of Motor Vehicles, Driver’s 

License and Identification Card Application (July 1, 

2021), https://www.dmv.virginia.gov/webdoc/pdf/ 

dl1p.pdf; Washington State Dep’t of Licensing, 

Change of Gender Designation (Nov. 2019), https:// 

www.dol.wa.gov/forms/520043.pdf; New York City 

Dep’t of Homeless Services, Off. of Policy, 

Procedures and Training, Transgender, Non-binary, 

and Intersex Clients (July 15, 2019), https://

www1.nyc.gov/assets/dhs/downloads/pdf/dhs_

policy_on_serving_transgender_non_binary_and_

intersex_clients.pdf. 

679See Bostock, 140 S. Ct. 1731. 

680 42 U.S.C. 2000e et seq. 

681Bostock, 140 S. Ct. 1731. 

682See Letter from Bureau of Consumer Fin. Prot., 

to Serv. & Advocacy for GLBT Elders (SAGE) (Aug. 

30, 2016), https://files.consumerfinance.gov/f/ 

documents/cfpb_sage-response-letter_2021-02.pdf. 

683 86 FR 14363 (Mar. 16, 2021). 

would improve data collection or 

otherwise further section 1071’s 

purposes, as well as whether it would 

pose any particular burdens or 

challenges for financial institutions 

collecting and reporting this 

information. Finally, the Bureau seeks 

comment on whether, similar to data 

collection pursuant to Regulation C, 

financial institutions should be limited 

to reporting a specified number of 

aggregate categories and disaggregated 

subcategories and, if so, whether such a 

limitation should be described in the 

sample data collection form. 

Proposed comment 107(a)(20)–6 

would explain that applicants must be 

permitted to provide a principal owner’s 

ethnicity using aggregate categories and 

disaggregated subcategories and would 

also list the aggregate categories and 

disaggregated subcategories that 

applicants must be permitted to use. 

Proposed comment 107(a)(20)–6 would 

also explain that applicants must be 

permitted to select one, both, or none of 

the aggregate categories and as many 

disaggregated subcategories as the 

applicant chooses, even if the applicant 

does not select the corresponding 

aggregate category. Proposed comment 

107(a)(20)–6 would state that, if an 

applicant provides ethnicity 

information for a principal owner, the 

financial institution reports all of the 

aggregate categories and disaggregated 

subcategories provided by the applicant, 

and it would provide an example. The 

proposed comment would state that a 

financial institution must also permit 

the applicant to refuse to provide 

ethnicity information for one or more 

principal owners and explain how a 

financial institution reports ethnicity 

information if an applicant declines to 

provide the information or fails to 

respond. Finally, the proposed comment 

would explain how a financial 

institution reports ethnicity information 

if an applicant has fewer than four 

principal owners, and it would provide 

an example. 

Proposed comment 107(a)(20)–7 

would explain that applicants must be 

permitted to provide a principal owner’s 

race using aggregate categories and 

disaggregated subcategories and would 

also list the aggregate categories and 

disaggregated subcategories that 

applicants must be permitted to use. 

Proposed comment 107(a)(20)–7 would 

also explain that applicants must be 

permitted to select one, more than one, 

or none of the aggregate categories and 

as many disaggregated subcategories as 

the applicant chooses, even if the 

applicant does not select the 

corresponding aggregate category. 

Proposed comment 107(a)(20)–7 would 

explain that, if an applicant provides 

race information for a principal owner, 

the financial institution reports all of 

the aggregate categories and 

disaggregated subcategories provided by 

the applicant, and it would provide an 

example. The proposed comment would 

state that a financial institution must 

also permit the applicant to refuse to 

provide race information for one or 

more principal owners and explains 

how a financial institution reports race 

information if an applicant declines to 

provide the information or fails to 

respond. Finally, the proposed comment 

would explain how a financial 

institution reports race information if an 

applicant has fewer than four principal 

owners, and it would provide an 

example. 

Proposed Rule—Collecting Sex 

Federal, State, and local government 

agencies have been moving to providing 

options for designating sex beyond the 

binary options of male or female. At the 

Federal level, for example, the 

Department of State has announced that 

it is planning to offer the option of a 

new gender marker for non-binary, 

intersex, and gender non-conforming 

persons. It will be available for 

passports and Consular Reports of Birth 

Abroad as an alternative to male or 

female.676 The Food and Drug 

Administration includes the gender 

options female, male, intersex, 

transgender, and ‘‘prefer not to 

disclose’’ on certain patient forms.677 A 

number of States and the District of 

Columbia, as well as some local 

governments, offer an alternative sex or 

gender designation to male and female 

(e.g., ‘‘X’’) on government-issued 

documents and forms such as drivers’ 

licenses and identification cards, and in 

some cases birth certificates.678

The Supreme Court’s opinion last 

year in Bostock v. Clayton County 

concluded that sex discrimination 

encompasses sexual orientation 

discrimination and gender identity 

discrimination, and that these forms of 

discrimination necessarily involve 

consideration of sex.679 It reached this 

conclusion in the context of Title VII of 

the Civil Rights Act of 1964, as 

amended,680 which prohibits sex 

discrimination in employment.681

Following the issuance of the Supreme 

Court’s opinion and building on a 2016 

letter the Bureau sent to an advocacy 

organization,682 the Bureau issued an 

interpretive rule clarifying that ECOA’s 

and Regulation B’s prohibition on 

discrimination based on sex protects 

against discrimination based on sexual 

orientation, gender identity, actual or 

perceived nonconformity with sex based 

or gender-based stereotypes, and the sex 

of people associated with the 

applicant.683 Other Federal agencies 

have similarly clarified that other 

statutes that protect against 


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684See, e.g., 86 FR 32637 (June 22, 2021) 

(Department of Education interpreting Title IX of 

the Education Amendments of 1972); 86 FR 27984 

(May 25, 2021) (Department of Health and Human 

Services interpreting section 1557 of the Affordable 

Care Act); Memorandum from Jeanine M. Worden, 

Acting Assistant Secretary for Fair Housing and 

Equal Opportunity, Implementation of Executive 

Order 13988 on the Enforcement of the Fair 

Housing Act (Feb. 11, 2021), https://www.hud.gov/ 

sites/dfiles/PA/documents/HUD_Memo_

EO13988.pdf (Department of Housing and Urban 

Development interpreting the Fair Housing Act). 

685U.S. Census Bureau, Phase 3.2 Household 

Pulse Survey (undated), http://www2.census.gov/ 

programs-surveys/demo/technical-documentation/ 

hhp/Phase_3.2_Household_Pulse_Survey_FINAL_

ENGLISH.pdf. 

686See, e.g., Off. of Disease Prevention & Health 

Promotion, Healthy People (2020), https://

www.healthypeople.gov/2020/topics-objectives/ 

topic/lesbian-gay-bisexual-and-transgender-health; 

Off. of the Nat’l Coordinator of Health Info. Tech., 

2021 Interoperability Standards Advisory (2021), 

https://www.healthit.gov/isa/sites/isa/files/inlinefiles/2021-ISA-Reference-Edition.pdf; Ctrs. for 

Disease Control & Prevention, Collecting Sexual 

Orientation and Gender Identity Information (Apr. 

1, 2020), https://www.cdc.gov/hiv/clinicians/ 

transforming-health/health-care-providers/ 

collecting-sexual-orientation.html. 

Additionally, on April 1, 2021, the Department of 

Health and Human Services’ Administration for 

Community Living (ACL) published a notice of its 

submission of a revised National Survey of Older 

Americans Act Participants for OMB review and 

clearance. ACL proposed to revise the existing 

survey to add a new rotating module on COVID– 

19. In response to an earlier notice related to the 

survey, ACL received a comment asking it to 

include survey response options that include 

‘‘transgender’’ or ‘‘other’’ with a write-in option. In 

response to comments it received on an earlier 

notice, ACL indicated that it was supporting an ad 

hoc panel that would be reviewing measures and 

methodological issues related to measuring sex as 

a non-binary construct, gender identity, and sexual 

orientation. ACL indicated that it expected the 

panel to produce a consensus report in December 

2021, and that ACL anticipated using the report as 

a basis for testing new survey questions. 86 FR 

17153 (Apr. 1, 2021). 

discrimination based on sex protect 

against discrimination based on sexual 

orientation and gender identity.684

Some other Federal agencies have also 

begun to re-consider how they collect 

information on sex by including 

questions about sexual orientation and 

gender identity as part of questions 

about sex. For example, the Census 

Bureau released the Household Pulse 

Survey,685 which asked questions about 

sex assigned at birth, current gender 

identity, and sexual orientation. 

Specifically, the Household Pulse 

Survey includes the following three 

questions: 

1. What sex were you assigned at birth, on 

your original birth certificate? (A respondent 

could provide a response of male or female.) 

2. Do you currently describe yourself as 

male, female or transgender? (A respondent 

also could provide a response of ‘‘none of 

these.’’) 

3. Which of the following best represents 

how you think of yourself? 

In response to the third question, a 

respondent would select from the following 

responses: (1) Gay or lesbian; (2) Straight, 

that is not gay or lesbian; (3) Bisexual; (4) 

Something else; or (5) I don’t know. 

Other Federal agencies and initiatives 

have encouraged sexual orientation and 

gender identity data collection in health 

care settings.686

In light of the Bureau’s recent ECOA 

interpretive rule, the continued 

evolution of categories used for sex data 

collection purposes at the Federal, State, 

and local government levels, and 

feedback on the SBREFA Outline, the 

Bureau is proposing to collect 

information about sex for purposes of 

section 1071 more expansively than was 

under consideration in the SBREFA 

Outline. Specifically, the Bureau is 

proposing adding an option for ‘‘I prefer 

to self-describe’’ (with the ability of the 

applicant to write in or otherwise 

provide additional information) for the 

principal owner’s sex to accompany the 

existing ‘‘male,’’ ‘‘female,’’ and ‘‘I do not 

wish to provide this information’’ 

options currently used on the HMDA 

sample data collection form. 

Proposed comment 107(a)(20)–8 

would explain that an applicant must be 

permitted to provide a principal owner’s 

sex using one or more of the following 

categories: Male, Female, and/or that the 

principal owner prefers to self-describe 

their sex. It would further explain that, 

if an applicant indicates that a principal 

owner prefers to self-describe their sex, 

the financial institution would be 

required to permit the applicant to 

provide additional information about 

the principal owner’s sex. The financial 

institution would report to the Bureau 

the additional information provided by 

the applicant as free-form text. 

Proposed comment 107(a)(20)–8 

would state that a financial institution 

must permit an applicant to select as 

many categories as the applicant 

chooses and that the financial 

institution reports the category or 

categories selected by the applicant, 

including any additional information 

provided by the applicant, or reports 

that the applicant refused to provide the 

information or failed to respond. It 

would clarify that a financial institution 

is not permitted to report sex based on 

visual observation, surname, or any 

basis other than the applicant-provided 

information. Finally, proposed comment 

107(a)(20)–8 would explain how a 

financial institution would report sex if 

an applicant has fewer than four 

principal owners, provide an example, 

and direct financial institutions to 

proposed appendix G for additional 

information on collecting and reporting 

a principal owner’s sex. 

The Bureau seeks comment on its 

proposed approach to requesting 

information about a principal owner’s 

sex, including the opportunity for selfidentification (by allowing the applicant 

to write in or otherwise provide 

additional information). The Bureau 

also seeks comment on whether the 

sample data collection form should list 

examples from which the applicant 

could choose when a principal owner 

self-identifies and an applicant writes in 

or otherwise provides additional 

information about the principal owner’s 

sex, such as ‘‘intersex,’’ ‘‘non-binary,’’ 

or ‘‘transgender.’’ The Bureau also seeks 

comment on whether, alternatively, sex 

should be collected solely via the ‘‘I 

prefer to self-describe’’ option (with the 

ability to write in or otherwise provide 

additional information)—that is, 

without male and female being listed as 

options. The Bureau also seeks 

comment on whether applicants should 

be restricted from designating more than 

one category for a principal owner’s sex 

(e.g., from selecting both ‘‘Female’’ and 

‘‘I prefer to self-describe’’). 

The Bureau also seeks comment on 

whether financial institutions should be 

required to ask separate questions 

regarding sex, sexual orientation, and 

gender identity and, if so, what 

categories should be offered for use in 

responding to each question. For 

example, the Bureau requests comment 

on whether the sample data collection 

form should include the three questions 

and related responses (described above) 

from the Pulse Household Survey 

questionnaire, or a check box for 

‘‘Principal owner identifies as LGBTQ+’’ 

with an accompanying space for 

providing additional information. The 

Bureau also seeks comment on whether 

it should adopt a data point to collect 

an applicant’s lesbian, gay, bisexual, 

transgender, or queer plus (LGBTQ+)- 

owned business status, similar to the 

way it is proposing to collect minorityowned business status and womenowned business status as discussed in 

the section-by-section analysis of 

proposed § 1002.107(a)(18) and (19) 

above. The Bureau also seeks comment 

on whether including such questions 

would improve data collection or 

otherwise further section 1071’s 

purposes, as well as whether it would 

pose any particular burdens or 

challenges for industry. 

In addition, to ensure that a financial 

institution’s representation of 

nondiscrimination on the basis of sex 

information provided by the applicant is 

consistent with the protections afforded 

under ECOA and Regulation B, the 

Bureau seeks comment on whether 

ambiguity exists for any responses that 


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687Small Bus. Admin., Paycheck Protection 

Program Weekly Reports 2021, Version 11, at 9 

(effective Apr. 5, 2021), https://www.sba.gov/sites/ 

default/files/2021-04/PPP_Report_Public_210404- 

508.pdf. PPP data was taken from 2021 loans for 

which the collection form for principal owner 

demographics was included on the PPP application 

itself and, for most of that time, was featured on the 

first page of the application. 

688 Id. 

an applicant might reasonably use to 

self-describe a principal owner’s sex for 

purposes of section 1071 (for example, 

intersex status) and if clarification may 

be needed. 

Finally, the Bureau also requests 

information on Federal, State, and local 

government initiatives, as well as 

private sector initiatives, involving the 

use of sex categories other than male 

and female and the inclusion of 

questions regarding sexual orientation 

and gender identity in demographic 

information. 

Proposed Rule—Collecting Ethnicity 

and Race via Visual Observation or 

Surname in Certain Circumstances 

The Bureau is proposing that financial 

institutions be required to collect and 

report at least one principal owner’s 

ethnicity and race based on visual 

observation and/or surname in certain 

circumstances. Specifically, a financial 

institution would be required to report 

at least one principal owner’s ethnicity 

and race based on visual observation 

and/or surname if the financial 

institution meets in person with one or 

more of the applicant’s principal owners 

and the applicant does not provide 

ethnicity, race, or sex information for at 

least one principal owner in response to 

the financial institution’s inquiry 

pursuant to proposed § 1002.107(a)(20). 

Although the Bureau indicated in the 

SBREFA Outline that it was not 

considering proposing that financial 

institutions report a principal owner’s 

race, sex, and ethnicity based on visual 

observation and/or surname, the Bureau 

asked SERs to provide feedback about 

the potential challenges, costs, and 

benefits of implementing such a 

requirement for applicants who do not 

self-report the information. The Bureau 

also asked SERs to provide feedback 

about how those potential challenges 

and costs would change if reporting 

based on visual observation and/or 

surname was required only if the 

applicant is a sole proprietor but not if 

the applicant is an entity. Although 

many SERs and commenters opposed 

reporting ethnicity, race, or sex on the 

basis of visual observation and/or 

surname, some other commenters said 

that financial institutions should be 

required to report based on visual 

observation and/or surname in certain 

circumstances. Additionally, one SER 

specifically noted that the Bureau 

would need to account for lower selfreporting rates than are achieved for 

HMDA reporting. Consistent with this 

feedback, the Bureau notes that 

demographic response rates in the 

SBA’s Paycheck Protection Program 

(PPP) data are much lower when 

compared to ethnicity, race, and sex 

response rates in HMDA data.687 For 

instance, roughly 71 percent of 

respondents in the PPP data did not 

provide a response for race, compared to 

only 14.7 percent in the HMDA data. 

Roughly 66 percent of respondents in 

the PPP data did not provide a response 

for ethnicity, compared to only 14.3 

percent in the HMDA data.688

Without a visual observation and/or 

surname collection requirement, the 

Bureau believes that meaningful 

analysis of the 1071 principal owner 

race and ethnicity data could be 

difficult, significantly undermining 

section 1071’s fair lending purpose. 

Comprehensive and accurate collection 

and reporting of data is also vital to 

section 1071’s business and community 

development purpose. Historically, one 

challenge under HMDA has been the 

reluctance of some applicants to 

voluntarily provide requested 

demographic information, such as race 

and ethnicity. The requirement in 

Regulation C to collect race, sex, and 

ethnicity on the basis of visual 

observation or surname is an important 

tool to address that challenge, and the 

Bureau believes that the requirement 

has resulted in more robust response 

rates in the HMDA data. The Bureau has 

considered the feedback in response to 

the SBREFA Outline and this related 

information and has determined that not 

proposing a requirement to report based 

on visual observation and/or surname 

could diminish the utility of the 1071 

data. 

Accordingly, the Bureau has 

determined that the appropriate 

approach to further section 1071’s 

purposes is to propose to require that 

financial institutions collect at least one 

principal owner’s race and ethnicity 

(but not sex) on the basis of visual 

observation and/or surname when the 

applicant does not provide ethnicity, 

race or sex information for at least one 

principal owner and the financial 

institution meets in person with one or 

more principal owners. In other words, 

a financial institution would not be 

required to collect race and ethnicity via 

visual observation and/or surname if the 

applicant provides any demographic 

information regarding any principal 

owner. The Bureau is concerned that, 

for applicants with multiple principal 

owners, the financial institution may 

not be able to determine whether the 

applicant has provided the demographic 

information, for example the sex, of the 

principal owner who meets in person 

with the financial institution or for 

another principal owner. The Bureau 

seeks comment on this proposed 

approach. The Bureau also seeks 

comment on whether a financial 

institution should be required to collect 

a principal owner’s ethnicity and/or 

race via visual observation and/or 

surname if the applicant has only one 

principal owner, the applicant does not 

provide the principal owner’s 

information, and the financial 

institution meets in person with the 

principal owner. In this situation, the 

financial institution would be able to 

‘‘match’’ any demographic information 

that the applicant provides with the 

correct the principal owner because 

there is only one principal owner. 

Proposed comment 107(a)(20)–9 

would explain that a financial 

institution is required to report ethnicity 

and race (but not sex) based on visual 

observation and/or surname in certain 

circumstances. The proposed comment 

would explain that if a financial 

institution meets in person with one or 

more of an applicant’s principal owners 

and the applicant does not provide 

ethnicity, race, or sex information for at 

least one principal owner, the financial 

institution must report at least one 

principal owner’s ethnicity and race 

(but not sex) based on visual 

observation, surname, or a combination 

of both visual observation and surname. 

It would further explain that a financial 

institution is not required to report 

based on visual observation and/or 

surname if the principal owner only 

meets in person with a third party 

through whom the applicant is 

submitting an application to the 

financial institution and would provide 

an example. 

Proposed comment 107(a)(20)–10 

would clarify that a financial institution 

meets with a principal owner in person 

if an employee or officer of the financial 

institution or one of its affiliates has a 

meeting or discussion with the 

applicant’s principal owner about an 

application and can visually observe the 

principal owner. The proposed 

comment would also provide examples 

of situations where the financial 

institution meets in person with a 

principal owner and where it does not. 

The Bureau requests comment on this 

approach and whether additional or 

different examples are necessary. 

Proposed comment 107(a)(20)–11 

would clarify that a financial institution 


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689SBREFA Outline at 32–33. 

690ECOA section 704B(e)(1). 

691SBREFA Panel Report at 26. 

uses only aggregate categories when 

reporting ethnicity and race based on 

visual observation and/or surname and 

would direct financial institutions to 

proposed appendix G for additional 

information on collecting and reporting 

ethnicity and race based on visual 

observation and/or surname. However, 

the Bureau requests comment on 

whether financial institutions should be 

permitted, but not required, to use the 

disaggregated subcategories (in addition 

to the required aggregate categories) 

when reporting race and ethnicity based 

on visual observation and/or surname. 

In addition to the specific matters 

identified above, the Bureau seeks 

comment on its proposed approach to 

this data point, the proposed methods of 

collecting and reporting the data, and 

requests comment on whether 

additional clarification regarding any 

aspect of this data point is needed. 

107(a)(21) Number of Principal Owners 

ECOA section 704B(e)(2)(H) 

authorizes the Bureau to require 

financial institutions to compile and 

maintain ‘‘any additional data that the 

Bureau determines would aid in 

fulfilling the purposes of [section 

1071].’’ The Bureau believes that 

collection of the number of principal 

owners of an applicant would aid in 

fulfilling the purposes of section 1071, 

as explained below. 

The Bureau did not address the 

number of principal owners as a 

potential data point under consideration 

in the SBREFA Outline, although it did 

seek feedback on several questions 

related to the number of applicants’ 

principal owners.689 To facilitate 

collection of the ethnicity, race, and sex 

of applicants’ principal owners 

pursuant to proposed § 1002.107(a)(20), 

the Bureau is proposing that financial 

institutions collect and report the 

number of an applicant’s principal 

owners. 

Section 1071 uses the term ‘‘principal 

owner’’ but does not define it. Proposed 

§ 1002.102(o) would define a principal 

owner as a natural person who directly 

owns 25 percent or more of the equity 

interests of a business. Thus, under this 

proposed definition, it is possible that 

an applicant would have no principal 

owners or between one and four 

principal owners. 

As explained in proposed comment 

107(a)(21)–1, a financial institution 

would be able to collect an applicant’s 

number of principal owners by 

requesting the number of principal 

owners from the applicant or by 

determining the number of principal 

owners from information provided by 

the applicant or that the financial 

institution otherwise obtains. If the 

financial institution asks the applicant 

to provide the number of its principal 

owners pursuant to proposed 

§ 1002.107(a)(21), the financial 

institution must provide the definition 

of principal owner set forth in proposed 

§ 1002.102(o). If permitted pursuant to 

proposed § 1002.107(c)(2), a financial 

institution could report an applicant’s 

number of principal owners based on 

previously collected data. 

The Bureau believes that an applicant 

is likely to know how many principal 

owners it has and should not have 

significant difficulties or objections to 

providing this basic piece of 

information. Moreover, the Bureau 

understands that financial institutions 

are already obtaining information about 

principal owners. Further, this 

additional information would aid in 

fulfilling the purposes of section 1071 as 

it may provide necessary context for 

other data points. For example, if an 

applicant reports the ethnicity, race, and 

sex for one principal owner, having the 

total number of principal owners would 

permit the Bureau and other data users 

to know whether that owner’s 

demographics represents the 

demographics of the entirety of the 

applicant’s principal ownership or 

merely one quarter of it. This 

information would help data users in 

fulfilling both the fair lending and 

business and community development 

purposes of section 1071. 

Proposed comment 107(a)(21)–2 

would clarify the relationship between 

the proposed requirement to collect and 

report the number of principal owners 

in proposed § 1002.107(a)(21) with the 

proposed requirement to report verified 

information in proposed § 1002.107(b). 

The proposed comment would state that 

the financial institution may rely on an 

applicant’s statements in collecting and 

reporting the number of the applicant’s 

principal owners. The financial 

institution would not be required to 

verify the number of principal owners 

provided by the applicant, but if the 

financial institution verifies the number 

of principal owners, then the financial 

institution would be required to report 

the verified number of principal owners. 

Proposed comment 107(a)(21)–3 

would state that pursuant to proposed 

§ 1002.107(c)(1), a financial institution 

is required to maintain procedures 

reasonably designed to collect 

applicant-provided information, which 

includes the applicant’s number of 

principal owners. However, if a 

financial institution is nonetheless 

unable to collect or determine the 

number of principal owners of the 

applicant, the financial institution 

would report that the number of 

principal owners is ‘‘not provided by 

applicant and otherwise 

undetermined.’’ 

The Bureau seeks comment on its 

proposed approach to this data point. 

The Bureau also seeks comment on 

whether the Bureau should instead, or 

additionally, require collection and 

reporting of similar information about 

owners (rather than principal owners). 

For example, should the Bureau require 

that financial institutions collect and 

report the number of owners that an 

applicant has that are not natural 

persons, in order to obtain a more 

complete picture of the applicant’s 

ownership structure? 

107(b) Verification of ApplicantProvided Information 

ECOA section 704B(e)(1) provides 

that ‘‘[e]ach financial institution shall 

compile and maintain, in accordance 

with regulations of the Bureau, a record 

of the information provided by any loan 

applicant pursuant to a request under 

[section 704B(b)].’’ 690 Section 1071 does 

not impose any requirement for a 

financial institution to verify the 

information provided by an applicant. 

In the SBREFA Outline, the Bureau 

did not include a general statement 

about the issue of verification of 

applicant-provided data points. For 

certain data points such as time in 

business, however, the Outline did 

explain that the Bureau was considering 

proposing that if the financial 

institution did not verify the 

information provided by the applicant, 

the financial institution would report 

the information provided by the 

applicant. If the financial institution did 

verify the information provided by the 

applicant, the Outline explained that 

the financial institution would report 

the verified information. The Outline 

did not state that the Bureau was 

considering proposing that a financial 

institution would be required to verify 

any of the applicant-provided data 

points. 

As explained in the section-by-section 

analysis of proposed § 1002.107(a) 

above, a number of SERs urged the 

Bureau to require collection and 

reporting of a number of data points 

based only on information as provided 

by the applicant.691 No SERs stated that 

they thought verification should be 

generally required. The industry 

stakeholders who commented on this 

issue asked that the Bureau not require 


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692See, e.g., ECOA section 704B(b) (‘‘[I]n the case 

of any application to a financial institution . . . .’’) 

and 704B(c) (‘‘Any applicant . . . may refuse to 

provide any information requested . . . .’’) 

(emphases added)). 

693See § 1002.5(b). 

694SBREFA Outline at 35–36. 

695SBREFA Panel Report at 32. 

696 Id. at 47. 

verification of applicant-provided 

information. The Bureau did not receive 

any comments on this issue from 

community group stakeholders. 

The Bureau is proposing in 

§ 1002.107(b) that unless otherwise 

provided in subpart B, the financial 

institution would be able to rely on 

statements of the applicant when 

compiling data unless it verifies the 

information provided, in which case it 

would be required to collect and report 

the verified information. Proposed 

comment 107(b)–1 would explain that a 

financial institution may rely on 

statements made by an applicant 

(whether made in writing or orally) or 

information provided by an applicant 

when compiling and reporting data 

pursuant to the 1071 rule for applicantprovided data; the financial institution 

would not be required to verify those 

statements. Proposed comment 107(b)–1 

would further explain, however, that if 

the financial institution does verify 

applicant statements for its own 

business purposes, such as statements 

relating to gross annual revenue or time 

in business, the financial institution 

would report the verified information. 

The comment would go on to explain 

that, depending on the circumstances 

and the financial institution’s 

procedures, certain applicant-provided 

data could be collected without a 

specific request from the applicant. For 

example, gross annual revenue could be 

collected from tax return documents. In 

addition, the proposed comment would 

make clear that applicant-provided data 

are the data that are or could be 

provided by the applicant, including 

those in proposed § 1002.107(a)(5) 

through (7), and (13) through (21). 

Finally, proposed comment 107(b)–1 

would provide a cross reference to 

proposed comment 107(c)(2)–3, which 

would discuss the possible reuse of 

certain previously collected data. 

The Bureau believes that requiring 

verification of applicant-provided data 

points would greatly increase the 

operational burden of the 1071 rule, and 

that relying on applicant-provided data 

would ensure sufficient accuracy to 

carry out the purposes of section 1071. 

As discussed above, section 1071 does 

not speak to verification; rather it refers 

only to compiling and maintaining a 

record of certain information provided 

by an applicant. However, the Bureau 

believes that requiring financial 

institutions to collect and report (for the 

1071 rule) information that they have 

already verified would not add 

operational difficulty, and would 

enhance the accuracy and usefulness of 

the data, thereby furthering the 

purposes of section 1071. The Bureau is 

implementing this requirement 

pursuant to its authority under ECOA 

section 704B(g)(1) to prescribe rules in 

order to carry out, enforce, and compile 

data pursuant to section 1071, and as an 

interpretation of the statutory phrase 

‘‘compile and maintain’’ in ECOA 

section 704B(e)(1). In the Bureau’s view, 

the verification that the financial 

institution chooses to carry out is part 

of compiling and maintaining the 

information provided by the applicant, 

and this requirement will improve the 

quality and usefulness of the resulting 

1071 data set. 

As discussed above, many SERs and 

other stakeholders opposed the 

inclusion of a verification requirement, 

and the Bureau has taken their input 

into account when crafting this 

proposed provision. 

The Bureau seeks comment on its 

proposed approach to verification of the 

1071 data points, including the specific 

guidance that would be presented in 

comment 107(b)–1. The Bureau also 

seeks comment on whether financial 

institutions should be required to 

indicate whether particular data points 

being reported have been verified or not. 

107(c) Time and Manner of Collection 

107(c)(1) In General 

Background 

Although the definition of 

‘‘application’’ triggers a financial 

institution’s duty to collect 1071 data, 

the application definition does not 

necessarily govern when that data must 

be collected. The language and structure 

of section 1071—which applies to 

‘‘applications’’ from ‘‘applicants’’— 

indicates that the data must be collected 

sometime during the application 

process, but does not provide further 

detail.692

Financial institutions have expressed 

concern about when applicant-provided 

data must be collected, and particularly 

the timing of collecting applicants’ 

protected demographic information 

(that is, whether the applicant is a 

minority-owned business or a womenowned business, and the ethnicity, race, 

and sex of the applicant’s principal 

owners, pursuant to proposed 

§ 1002.107(a)(18) through (20)). 

Collecting this protected demographic 

information from applicants for 

purposes of section 1071 has been a 

particular concern for financial 

institutions, as financial institutions 

currently are generally prohibited from 

collecting such information except in 

narrow circumstances.693 As such, its 

required collection under section 1071 

will be a departure from current practice 

for most financial institutions. 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated that it was not currently 

considering specifying a particular time 

period in which financial institutions 

must seek to collect 1071 data from 

applicants.694 It also conveyed that it 

was seeking to provide financial 

institutions discretion and flexibility to 

time their 1071 data collection at a point 

during the application process that 

works best for their processes and 

relationships with applicants and to 

avoid unnecessary costs, while still 

fulfilling section 1071’s purposes. The 

Bureau also noted that it had considered 

possible alternatives of requiring 

financial institutions to collect 1071 

data within or by a specified time 

period, such as simultaneous with the 

triggering of an ‘‘application,’’ before 

obtaining a ‘‘completed application,’’ or 

before notifying the applicant of action 

taken. 

Most SERs that addressed the issue of 

timing for data collection indicated that 

they plan to collect 1071 data, and 

particularly applicants’ protected 

demographic information (as would be 

required under proposed 

§ 1002.107(a)(18) through (20)), early in 

the application process and likely at the 

time an application is initially being 

submitted.695 These SERs felt that the 

longer they wait to request 1071 data, 

the more difficult or infeasible it will be 

to gather the information from 

applicants. Another SER urged the 

Bureau to give financial institutions 

flexibility to explore optimal timing for 

collection of 1071-required protected 

demographic information in order to 

maximize the response rate without 

discouraging applicants from pursuing 

the application. This SER suggested that 

protected demographic information 

should be collected during the 

application process, but before the 

application is considered complete. The 

SBREFA Panel recommended that the 

Bureau seek comment on whether it is 

necessary to specify a time period 

specifically for the collection of 1071- 

required protected demographic 

information, and if so, what would be 

the best period to designate.696


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Nearly all industry stakeholders to 

comment on this issue supported the 

Bureau not specifying a time period, 

and instead giving financial institutions 

discretion to set their own optimal 

timing for the collection of applicantprovided 1071 data. The commenters 

noted that given the variety of products, 

financial institutions, and business 

models in small business lending, a onesize-fits-all approach would be 

unworkable and could disrupt financial 

institutions’ processes. Some 

commenters also highlighted the 

complexity of small business lending 

applications and stated that flexible 

collection would provide greater 

simplicity, reduce burden, and allow for 

more accurate reporting, particularly 

where not all the data points are 

available at the time of collection. A few 

commenters sought flexibility due to 

concerns that if protected demographic 

information is collected early on in the 

process, an applicant would believe that 

information would be used to 

discriminate against them. One 

commenter suggested looking at 

FinCEN’s customer due diligence rule, 

which allows for information collection 

at the time of closing. Although industry 

commenters generally favored 

flexibility, several stated they would 

likely collect 1071 data as early as 

possible in order to ensure data quality 

and collection. One stakeholder stated 

that applicant-provided data would be 

impossible to get if an application is 

withdrawn, incomplete, or denied 

before the required data are requested. 

Another industry commenter suggested 

the Bureau allow flexibility, but provide 

a safe harbor for financial institutions 

that collect applicant-provided data 

points on or with the application. 

Many of the commenters seeking 

flexibility stated that point-of-sale (POS) 

applications would be particularly 

problematic with a rigid timing 

requirement. POS applications include 

those private label credit cards or other 

products offered through retailers in 

which the financial institution itself 

does not interact with the applicant at 

the time of application. POS 

applications are taken in a variety of 

different settings and locations, such as 

at the checkout line, online, or at 

customer service desks. Commenters 

urged that they would need additional 

flexibility for a POS application to 

request 1071 data, such as at some point 

reasonably following application 

submission. Commenters cited concerns 

about the accuracy and completeness of 

data collected in a POS application: 

Interactions are with retailer’s 

employees who may not be able to 

answer questions about the data 

collection, interactions often take place 

in a public place (which may lead to 

erroneous answers or refusals to 

answer), and the person submitting a 

POS application may not have relevant 

knowledge to respond to the 1071- 

required questions, leading to delayed 

or abandoned applications. Commenters 

also expressed concern that reporting of 

POS applications would reflect the 

retailer’s lending footprint, not the 

financial institution’s, and so lead to 

incorrect assumptions about the 

financial institution’s lending. 

A number of stakeholders, including 

community groups and several financial 

institutions, urged the Bureau to specify 

a time period for the collection of 1071 

data, stating that failure to do so would 

undermine the accuracy of the data. The 

commenters stated that complete 

flexibility would result in inconsistent 

and unreliable data since financial 

institutions would be collecting the data 

at different stages of the application 

process. The commenters stated that 

financial institutions that wait to collect 

the data would have difficulty obtaining 

applicant-provided information if the 

application was withdrawn, incomplete, 

or denied. The commenters also noted 

that discrimination is likely to occur in 

the early stages of the application 

process, and would not be captured if 

financial institutions are permitted to 

delay data collection. One commenter 

stated that requiring collection at the 

time of application could also promote 

non-discriminatory treatment as it 

would impress upon lenders and 

applicants the need for fair treatment. 

An industry commenter stated that not 

specifying a time period may lead to 

financial institution regulatory paralysis 

or confusion about when to collect 1071 

data from applicants. 

Among commenters that 

recommended a specific time period for 

collection, many suggested collecting 

applicant-provided data at the time of 

an application or otherwise ‘‘upfront.’’ 

One commenter noted that 1071- 

required data could be built into the 

application itself. On the other hand, 

several commenters suggested 1071 data 

should be collected any time before an 

application is considered complete or, 

one commenter suggested, when 

financial institutions know that 1071 

collection will be required. The 

commenters stated that this would be 

the time period during which applicants 

are most likely to voluntarily provide 

the data, would ensure comparable data 

across lenders, and would still provide 

financial institutions flexibility to 

account for various application 

processes. One commenter suggested 

testing and focus groups to determine 

optimal timing. Otherwise, the 

commenter suggested 1071 data be 

collected before a financial institution 

disburses funds to the applicant. 

Proposed Rule 

The Bureau is proposing 

§ 1002.107(c)(1), which would require a 

covered financial institution to maintain 

procedures to collect applicantprovided data under proposed 

§ 1002.107(a) at a time and in a manner 

that is reasonably designed to obtain a 

response. The Bureau agrees with SERs 

and other stakeholders about the 

benefits of providing a flexible approach 

concerning when applicant-provided 

data must be collected during the 

application process. As noted by some 

commenters, given the variety of 

application processes in the small 

business lending space, requiring 1071 

data collection to occur within a narrow 

window may affect data quality and 

disrupt financial institution practices. 

On the other hand, the Bureau believes 

that safeguards are necessary to ensure 

that financial institutions are not 

evading or delaying their obligation to 

collect 1071 data in a manner that 

detrimentally affects response rates. In 

light of these considerations, the Bureau 

is proposing an approach that would 

maintain flexibility, but require a 

financial institution to maintain 

procedures to collect applicantprovided data at a time and in a manner 

that is reasonably designed to obtain a 

response. This proposal thus 

implements the flexible approach under 

consideration in the SBREFA Outline, 

though with additional safeguards. 

Proposed comments 107(c)(1)–1 and 

–2 would clarify the meaning of 

financial institution ‘‘procedures’’ and 

reiterate a financial institution’s latitude 

to establish procedures concerning the 

timing and manner that it collects 

applicant-provided data, provided that 

those procedures are reasonably 

designed to collect the applicantprovided data in proposed 

§ 1002.107(a). 

Proposed comment 107(c)(1)–3 would 

clarify what constitutes ‘‘applicantprovided data’’ in proposed 

§ 1002.107(c)(1). The proposed 

comment would also clarify that 

applicant-provided data does not 

include data that is generated or 

supplied only by the financial 

institution. The Bureau believes this 

clarification would address commenter 

concerns that certain data points 

collected early in the process may not 

be as accurate (or available) as data 

available at a later time—for example, 


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697As discussed in greater detail in part VI below, 

the Bureau is proposing not to determine what data 

to include in the public application-level 1071 data 

until after it receives at least one full year of 1071 

data reported by financial institutions. Following 

the compliance date of the final rule, the Bureau 

proposes to issue a policy statement setting forth its 

intended modifications and deletions to the public 

application-level 1071 data. Of course, the Bureau 

acknowledges that the availability and robustness of 

a peer analysis would also depend on the extent to 

which 1071 data are made publicly available. 

698 In order to help identify such transactions, the 

Bureau is proposing to collect information about the 

application recipient. See proposed 

§ 1002.107(a)(4). 

699 31 CFR 1010.230(h)(1)(i). 

information on action taken is only 

available late in the application process. 

Proposed comment 107(c)(1)–4 would 

provide additional guidance on 

financial institutions’ procedures that 

are reasonably designed to obtain a 

response. As noted in proposed 

comment 107(c)(1)–4, a financial 

institution would assess on a periodic 

basis whether its procedures are 

reasonably designed. One way a 

financial institution may be able to 

assess whether its procedures are 

reasonably designed would be, once 

1071 data are made publicly available, 

to compare its response rate with 

similarly situated financial institutions 

(for example, those that offer similar 

products, use a similar lending model, 

or are of a similar size).697 The Bureau 

also anticipates that the response rate 

will differ depending on the data point: 

Some applicant-provided data points 

(for example, time in business) may 

have a higher response rate than other 

applicant-provided data points (such as 

a principal owner’s race, sex, and 

ethnicity). The key is for a financial 

institution to assess on a periodic basis 

whether its procedures are reasonably 

designed to obtain a response. 

Proposed comments 107(c)(1)–5 and 

–6 would provide examples of 

procedures that generally are and are 

not reasonably designed to obtain a 

response. Although the inquiry requires 

a fact-based determination, the Bureau 

believes providing examples and further 

guidance of practices that likely are and 

are not reasonably designed to obtain a 

response would facilitate compliance 

and promote best practices. For 

example, the Bureau believes that, as a 

general matter, once there is a ‘‘covered 

application,’’ the earlier a financial 

institution seeks to collect applicantprovided information, the greater the 

likelihood of obtaining an applicant 

response (particularly for covered 

applications that are later withdrawn or 

left incomplete). Thus, the Bureau 

believes that, as a general matter, a 

procedure reasonably designed to obtain 

a response is one in which a financial 

institution requests applicant-provided 

data at the time of a covered 

application. For example, it could 

request these data in connection with a 

written application form, provided any 

collection form requesting applicants’ 

protected demographic information 

pursuant to proposed § 1002.107(a)(18) 

through (20) is separate from the 

application form and other documents 

used to collect other information related 

to the application, as would be required 

by proposed § 1002.111(b). Collecting 

applicant-provided data after a covered 

application is submitted—for example, 

while the application is being 

completed through the submission of 

additional documents and 

verifications—may be reasonably 

designed to obtain a response 

depending on the particular financial 

institution’s procedures, with earlier 

collections more likely to be reasonably 

designed. The Bureau believes 

providing such compliance examples 

would incentivize early collection and 

be consistent with the practice many 

SERs and other industry commenters 

indicated they planned to follow in any 

event. While some commenters stated 

that an applicant may be reluctant to 

respond to early collection due to 

concerns that the information may be 

used to discriminate against them, the 

Bureau believes those concerns can be 

addressed through the use of a data 

collection form (such as the sample 

collection form in proposed appendix E) 

that would explain to applicants the 

reason the information is being 

collected. Moreover, the Bureau notes 

that financial institutions regularly 

collect data required by HMDA and 

Regulation C at the time of application 

without significant issue and that the 

sample data collection form in 

Regulation C similarly provides an 

explanation to applicants as to the 

reason protected demographic 

information is being collected. 

Conversely, the Bureau believes that, 

as a general matter, it is unlikely that 

small business applicants will respond 

to data requests that occur simultaneous 

with or after notifying an applicant of 

action taken on the covered application. 

Depending on the particular facts, 

however, these procedures may be 

reasonably designed to obtain a 

response; for example, if the financial 

institution has evidence or a reason to 

believe that under its procedures the 

response rate would be similar to or 

better than other alternatives. Although 

a fact-based determination, proposed 

comment 107(c)(1)–6 would clarify that 

such procedures would generally not be 

considered ‘‘reasonably designed.’’ 

Proposed comment 107(c)(1)–7 would 

explain that a financial institution 

reports updated applicant-provided data 

if it obtains more current data during 

the application process. Proposed 

comment 107(c)(1)–8 would provide 

guidance in the event a financial 

institution changes its determination 

regarding an applicant’s status as a 

small business. 

Many industry commenters discussed 

the need for additional flexibility 

specifically for POS applications. The 

Bureau understands that many (though 

not all) POS applications, particularly 

those for smaller credit amounts or to 

purchase particular goods in a store, are 

often submitted on-site at POS and 

decisioned in real time. Under proposed 

§ 1002.107(c)(1) and associated 

commentary, the Bureau anticipates that 

most financial institutions would 

generally collect applicant-provided 

1071 data at POS, and not at some later 

time after the credit request has been 

decisioned and the applicant has left the 

store, as suggested by some commenters. 

Despite the comments on this issue, the 

Bureau is not proposing a different 

approach for collecting applicantprovided data specifically for POS 

applications. Commenters raised 

concerns about retail employees seeking 

to collect 1071 required data in a public 

setting. However, the Bureau believes 

that financial institutions can develop 

procedures to accommodate collection 

in this setting, including (as discussed 

above) by using the sample collection 

form developed by the Bureau. The 

Bureau also does not believe that any 

specialized knowledge is necessary to 

collect 1071 data, and so believes that 

retail employees can collect the 

information. Although it is possible that 

the accuracy of the data collected in 

POS applications may be more prone to 

errors, as some commenters allege, the 

Bureau believes that having such data, 

even with decreased accuracy, would be 

preferable to not having any applicantprovided data for such applications.698

Several industry commenters 

suggested the Bureau look to FinCEN’s 

customer due diligence (CDD) rule, 

which excludes from certain of its 

requirements POS transactions to 

provide credit products solely for the 

purchase of retail goods/services up to 

a limit of $50,000.699 The Bureau is not 

proposing to take this approach given 

the different purposes and requirements 

of the CDD rule and section 1071. The 

purpose of the CDD rule is to improve 

financial transparency and prevent 

criminals and terrorists from misusing 

companies to disguise their illicit 

activities and launder their ill-gotten 


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700See FinCEN, Information on Complying with 

the Customer Due Diligence (CDD) Final Rule, 

https://www.fincen.gov/resources/statutes-andregulations/cdd-final-rule (last visited Aug. 6, 

2021). 701 Id. 702FinCEN, Guidance, at Q 29 (Apr. 3, 2018), 

https://www.fincen.gov/sites/default/files/2018-04/ 

FinCEN_Guidance_CDD_FAQ_FINAL_508_2.pdf. 703FinCEN’s CIP rule does not include a point of 

sale exclusion. While the rule permits verification 

of the identity of the customer within a reasonable 

time after the account is opened, the collection of 

required customer information must occur prior to 

account opening. See 31 CFR 1020.220(a)(2)(i)(A) 

and (ii). 704SBREFA Outline at 35–36. 

gains.700 Under the CDD rule, covered 

financial institutions must identify and 

verify the identity of natural persons 

(known as beneficial owners) of legal 

entity customers who own, control, and 

profit from companies when those 

companies open accounts.701 The CDD 

exclusion for certain POS transactions is 

based on the ‘‘very low risk posed by 

opening such accounts at [a] brick and 

mortar store.’’ 702 While the CDD rule 

(and the customer identification 

program (CIP) rule 703) focus on 

accounts (including certain originated 

loans), obtaining data on denials is 

essential to 1071’s purposes. Moreover, 

unlike the CDD and CIP rules, which 

require covered financial institutions to 

collect certain essential information, 

section 1071 only requires that financial 

institutions seek to collect applicants’ 

protected demographic information, and 

permits applicants to refuse to provide 

that information. Given these key 

differences, the Bureau is not proposing 

to follow the CIP and CDD rules 

concerning timing of collection or the 

exclusion of certain POS applications. 

The Bureau seeks comment on 

proposed § 1002.107(c)(1) and 

associated commentary. As 

recommended by the SBREFA Panel, 

the Bureau seeks comment on whether 

it is necessary to specify a time period 

specifically for the collection of 

protected 1071 demographic 

information, and if so, what time period 

the Bureau should designate. The 

Bureau also seeks comment on the 

examples set forth in proposed 

comments 107(c)(1)–5 and –6, and 

whether it would be useful to provide 

additional examples of procedures that 

are and that are not reasonably designed 

to obtain a response. In addition, the 

Bureau seeks comment on its proposed 

approach for POS applications, 

including its proposal that would not 

make any particular exceptions for the 

timing and manner of 1071 data 

collection for POS applications. 

107(c)(2) Previously Collected Data 

In the SBREFA Outline, the Bureau 

emphasized that it was seeking to 

provide financial institutions with 

discretion and flexibility in the timing 

of 1071 data collection, in light of 

considerations including their 

relationships with applicants and the 

need to avoid unnecessary costs.704 The 

Bureau did not specifically discuss 

whether a financial institution could 

meet its 1071 obligations on a covered 

application by reusing certain data it 

had previously collected from the same 

applicant. In response to the Bureau’s 

proposal under consideration 

concerning timing of collection of 

certain 1071 data, however, a 

commenter suggested financial 

institutions provide annual certification 

of 1071 data where there is an ongoing 

customer relationship. The commenter 

noted that the data are unlikely to 

change within a year, there may be 

multiple transactions during that time, 

and it would avoid financial institutions 

and applicants having to provide the 

information during the application 

process, saving time and expense. 

The Bureau is proposing 

§ 1002.107(c)(2), which would permit, 

but not require, a financial institution to 

reuse previously collected data to satisfy 

proposed § 1002.107(a)(13) through (21) 

if the data were collected within the 

same calendar year as the current 

covered application and the financial 

institution has no reason to believe the 

data are inaccurate. The Bureau believes 

that, absent a reason to suspect 

otherwise, recently collected 1071 data 

are likely to be reliable. Additionally, 

the Bureau believes that a flexible 

approach giving financial institutions 

discretion to reuse these data is 

consistent with the approach the Bureau 

proposed at SBREFA. Although 

proposed § 1002.107(c)(2) would apply 

to certain data collected within the same 

calendar year, nothing prevents a 

financial institution from confirming 

with the applicant whether information 

collected more than a year ago from the 

applicant remains accurate. 

Proposed comment 107(c)(2)–1 would 

provide an example of how certain 

previously collected data can be reused 

by a financial institution. Proposed 

comment 107(c)(2)–2 would identify the 

particular data that can be reused. The 

comment would also clarify that other 

data required by proposed § 1002.107(a) 

could not be reused, as those data points 

are specific and unique to each covered 

application. Proposed comment 

107(c)(2)–3 would clarify instances 

where data have not been ‘‘previously 

collected’’ and so cannot be reused 

under proposed § 1002.107(c)(2). 

Proposed comment 107(c)(2)–4 would 

provide guidance on when information 

is considered collected in the same 

calendar year, and so may be reused by 

a financial institution in certain 

circumstances. In particular, the 

proposed comment discusses 

applications that span more than one 

calendar year. 

Proposed comment 107(c)(2)–5 would 

provide clarity and an example of when 

a financial institution has reason to 

believe data may be inaccurate, and so 

cannot be reused for a subsequent 

covered application. Finally, proposed 

comments 107(c)(2)–6 and –7 would 

provide guidance on when data 

regarding minority-owned business 

status, women-owned business status, 

and data on the principal owners’ 

ethnicity, race, and sex may be reused 

by a financial institution in a 

subsequent covered application. 

The Bureau seeks comment on 

§ 1002.107(c)(2) and associated 

commentary. The Bureau also seeks 

comment on whether a period of one 

calendar year to reuse certain previously 

collected data is appropriate or whether 

it should be extended to a longer period 

(such as two or three years). In addition, 

the Bureau seeks comment on whether 

financial institutions should be required 

to notify applicants that information 

they provide (including, in particular, 

minority-owned business status, 

women-owned business status, and the 

principal owners’ ethnicity, race, and 

sex) could be reused for subsequent 

applications. 

Section 1002.108 Firewall 

Background 

ECOA section 704B(d) generally 

restricts the access of certain 

individuals at a financial institution or 

its affiliates to certain information 

provided by an applicant pursuant to 

section 1071. The Bureau calls this 

requirement in 704B(d) a ‘‘firewall.’’ 

More specifically, 704B(d)(1) states that 

‘‘[w]here feasible,’’ underwriters and 

other officers and employees of a 

financial institution or its affiliates 

‘‘involved in making any determination 

concerning an application for credit’’ 

cannot have access to any information 

provided by the applicant pursuant to a 

request under 704B(b). That is, the 

statute limits access not only by 

underwriters and persons making an 

underwriting decision but also by 

anyone else involved in making any 

determination concerning an 

application. However, it does not 

expressly define the term ‘‘feasible’’ or 

provide clarification regarding what it 

means to be involved in making any 


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705As explained in the Overview to this part V, 

the Bureau is not proposing to require financial 

institutions to maintain and report a data point on 

small business status. 706SBREFA Outline at 36–37. 

determination concerning an 

application for credit. 

Additionally, under ECOA section 

704B(d)(2), if the financial institution 

determines that an underwriter, 

employee, or officer involved in making 

a determination ‘‘should have access’’ to 

any information provided by the 

applicant pursuant to a request under 

704B(b), the financial institution must 

provide a notice to the applicant of the 

underwriter’s access to such 

information, along with notice that the 

financial institution may not 

discriminate on the basis of such 

information. Section 704B(d)(2) does 

not expressly define or describe when 

an underwriter, employee, or officer 

‘‘should have access,’’ nor does it 

explain the relationship, if any, between 

when a financial institution determines 

that an individual ‘‘should have access’’ 

under 704B(d)(2) and whether it is 

‘‘feasible’’ to implement and maintain a 

firewall under 704B(d)(1). 

The Bureau believes that ECOA 

section 704B(d) contains significant 

ambiguities with respect to how 

financial institutions, in practical terms, 

should determine how to implement a 

firewall to limit underwriters’, 

employees’, and officers’ access to the 

information provided by applicants 

pursuant to section 704B(b). Indeed, 

based on feedback from SERs and other 

commenters, the Bureau believes that in 

many instances financial institutions 

that find it not ‘‘feasible’’ to implement 

and maintain a firewall will be the same 

institutions determining that relevant 

individuals ‘‘should have access’’ to the 

information provided by an applicant 

pursuant to 704B(b). The Bureau further 

believes that reading these two 

provisions in isolation from each other 

would result in significant confusion 

and challenges, particularly for smaller 

financial institutions. 

Accordingly, the Bureau believes that 

section 1071’s firewall requirement is 

best implemented by reading the 

‘‘should have access’’ language in ECOA 

section 704B(d)(2) in conjunction with 

the ‘‘feasibility’’ language in 704B(d)(1). 

In 704B(d)(1), if it is feasible to 

implement and maintain a firewall, then 

underwriters, other employees, and 

officers shall not have access to the 

information subject to the firewall; but 

it is not feasible to implement and 

maintain a firewall if an underwriter, 

other employee, or officer subject to the 

firewall should have access to that 

information. If it is not feasible to 

implement and maintain a firewall, then 

that underwriter, other employee, or 

officer who should have access is 

permitted to have access so long as the 

financial institution provides a notice to 

the applicant. 

As discussed in greater detail above in 

E.2 of the Overview to this part V, the 

Bureau also believes that section 1071 is 

ambiguous with respect to the meaning 

of ‘‘any information provided by the 

applicant pursuant to a request under 

subsection (b).’’ On the one hand, ECOA 

section 704B(b)(1) directs financial 

institutions to inquire whether a 

business is ‘‘a women-owned, minorityowned, or small business,’’ so the 

phrase could be interpreted as referring 

only to those three data points. Section 

704B(e), however, indicates that the 

scope of 704B(b) is much broader. It 

instructs financial institutions that 

‘‘information provided by any loan 

applicant pursuant to a request under 

subsection (b) . . . shall be itemized in 

order to clearly and conspicuously 

disclose’’ data including the loan type 

and purpose, the amount of credit 

applied for and approved, and gross 

annual revenue, among others. In other 

words, 704B(e) designates all of the 

information that financial institutions 

are required to compile and maintain— 

not simply an applicant’s status as a 

women-owned, minority-owned, or 

small business—as information 

provided by an applicant ‘‘pursuant to 

a request under subsection (b).’’ But 

information deemed provided pursuant 

to 704B(b) is subject not only to the 

firewall under 704B(d) but also to a 

right to refuse under 704B(c) and 

separate recordkeeping requirements 

under 704B(b)(2). Applying these 

special protections to many of the data 

points in 704B(e), such as an applicant’s 

gross annual revenue or the amount 

applied for, would be extremely 

difficult to implement because this 

information is critical to financial 

institutions’ ordinary operations in 

making credit decisions. 

In order to resolve these ambiguities, 

the Bureau believes that the best reading 

of the statute is to give different 

meanings to the phrase ‘‘any 

information provided by the applicant 

pursuant to a request under subsection 

(b)’’ with respect to ECOA section 

704B(e) as opposed to 704B(b)(2), (c), 

and (d). As relevant here, with respect 

to the firewall in ECOA section 704B(d), 

the Bureau interprets the phrase to refer 

to the data points in proposed 

§ 1002.107(a)(18) (minority-owned 

business status) and proposed 

§ 1002.107(a)(19) (women-owned 

business status), as well as proposed 

§ 1002.107(a)(20) (ethnicity, race, and 

sex of principal owners). Each of these 

data points require financial institutions 

to request demographic information that 

has no bearing on the creditworthiness 

of the applicant. Moreover, a financial 

institution could not inquire about this 

demographic information absent section 

1071’s mandate to collect and report the 

information, and ECOA prohibits a 

financial institution from discriminating 

against an applicant on the basis of the 

information. The Bureau accordingly 

believes that the best effectuation of 

congressional intent is to apply section 

1071’s special-protection provisions to 

apply to this demographic information, 

regardless of whether the statutory 

authority to collect it originates in 

704B(b)(1) (women-owned business 

status and minority-owned business 

status) or 704B(e)(2)(G) (race, sex, and 

ethnicity of principal owners). The 

Bureau similarly believes that Congress 

did not intend these special protections 

to apply to any of the other data points 

proposed in § 1002.107(a), which the 

financial institution is permitted to 

request regardless of coverage under 

section 1071, which are not the subject 

of Federal antidiscrimination law, and 

many of which financial institutions 

currently use for underwriting 

purposes.705

The Bureau is proposing § 1002.108 to 

implement ECOA section 704B(d) and, 

pursuant to its authority in 704B(g)(1), 

to prescribe such rules and issue such 

guidance as may be necessary to carry 

out, enforce, and compile data pursuant 

to section 1071. 

SBREFA Proposal Under Consideration 

and Feedback 

Information subject to the firewall. In 

the SBREFA Outline, the Bureau stated 

that it was considering proposing that 

financial institutions need only limit 

access under ECOA section 704B(d) to 

an applicant’s responses to the financial 

institution’s specific inquiries regarding 

women-owned and minority-owned 

business status and the ethnicity, race, 

and sex of principal owners, but not to 

an applicant’s small business status.706

As discussed below, many SERs and 

other commenters suggested that 

restricting access to protected 

demographic information obtained to 

comply with section 1071 (i.e., 

minority-owned business status, 

women-owned business status, and the 

principal owners’ ethnicity, race, and 

sex) would be difficult for their 

institutions. Although these SERs and 

other commenters generally did not 

comment on the scope of information 

that the Bureau considered proposing be 

subject to the firewall (other than to say 


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707SBREFA Panel Report at 47. 

708SBREFA Outline at 36–37. 

709The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 33–34. 

710 Id. at 47. 

711SBREFA Outline at 36–37. 

that liming access would be difficult), 

one commenter said that small business 

status should not be subject to the 

firewall and another commenter said 

that it should. 

The SBREFA Panel recommended 

that the Bureau propose clear guidance 

on what information is subject to the 

firewall requirement.707

Feasibility of maintaining a firewall. 

In the SBREFA Outline, the Bureau also 

stated that it was considering how it 

might apply the feasibility standard in 

ECOA section 704B(d)(1) and asked 

several questions related to this 

standard.708 Several SERs that take inperson or paper applications or that 

have very limited commercial lending 

staff stated that it would be costly or 

impossible for them to restrict access to 

applicants’ protected demographic 

information by underwriters and other 

persons involved in making 

determinations concerning applications 

from small businesses.709 In contrast, 

several SERs that operate entirely online 

said that it would be relatively easy for 

them to restrict access to applicants’ 

protected demographic information. 

Another SER said that it could restrict 

access to protected demographic 

information for applications received 

online (though not for paper 

applications), but that it would 

necessitate an overhaul of its online 

system. 

Many other stakeholders providing 

feedback on the SBREFA Outline said 

that it would not be possible to limit 

access to applicants’ protected 

demographic information or that 

attempting to do so would be costly and 

time consuming. Some other 

commenters suggested that 

implementing and maintaining a 

firewall would be impossible for all 

financial institutions or certain 

categories of financial institutions (i.e., 

smaller financial institutions, 

community banks, credit unions). 

Generally, these commenters requested 

exemptions from the firewall 

requirement for either all financial 

institutions or specific categories of 

financial institutions. Generally, 

commenters were concerned about the 

costs associated with hiring additional 

staff, outsourcing additional functions, 

or making system changes to implement 

and maintain the firewall. However, 

some commenters indicated that 

financial institutions should not be 

required to change their existing 

application or other processes to 

maintain a firewall and noted that 

underwriters and officers who gather 

information from small business 

applicants also make determinations 

regarding such applications. 

Commenters noted that implementing a 

firewall would necessitate more points 

of contact between employees of the 

financial institution and an applicant 

and would require financial institutions 

to reassign job duties and retrain 

existing employees. 

Importantly, many comments from 

SERs and others seemed to reflect 

confusion about the intended scope of 

the firewall. For example, some SERs 

and other commenters seemed to think 

that the firewall would prohibit 

employees who were generally aware of 

an applicant’s business status or of a 

principal owner’s ethnicity, race, and 

sex, such as due to participation in 

outside organizations or activities, from 

making any determinations regarding 

applications. One commenter remarked 

that it would be impossible to comply 

with the firewall requirement if a 

financial institution required a principal 

owner to provide a driver’s license. 

Additionally, some SERs and other 

commenters requested guidance on the 

scope and applicability of the firewall, 

indicating that the SBREFA Outline was 

not sufficiently clear regarding the 

firewall’s scope. 

The SBREFA Panel recommended 

that the Bureau propose a clear 

feasibility standard that takes into 

account the costs of establishing and 

maintaining a firewall to limit access by 

underwriters and other persons.710

Providing a notice in lieu of the 

firewall. In the SBREFA Outline, the 

Bureau also stated that it was 

considering proposing to interpret 

ECOA section 704B(d)(2) to permit 

financial institutions to give 

underwriters, employees, and officers 

access to applicants’ responses 

regarding women-owned business 

status, minority-owned business status 

and the principal owners’ race, sex, and 

ethnicity when the financial institution 

determines that such access is needed 

for the underwriter, employee, or officer 

to perform usual and regularly assigned 

job duties.711 In such circumstances, the 

financial institution would need to 

comply with the statutory requirement 

to provide a notice in lieu of limiting 

access. The Bureau also stated in the 

SBREFA Outline that the financial 

institution could provide the notice to 

all small business applicants or the 

specific applicant or applicants whose 

information will or may be accessed. 

The Bureau also stated that it was 

considering developing sample 

disclosure language that financial 

institutions could use when providing 

the notice under 704B(d)(2) and that the 

notice under 704B(d)(2) need not 

include language regarding small 

business status. 

SERs and other stakeholders generally 

were supportive of providing a notice to 

applicants in lieu of restricting access to 

applicants’ protected demographic 

information obtained for purposes of the 

1071 rule. Several stated that it should 

be permissible to provide a disclosure or 

notice to meet the firewall requirement, 

and others stated that a financial 

institution should be permitted to 

provide a notice to meet the firewall 

requirement if the financial institution 

itself determines that establishing and 

maintaining a firewall was not feasible. 

However, one industry commenter 

stated that financial institutions should 

not be required to provide a notice to 

comply with the firewall requirement, 

and one SER said that use of the notice 

should be optional. This SER suggested 

that requiring the use of a notice may 

cause confusion for the applicant and 

have the unintended consequence of 

causing unfounded claims of 

discrimination if the application is 

denied. One SER cautioned that many 

people do not read notices and 

disclosures, and another SER suggested 

that financial institutions would not 

want to provide a notice because the 

loan process already involves too much 

paperwork. 

Several SERs and several other 

stakeholders indicated a preference for 

providing a notice to all applicants, not 

just those specific applicants whose 

protected demographic information was 

likely to be accessed by underwriters 

and others making decisions regarding 

applications. 

Several stakeholders supported a 

model notice. One SER as well as two 

other commenters asked that, if the 

Bureau provided sample language or a 

model notice, that the Bureau provide it 

in English as well as in other languages, 

such as Spanish. SERs and other 

stakeholders suggested a variety of 

statements that they thought should or 

should not be included in sample 

language or a model notice. They also 

provided a variety of suggestions on 

combining the notice with other 

documents, such as the application, 

sample data collection form, or with 

other required notices and disclosures. 

One SER requested that the Bureau 

clarify when a financial institution 

would be permitted to provide a notice 

in lieu of restricting access to 


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712SBREFA Panel Report at 47. 

713While ECOA section 704B(d) refers to 

underwriters and other officers and employees of a 

financial institution, or any affiliate of a financial 

institution, who are involved in making any 

determination concerning an application, the 

Bureau has clarified that underwriters are one 

classification or category of employees and officers 

who are involved in making a determination 

concerning an application. The Bureau has not 

separately listed underwriters as subject to the 

firewall because doing so is unnecessary given their 

inclusion in the larger group of employees and 

officers who are involved in making any 

determination concerning an application. 

applicants’ protected demographic 

information. Some stakeholders 

requested additional guidance on the 

timing and methods for providing a 

notice. 

The SBREFA Panel recommended 

that the Bureau propose to permit 

financial institutions to provide a notice 

to applicants instead of restricting 

access to applicants’ protected 

demographic information if it is not 

feasible for the financial institution to 

restrict such access.712

Proposed Rule 

The Bureau is proposing § 1002.108 to 

implement the firewall provisions in 

ECOA section 704B(d). Proposed 

§ 1002.108(a) would provide certain 

relevant definitions, proposed 

§ 1002.108(b) would state the general 

prohibition on access to applicants’ 

protected demographic information by 

certain persons, proposed § 1002.108(c) 

would explain the exception to that 

prohibition, and proposed § 1002.108(d) 

would provide language for the notice 

necessary in order to qualify for the 

exception. The Bureau is also proposing 

commentary. The Bureau’s proposed 

approach to § 1002.108 is consistent 

with its approach under consideration 

during the SBREFA process. The 

Bureau’s general rationale for how it 

reads the firewall provisions are set 

forth in this section-by-section analysis 

of proposed § 1002.108 above, under 

Background. 

Proposed § 1002.108(b) would state 

that, unless the exception under 

proposed § 1002.108(c) applies, an 

employee or officer of a covered 

financial institution or a covered 

financial institution’s affiliate shall not 

have access to an applicant’s responses 

to inquiries that the financial institution 

makes pursuant to this subpart 

regarding whether the applicant is a 

minority-owned business under 

proposed § 1002.107(a)(18) or a womenowned business under proposed 

§ 1002.107(a)(19), and regarding the 

ethnicity, race, and sex of the 

applicant’s principal owners under 

proposed § 1002.107(20), if that 

employee or officer is involved in 

making any determination concerning 

that applicant’s covered application. 

Consistent with the SBREFA Panel’s 

recommendation, proposed comment 

108(b)–1 would clarify the information 

that is subject to the prohibition on 

access (i.e., the firewall) and provide 

examples. First, proposed comment 

108(b)–1 would clarify that the 

prohibition in proposed § 1002.108(b) 

would apply only to an applicant’s 

responses to the inquiries that the 

covered financial institution makes to 

satisfy § 1002.107(a)(18) through (20) 

and provide examples. Second, 

proposed comment 108(b)–1 would 

clarify that the prohibition in proposed 

§ 1002.108(b) does not apply to 

ethnicity or race information about 

principal owners that the financial 

institution collects via visual 

observation or surname, or to an 

applicant’s responses to inquiries 

regarding minority-owned or womenowned business status, or principal 

owners’ ethnicity, race, or sex, made for 

other purposes and provide an example. 

It would also clarify that the prohibition 

does not apply if an employee or officer 

generally knows that an applicant is a 

minority-owned business or womenowned business, or knows the ethnicity, 

race, or sex of any of the applicant’s 

principal owners due to activities 

unrelated to the inquiries made to 

satisfy the financial institution’s 

obligations under subpart B, as well as 

provide an example. 

In response to SBREFA feedback 

requesting additional clarification and 

guidance on who would be subject to 

the firewall, proposed comment 108(b)– 

2 would clarify the scope of persons 

subject to the prohibition and provide 

examples. 

Additionally, the Bureau is proposing 

to define the phrase ‘‘involved in 

making any determination concerning a 

covered application.’’ Proposed 

§ 1002.108(a)(1) would define this 

phrase to mean participating in a 

decision regarding the evaluation of a 

covered application, including the 

creditworthiness of an applicant for a 

covered credit transaction. Thus, an 

employee or officer who participates in 

such decision would be subject to the 

prohibition in proposed § 1002.108(b), 

and thus could not have access to an 

applicant’s responses to the covered 

financial institution’s inquiries under 

proposed § 1002.107(a)(18) through (20) 

with regard to that covered application, 

unless the exception in proposed 

§ 1002.108(c) applies. 

Proposed comment 108(a)–1 would 

provide additional clarification 

regarding when an employee or officer 

is ‘‘involved in making any 

determination concerning a covered 

application.’’ In particular, it would 

clarify that an employee or officer is 

involved in making a determination 

concerning a covered application if the 

employee or officer makes, or otherwise 

participates in, a decision regarding the 

evaluation of a covered application or 

the creditworthiness of an applicant for 

a covered credit transaction. Proposed 

comment 108(a)–1 would note that this 

group of employees and officers 

includes, but is not limited to, 

employees and officers who serve as 

underwriters.713 Additionally, it would 

explain that the decision that the 

employee or officer makes or 

participates in must be about a specific 

covered application. An employee or 

officer would not be involved in making 

a determination concerning a covered 

application if the employee or officer is 

involved in making a decision that 

affects covered applications generally, 

the employee or officer interacts with 

small businesses prior to them 

becoming applicants or submitting a 

covered application, or the employee or 

officer makes or participates in a 

decision after the financial institution 

has taken final action on the 

application, such as decisions about 

servicing or collecting a covered credit 

transaction. 

Consistent with the SBREFA Panel’s 

recommendation, proposed 

§ 1002.108(c) would state that the 

prohibition in proposed § 1002.108(b) 

shall not apply to an employee or officer 

if a financial institution determines that 

it is not feasible to limit that employee’s 

or officer’s access to one or more of an 

applicant’s responses to the financial 

institution’s inquiries under 

§ 1002.107(a)(18) through (20) and the 

financial institution provides the notice 

required under proposed § 1002.108(d) 

to the applicant. Proposed § 1002.108(c) 

would further state that it is not feasible 

to limit access as required pursuant to 

proposed § 1002.108(b) if the financial 

institution determines that an employee 

or officer involved in making any 

determination concerning a covered 

application should have access to one or 

more applicants’ responses to the 

financial institution’s inquiries under 

proposed § 1002.107(a)(18) through (20). 

Proposed comment 108(c)–1 would 

clarify that a financial institution is not 

required to limit the access of a 

particular employee or officer who is 

involved in making determinations 

concerning covered applications if the 

financial institution determines that the 

particular employee or officer should 

have access to the information collected 


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pursuant to proposed § 1002.107(a)(18) 

through (20) and the financial 

institution provides the notice required 

by proposed § 1002.108(d). It would 

explain that a financial institution can 

determine that several employees and 

officers should have access or that all of 

a group of similarly situated employees 

or officers should have access, but that 

a financial institution cannot permit all 

employees and officers to have access 

simply because it has determined that 

one or more employees or officers 

should have access. It would also 

provide an example. 

Proposed § 1002.108(a)(2) would 

define the phrase ‘‘should have access’’ 

to mean that an employee or officer may 

need to collect, see, consider, refer to, or 

otherwise use the information to 

perform that employee’s or officer’s 

assigned job duties. Proposed comment 

108(a)–2 would explain that a financial 

institution may determine that an 

employee or officer should have access 

for purposes of proposed § 1002.108 if 

that employee or officer is assigned one 

or more job duties that may require the 

employee or officer to collect (based on 

visual observation, surname, or 

otherwise), see, consider, refer to, or use 

information otherwise subject to the 

prohibition in proposed § 1002.108(b). 

The employee or officer would not have 

to be required to collect, see, consider, 

refer to or use such information or to 

actually collect, see, consider, refer to or 

use such information. It would be 

sufficient if the employee or officer 

might need to do so to perform the 

employee’s or officer’s assigned job 

duties. This approach is similar to the 

approach under consideration during 

the SBREFA process, though in 

response to feedback received, the 

proposed definition would not require 

that the assigned job duties be usually 

or regularly assigned. Thus, an 

employee or officer would not be 

subject to the prohibition if the financial 

institution determines that the 

employee or officer might need to see, 

consider, refer to, or otherwise use the 

information an applicant provided 

pursuant to proposed § 1002.17(a)(18) 

through (20) to perform the employee’s 

or officer’s assigned job duties, and the 

financial institution provides the 

required notice to the applicant. 

Proposed comment 108(a)–2 would 

include an example of when a financial 

institution would be able to determine 

that an officer should have access and 

would state that, if a financial 

institution determines that an employee 

or officer who is involved in making any 

determination concerning a covered 

application should have access for 

purposes of § 1002.108, the financial 

institution is responsible for ensuring 

that the employee or officer only 

accesses and uses the protected 

information for lawful purposes. 

Additionally, proposed comment 

108(a)–2 would explain that a financial 

institution may determine that all 

employees or officers with the same job 

description or assigned duties should 

have access for purposes of § 1002.108 

and provide an example. 

Proposed § 1002.108(d) would 

describe the notice that a financial 

institution is required to provide to 

satisfy the exception in proposed 

§ 1002.108(c). Proposed § 1002.108(d) 

would state that, in order to satisfy the 

exception set forth in proposed 

§ 1002.108(c), a financial institution 

shall provide a notice to each applicant 

whose responses will be accessed, 

informing the applicant that one or 

more employees or officers involved in 

making determinations concerning the 

covered application may have access to 

the applicant’s responses to the 

financial institution’s inquiries 

regarding whether the applicant is a 

minority-owned business or a womenowned business, and regarding the 

ethnicity, race, and sex of the 

applicant’s principal owners. Proposed 

§ 1002.108(d) would also state that the 

financial institution shall provide this 

notice when making the inquiries 

required under § 1002.107(a)(18) 

through (20) and together with the 

notices required pursuant to 

§ 1002.107(a)(18) through (20). 

Proposed comment 108(d)–1 would 

explain that if a financial institution 

determines that one or more employees 

or officers should have access pursuant 

to proposed § 1002.108(c), then the 

financial institution must provide the 

required notice to, at a minimum, the 

applicant or applicants whose responses 

will be accessed by an employee or 

officer involved in making 

determinations regarding the applicant’s 

or applicants’ covered applications. It 

would also clarify that, as an alternative, 

the financial institution could provide 

the required notice to a larger group of 

applicants, including all applicants, if it 

determines that one or more officers or 

employees should have access. 

Proposed comment 108(d)–2 would 

describe the content of the required 

notice. It would state that the notice 

must inform the applicant that one or 

more employees and officers involved 

in making determinations regarding the 

applicant’s covered application may 

have access to the applicant’s responses 

regarding the applicant’s minorityowned business status, its womenowned business status, and its principal 

owners’ ethnicity, race, and sex. 

Proposed comment 108(d)–2 would note 

that the financial institution may, but is 

not required to, provide the notice on its 

data collection form. Additionally, 

proposed comment 108(d)–2 would 

include language for the required notice. 

A financial institution would be 

required to use the language set forth in 

proposed comment 108(d)–2 or 

substantially similar language when 

providing the notice. 

Comment 108(d)–3 would explain 

that if a financial institution is 

providing the notice required by 

proposed § 1002.108(d) orally, it must 

provide the notice prior to asking the 

applicant if it is a minority-owned 

business or women-owned business and 

prior to asking for a principal owner’s 

ethnicity, race, or sex. It would further 

explain that, if the notice required by 

proposed § 1002.108(d) is provided on 

the same paper or electronic data 

collection form as the inquiries about 

minority-owned business status, 

women-owned business status, and the 

principal owners’ ethnicity, race, or sex, 

the financial institution would be 

required to provide the notice at the top 

of the form. If the notice required by 

proposed § 1002.108(d) is provided in 

an electronic or paper document that is 

separate from the data collection form, 

the financial institution would be 

required to provide the notice at the 

same time as the data collection form or 

prior to providing the data collection 

form. Additionally, proposed comment 

108(d)–3 would clarify that the notice 

required pursuant to proposed 

§ 1002.108(d) must be provided with the 

non-discrimination notices required 

pursuant to proposed § 1002.107(a)(18) 

through (20) and would reference 

proposed appendix E for an example. 

The Bureau believes that its proposed 

approach reflects the feedback from 

most SERs and commenters who 

preferred to be able to give a notice and 

did not want to hire additional staff or 

change processes. While some 

commenters did not want to provide a 

notice, section 1071 requires that a 

financial institution provide a specific 

notice to an applicant if the financial 

institution determines that an employee 

or officer should have access to 

information otherwise subject to the 

firewall requirement. As an alternative 

to providing a notice, a financial 

institution could take the steps 

necessary to establish and maintain a 

firewall. 

The Bureau seeks comment on its 

proposed approach to the firewall 

requirement and whether a different 

approach might result in a better policy 

outcome. The Bureau also seeks 


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714SBREFA Outline at 39–40. 

715The SER feedback in this section-by-section 

analysis can be found in the SBREFA Panel Report 

at 34. 

716 Id. at 47. 

717Some financial institutions with over 60,000 

covered loans and applications must file HMDA 

data on a quarterly basis. 12 CFR 1003.5(a)(ii). 

comment on the scope of the proposed 

firewall and the exception. The Bureau 

specifically seeks comment on whether 

the firewall should apply to information 

about principal owners’ ethnicity and 

race that is obtained via visual 

observation and/or surname. Finally, 

the Bureau generally requests comment 

on whether additional clarification is 

needed regarding the firewall 

requirement. 

Section 1002.109 Reporting of Data to 

the Bureau 

Proposed § 1002.109 would address 

several aspects of financial institutions’ 

obligations to report 1071 data to the 

Bureau. First, proposed § 1002.109(a) 

would require 1071 data to be collected 

on a calendar year basis and reported to 

the Bureau by June 1 of the following 

year, and would address several related 

issues. Second, proposed § 1002.109(b) 

would detail the information that 

financial institutions must provide 

about themselves when reporting 1071 

data to the Bureau. Finally, proposed 

§ 1002.109(c) would address technical 

instructions for submitting data to the 

Bureau. 

The Bureau is proposing § 1002.109 to 

implement ECOA section 704B(f)(1) and 

pursuant to its authority under 

704B(g)(1) to prescribe such rules and 

issue such guidance as may be 

necessary to carry out, enforce, and 

compile data pursuant to section 1071. 

The Bureau is also proposing 

§ 1002.109(b) pursuant to 704B(e)(2)(H), 

which requires financial institutions to 

compile and maintain as part of their 

1071 data any additional data that the 

Bureau determines would aid in 

fulfilling the purposes of section 1071. 

109(a) Reporting to the Bureau 

109(a)(1) Annual Reporting 

Background 

ECOA section 704B(f)(1) provides that 

‘‘[t]he data required to be compiled and 

maintained under [section 1071] by any 

financial institution shall be submitted 

annually to the Bureau.’’ 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated it was considering proposing that 

financial institutions collect 1071 data 

on a calendar year basis, and that 

financial institutions report 1071 data to 

the Bureau by a specified time after the 

end of each calendar year.714

SERs and other stakeholders 

responded to various aspects of the 

Bureau’s proposals under consideration 

in the SBREFA Outline on reporting 

1071 data to the Bureau, including 

reporting frequency, reporting period, 

and submission date.715

Regarding reporting frequency, 

stakeholder comments were split. One 

SER suggested that data reporting be 

done on a calendar year basis, to avoid 

half-year measurements. Some other 

stakeholders—including several 

industry and trade association 

stakeholders, and a community group— 

also supported reporting no more or less 

frequently than once a year. Other 

stakeholders supported reporting on a 

more frequent basis than annually. In 

that latter group, another SER requested 

ongoing data reporting, arguing that 

more frequent reporting is less 

burdensome by permitting financial 

institutions to submit data as 

applications are received or loans are 

made. Three stakeholders (a community 

group, a think tank, and a community 

development lender trade association) 

also supported reporting more 

frequently than annually, especially for 

larger financial institutions, arguing that 

technology enables near real-time 

reporting. 

Regarding the reporting period and 

submission date, several trade 

associations supported collecting data 

on a calendar year basis. A community 

group suggested an alternative to 

calendar-year reporting, specifically a 

one-year collection period starting on 

July 1 and ending on June 30 the next 

year. The group argued that this 

alternative schedule would help 

financial institutions avoid overlapping 

obligations with the calendar year data 

collection schedule for HMDA. A SER 

cautioned against aligning the annual 

reporting dates for section 1071 with the 

reporting dates for HMDA, noting that 

reporting for both regimes at the same 

time could strain resources; other 

stakeholders echoed this view. Other 

stakeholders requested that the Bureau 

coordinate reporting dates with other 

Federal agencies, including those 

responsible for collecting data from 

CDFI Fund participants and banks 

subject to CRA reporting. 

Regarding reporting 1071 data to the 

Bureau, several SERs noted that they 

already report much of the data that a 

1071 rule would seem likely to require 

to the Treasury Department’s CDFI 

Fund. One SER requested that the 

Bureau coordinate with the CDFI Fund 

on consistency of definitions, types of 

data collection, and timing of reporting, 

and that the agencies should consider 

streamlining reporting requirements 

through data sharing. 

The SBREFA Panel recommended, 

regarding this issue as well as other 

recordkeeping and reporting issues 

addressed in the SBREFA Outline, that 

the Bureau seek comment on these 

aspects of a 1071 rule, and how best to 

implement them in a manner that 

minimizes cost and burden to small 

financial institutions.716

Proposed Rule 

The Bureau is proposing, in 

§ 1002.109(a)(1)(i), to require that by 

June 1 following the calendar year for 

which data are collected and 

maintained as required by proposed 

§ 1002.107, a covered financial 

institution shall submit its small 

business lending application register in 

the format prescribed by the Bureau. 

This approach to reporting frequency 

and reporting period is consistent with 

both the annual submission schedule 

specified in the statute as well as with 

the approach under consideration at 

SBREFA. 

Regarding reporting frequency, while 

several stakeholders and one SER 

advocated for more frequent reporting 

(especially via application programming 

interface (API)), annual reporting is 

consistent with what ECOA section 

704B(f)(1) provides and with HMDA for 

most filers.717 The Bureau is concerned 

that requiring more frequent reporting 

for 1071 data could be unduly onerous 

for financial institutions, especially 

small financial institutions and those 

with lower application volumes. 

Further, the Bureau is not proposing 

that financial institutions (small or 

otherwise) be permitted to submit their 

1071 data on a real-time basis. The 

Bureau believes that this would add 

complexity to the Bureau reporting 

system. The Bureau is concerned that 

this approach could result in financial 

institutions treating the Bureau as their 

official recordkeeping system for their 

1071 data. Financial institutions that 

were required to update or correct their 

data as a result of an audit, examination, 

or compliance review would need to 

make such changes within the Bureau’s 

system, requiring the Bureau to develop 

an infrastructure that not only accepts 

real-time submissions, but also real-time 

corrections to prior real-time 

submissions. Nonetheless, the Bureau is 

continuing to explore ways it might 

facilitate or streamline reporting, 

particularly for small financial 


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56494 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

institutions. See the section-by-section 

analysis of proposed § 1002.109(c) 

below for additional information. 

Regarding the reporting period, the 

Bureau believes there are advantages to 

having data collected and reported on a 

calendar year basis. Calendar year 

reporting may facilitate other aspects of 

the rule that depend on data that is 

typically recorded on a calendar year 

basis. For instance, other parts of the 

rule look to annual data, such as 

proposed § 1002.105(b), which would 

use a financial institution’s loan 

volumes over the prior two calendar 

years to determine coverage. Further, 

the Bureau understands that financial 

institutions would generally prefer to 

have such data collections occur on a 

calendar year basis because such an 

approach would be generally consistent 

with their operations. The Bureau is 

concerned that requiring an annual 

reporting period other than the calendar 

year—such as July 1 to June 30—could 

result in additional challenges for 

financial institutions in complying with 

the rule, which could in turn make 

errors in collecting and reporting data to 

the Bureau more likely. 

As discussed in more detail below in 

the section-by-section analysis of 

proposed § 1002.114(b) below, the 

Bureau is considering whether to 

require or permit the initial collection of 

data under the eventual 1071 rule to 

begin, following an appropriate 

implementation period, at some point 

during the year rather than on January 

1. For example, if the compliance date 

were on July 1, 2024, the Bureau would 

permit or require all financial 

institutions to collect and report data 

pursuant to proposed § 1002.109(a) for 

the period July 1 to December 31, 2024. 

After this initial partial collection year, 

financial institutions would collect data 

on a calendar year basis. 

Regarding the proposed submission 

date, several stakeholders (including 

community groups) requested a March 1 

submission deadline on the grounds 

that financial institutions comply with a 

March 1 deadline for HMDA despite its 

relative complexity compared to 1071. 

The Bureau is proposing a June 1 

submission deadline to give additional 

time for the compliance staff of financial 

institutions to dedicate time and 

resources focused on preparing a small 

business lending application register, 

after meeting other reporting obligations 

with earlier deadlines, such as under 

HMDA or CRA. This may be especially 

important for smaller financial 

institutions that will rely on the same 

staff to comply with other data reporting 

regimes and this 1071 rule. 

Proposed § 1002.109(a)(1)(ii) would 

require that an authorized 

representative of the covered financial 

institution with knowledge of the data 

submitted certify to the accuracy and 

completeness of data submitted 

pursuant to proposed § 1005.109(a). A 

similar provision exists in Regulation C 

(§ 1003.5(a)(i)), and the Bureau believes 

it would be appropriate to adopt it here 

as well. Based on the Bureau’s 

experience with HMDA and Regulation 

C, the Bureau believes that having a 

specific person responsible for 

certifying to the accuracy and 

completeness of data is likely to lead to 

financial institutions providing better 

quality data. 

Proposed § 1002.109(a)(1)(iii) would 

clarify that when the last day for 

submission of data prescribed under 

proposed § 1002.109(a)(1) falls on a date 

that is not a business day, a submission 

is considered timely if it is submitted no 

later than the next business day. 

The Bureau seeks comment on its 

proposed approach to the aspects of 

reporting addressed in proposed 

§ 1002.109(a), including that the 

reporting frequency be annual, that the 

reporting period be the calendar year, 

and that the submission date be June 1 

of the next calendar year. In particular, 

the Bureau seeks comment with respect 

to proposed § 1002.109(a)(1)(i) on 

whether requiring the submission of 

small business lending application 

registers by June 1 might give rise to 

complications for any persons or 

entities relying on data from the 

registers for other purposes, such as 

Federal regulators scheduling 

examinations. 

109(a)(2) Reporting by Subsidiaries 

ECOA section 704B(f)(1) states that 

‘‘any’’ financial institution obligated to 

report 1071 data to the Bureau must do 

so annually; the statute does not 

expressly address financial institutions 

that are themselves subsidiaries of other 

financial institutions. In the SBREFA 

Outline, the Bureau did not address this 

issue for section 1071 reporting. 

Proposed § 1002.109(a)(2) would state 

that a covered financial institution that 

is a subsidiary of another covered 

financial institution shall complete a 

separate small business lending 

application register. The subsidiary 

shall submit its small business lending 

application register, directly or through 

its parent, to the Bureau. Proposed 

comment 109(a)(2)–1 would explain 

that a covered financial institution is 

considered a subsidiary of another 

covered financial institution for 

purposes of reporting data pursuant to 

proposed § 1002.109 if more than 50 

percent of the ownership or control of 

the first covered financial institution is 

held by the second covered financial 

institution. This proposed provision 

mirrors one that exists for HMDA 

reporting under Regulation C in 

§ 1003.5(a)(2). The Bureau believes that 

this proposed provision would help 

facilitate compliance with the 1071 rule 

by permitting parent financial 

institutions to coordinate the reporting 

of all their subsidiaries’ small business 

lending data together. 

The Bureau seeks comment on this 

aspect of its proposal. Additionally, the 

Bureau seeks comment on proposed 

§ 1002.109(a)(2) in light of proposed 

§ 1002.105(b), which would define a 

covered financial institution as a 

financial institution that originated at 

least 25 covered credit transactions for 

small businesses in each of the two 

preceding calendar years. The Bureau 

seeks comment on whether this 

provision may risk creating ambiguity 

with respect to compliance and whether 

additional safeguards may be required 

to dissuade financial institutions from 

creating subsidiaries for the sole 

purpose of avoiding the collection and 

reporting or section 1071 data. The 

Bureau also seeks comment on all other 

aspects of this proposal. 

109(a)(3) Reporting Obligations Where 

Multiple Financial Institutions Are 

Involved in a Covered Credit 

Transaction 

Section 1071’s requirement to collect 

and report data for any ‘‘application to 

a financial institution for credit’’ could 

be read as applying to more than one 

financial institution when an 

intermediary provides the application to 

another institution that takes final 

action on the application. It might also 

apply in cases where one application is 

simultaneously sent to multiple 

financial institutions. This broad 

reading may serve a useful function, 

such as comprehensive reporting by all 

financial institutions involved in a 

small business lending transaction, but 

could also generate duplicative 

compliance costs for financial 

institutions and potentially detract from 

the quality of reported 1071 data, 

increasing the risk that certain 

applications are reported multiple 

times. 

At SBREFA, in considering ECOA 

section 704B(f)(1), the Bureau stated 

that it was considering proposing that in 

the situation where more than one party 

is involved on the lender side of a single 

small business loan or application, 

section 1071’s data collection and 

reporting requirements would be 

limited in the same manner as in 


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718See the section-by-section analysis of 

proposed § 1002.104(b) above for further discussion 

of the proposed treatment of pooled loans. 

719See 54 FR 51356, 51361 (Dec. 15, 1989) 

(requiring financial institutions to use the 

transmittal sheet and loan/application register in 

appendix A). 

720 80 FR 66128, 66526 (Oct. 28, 2015) (deleting 

appendix A and relocating its substantive 

requirements to § 1003.5(a)(3)). 

721See Fed. Fin. Insts. Examination Council, 

HMDA Reporter Panel, https://www.ffiec.gov/ 

hmdarawdata/FORMATS/HMDAReporterPanel.pdf 

(last visited July 27, 2021). 

Regulation C. For HMDA, Regulation C 

provides (in § 1003.4(a) and comment 

4(a)–3) that if more than one financial 

institution was involved in the 

origination of a covered loan, the 

financial institution that made the final 

credit decision approving the 

application before closing or account 

opening shall report the covered loan as 

an origination. If there was an 

origination, then the financial 

institution making the final credit 

decision approving the application 

would be responsible for reporting (even 

if the financial institution used credit 

standards set by another party). If more 

than one financial institution approved 

a loan, and the loan was purchased after 

closing by one of the financial 

institutions approving the loan, the 

purchaser (such as an assignee) would 

report the loan. If there was no 

origination and multiple financial 

institutions received the same 

application, then any financial 

institution that made a credit decision 

would be responsible for reporting (even 

if other financial institution also 

reported on the same potential nonoriginated application). 

Several SERs voiced support for 

aligning reporting requirements for 

financial institutions that are not the 

lender of record with the approach 

taken for HMDA reporting in the 

Bureau’s Regulation C. One SER 

stressed that imposing section 1071 

requirements for loan buyers, who play 

an important role in assisting CDFIs but 

do not make credit decisions, might risk 

their continued participation. Another 

CDFI SER explained that the institution 

occasionally participates in pooled loan 

purchases and recommended that the 

Bureau ensure that reporting obligations 

for such pooled loans are clear.718 Other 

SERs expressed concern in adopting the 

Bureau’s approach in Regulation C, 

noting the differences between small 

business and residential loan products, 

and advocated for simpler approaches. 

The SBREFA Panel did not provide a 

relevant recommendation. 

Comments from other stakeholders 

included several voicing support for a 

HMDA-like approach, praising the 

Bureau’s consistent approach and 

interest in limiting duplicative 

information. However, several 

comments advocated against the HMDA 

approach, generally by proffering other 

ideas rather than criticizing the rules or 

outcomes of the HMDA approach. 

Alternative suggestions varied, but 

included suggesting that data collection 

and reporting should be required only 

for the company most closely 

interacting with the loan applicant; if a 

financial institution receives a covered 

application, then the application should 

be subject to reporting, regardless of 

outcome; the financial institution that 

funded (or would have funded) the loan 

should be required to collect and report; 

and the financial institution that 

conducts the underwriting and 

determines whether the small business 

credit applicant qualifies for credit 

using its underwriting criteria should be 

required to report and collect. 

Proposed § 1002.109(a)(3) would 

provide that only one covered financial 

institution shall report each covered 

credit transaction as an origination, and 

that if more than one financial 

institution was involved in an 

origination, the financial institution that 

made the final credit decision approving 

the application shall report the loan as 

an origination, if the financial 

institution is a covered financial 

institution. 

Proposed § 1002.109(a)(3) would 

further provide that if there was no 

origination, then any covered financial 

institution that made a credit decision 

shall report the application. The Bureau 

is aware that under certain lending 

models as they operate today, financial 

institutions may not always be aware of 

whether another financial institution 

originated a credit transaction. The 

Bureau believes that information on 

whether there was an origination should 

generally be available, or that lending 

models can be adjusted to provide this 

information at low cost. For example, if 

an applicant applies to Financial 

Institutions A and B, and then 

withdraws an application with 

Financial Institution A, then Financial 

Institution A should be able to ascertain 

whether the applicant obtained credit 

from Financial Institution B. 

Proposed comment 109(a)(3)–1 would 

provide general guidance on how to 

report originations and applications 

involving more than one institution. In 

short, if more than one financial 

institution was involved in the 

origination of a covered credit 

transaction, the financial institution that 

made the final credit decision approving 

the application shall report the covered 

credit transaction as an origination. 

Proposed comment 109(a)(3)–2 would 

offer examples illustrating how a 

financial institution should report a 

particular application or originated 

covered credit transaction. Proposed 

comment 109(a)(3)–3 would explain 

that if a covered financial institution 

made a credit decision on a covered 

application through the actions of an 

agent, the financial institution reports 

the application, and provides an 

example. State law determines whether 

one party is the agent of another. While 

these proposed comments assume that 

all of the parties are covered financial 

institutions, the same principles and 

examples would apply if any of the 

parties is not a covered financial 

institution. 

The Bureau seeks comment on this 

aspect of its proposal. In particular, the 

Bureau seeks comment with respect to 

proposed § 1002.109(a)(3) on whether, 

particularly in the case of applications 

that a financial institution is treating as 

withdrawn or denied, the financial 

institution can ascertain if a covered 

credit transaction was originated by 

another financial institution without 

logistical difficulty or significant 

compliance cost. 

109(b) Financial Institution Identifying 

Information 

Beginning in 1989, Regulation C 

required financial institutions reporting 

HMDA data to use a discrete transmittal 

sheet to provide information on 

themselves separate from the loan/ 

application registers used to submit 

HMDA data.719 The 2015 HMDA final 

rule replaced the transmittal sheet 

requirement with Regulation C 

§ 1003.5(a)(3), which requires that a 

financial institution reporting HMDA 

data to provide with its submission (i) 

its name; (ii) the calendar year the data 

submission covers; (iii) the name and 

contact information of a person who 

may be contacted with questions about 

the institution’s submission; (iv) its 

appropriate Federal agency; (v) the total 

number of entries contained in the 

submission; (vi) its Federal Taxpayer 

Identification Number; and (vii) its 

Legal Entity Identifier (LEI).720 The 

Bureau and FFIEC publish information 

on financial institutions that report 

HMDA data in the HMDA Reporter 

Panel, which includes the required 

submission information, provided by 

financial institutions under 

§ 1003.5(a)(3), as well as other data 

derived from this information.721

The Bureau is proposing to collect 

information regarding financial 

institutions that report 1071 data, 

similar to the information required 


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56496 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

under Regulation C. Specifically, 

proposed § 1002.109(b) would require 

that a financial institution provide the 

following information about itself as 

part of its submission: (1) Its name; (2) 

its headquarters address; (3) the name 

and business contact information of a 

person who may be contacted with 

questions about the financial 

institution’s submission; (4) its Federal 

prudential regulator, if applicable; (5) its 

Federal Taxpayer Identification 

Number; (6) its LEI; (7) its Research, 

Statistics, Supervision, and Discount 

identification (RSSD ID) number, if 

applicable; (8) its parent institution 

information, if applicable (including the 

name, LEI, and RSSD ID number of its 

immediate parent entity and topholding parent entity, if applicable); (9) 

the type of financial institution, chosen 

from a list provided; and (10) whether 

the financial institution is voluntarily 

reporting 1071 data. 

As discussed below, the Bureau 

believes it would be appropriate to 

require each of these pieces of 

information regarding financial 

institutions reporting 1071 data. As a 

practical matter, the Bureau expects that 

this information might be provided by a 

financial institution when it initially 

sets up an account with the Bureau’s 

1071 data submission platform to allow 

it to file 1071 data as required by the 

rule. Thus, this information might exist 

in the Bureau’s 1071 data submission 

system and be updated by the financial 

institution as needed. 

As described in detail below, the 

Bureau believes that detailed 

information on the financial institutions 

reporting 1071 data is necessary to carry 

out, enforce, and compile data under 

section 1071, pursuant to ECOA section 

704B(f)(1) and (g)(1), and would aid in 

fulfilling the purposes of section 1071, 

pursuant to 704B(e)(2)(H). To analyze 

1071 data, the Bureau and other 

potential users of the data would need 

information on the financial institutions 

that are taking covered applications and 

making covered credit transactions. Fair 

lending analysis is based on a review of 

the decisions financial institutions make 

on applications. Similarly, an analysis 

of the business and community 

development needs of a given 

community is based on understanding 

the volume and geography of the 

lending activities of specific financial 

institutions. 

With the possible exception of the LEI 

(in proposed § 1002.109(b)(6) and (8)(ii) 

and (v)) in certain circumstances, the 

Bureau believes that financial 

institutions already have all the 

information that would be required of 

them under proposed § 1002.109(b), and 

that being required to provide this 

information to the Bureau should not 

pose any particular difficulties or costs 

on financial institutions. 

The Bureau seeks comment on its 

approach to collecting information on 

financial institutions, including each of 

the items listed in proposed 

§ 1002.109(b)(1) through (10) as well as 

whether the Bureau should require the 

reporting of any other information on 

financial institutions. Additional 

requests for comment specific to certain 

pieces of information are included 

below. 

Paragraph 109(b)(1) 

During the SBREFA process, in the 

context of discussing privacy, some 

stakeholders expressed an aversion to 

the collection and publication of 

information on financial institutions. 

Some stakeholders, including SERs and 

some larger entities, commented that the 

Bureau should not publish the names of 

financial institutions reporting 1071 

data, asserting that those financial 

institutions would face reputational 

risks. Some stakeholders even appeared 

to suggest that the Bureau not collect the 

names of financial institutions at all. 

Proposed § 1002.109(b)(1) would 

require a financial institution to provide 

its name. Regulation C (§ 1003.5(a)(2)(i)) 

requires financial institutions to provide 

their names on their transmittal sheets 

when filing HMDA data, and the Bureau 

believes that a similar requirement 

would be appropriate here. 

The Bureau believes that collecting a 

financial institution’s name (as well as 

all the other identifying information in 

proposed § 1002.109(b)) is necessary to 

carry out, enforce, and compile data 

under section 1071, and would aid in 

fulfilling the purposes of section 1071. 

For both of section 1071’s statutory 

purposes, the identity of the financial 

institution taking covered applications 

and originating covered credit 

transactions is critical. Without 

knowing the financial institution’s 

name, fair lending enforcement would 

not be possible. Analyzing business and 

community development needs is much 

improved when it is possible to identify 

which financial institutions are 

operating in specific geographic areas. 

There are additional practical 

considerations. Examinations for 

compliance with section 1071 would be 

difficult, if not impossible, without the 

name of the financial institution 

associated with a specific small 

business lending application register. 

Further, it would be difficult for the 

Bureau to administer a website for 1071 

data submissions without creating 

logins assigned to specific financial 

institutions. Finally, the Bureau is 

proposing in § 1002.110(c) that financial 

institutions’ statutory obligation to make 

1071 data available to any member of 

the public, upon request, pursuant to 

ECOA section 704B(f)(2)(B) would be 

satisfied by the institutions’ directing 

the public to the Bureau’s website for 

this information. Without the financial 

institution’s name (and other relevant 

identifying information), proposed 

§ 1002.110(c) would not satisfy this 

statutory requirement. 

Paragraph 109(b)(2) 

Proposed § 1002.109(b)(2) would 

require a financial institution to provide 

the physical address of its headquarters 

location. The headquarters address of a 

financial institution would provide 

geographic information that would aid 

in fulfilling the statutory purposes of 

section 1071, including, for instance, 

analyses of the connection between a 

financial institution’s location and the 

business and community development 

needs where it operates. It will also help 

identify and differentiate financial 

institutions, particularly nondepository 

financial institutions, that have similar 

names. 

Paragraph 109(b)(3) 

Proposed § 1002.109(b)(3) would 

require a financial institution to provide 

the name and business contact 

information of a person who may be 

contacted with questions about the 

financial institution’s 1071 data 

submission. Regulation C includes a 

similar requirement in 

§ 1003.5(a)(3)(iii), and the Bureau 

believes it would be appropriate to 

require such information here. In 

general, the Bureau has found, from its 

experience with HMDA and Regulation 

C, that requiring the name and business 

contact information of a person who 

may be contacted with questions 

generally facilitates communication in 

the event that follow-up on a 

submission is required. 

Paragraph 109(b)(4) 

Proposed § 1002.109(b)(4) would 

require a financial institution that is a 

depository institution to provide the 

name of its Federal prudential regulator, 

if applicable. Proposed comment 

109(b)(4)–1 would explain how to 

determine which Federal prudential 

regulator (i.e., the OCC, the FDIC, the 

Board, or the NCUA) a financial 

institution should report. Proposed 

comment 109(b)(4)-2 would provide 

guidance on when a financial institution 

must report a new Federal prudential 

regulator, for instance, in the event of a 

merger or a change of charter. 


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722 12 U.S.C. 2803(h). 

723 80 FR 66128, 66248 (Oct. 28, 2015) (noting 

that, despite the cost, the Bureau believed that the 

benefit of all HMDA reporters using an LEI justified 

the associated costs by improving the ability to 

identify financial institution reporting the data and 

link it to its corporate family). 

724 Id. (‘‘By facilitating identification, this 

requirement will help data users achieve HMDA’s 

objectives of identifying whether financial 

institutions are serving the housing needs of their 

communities, as well as identifying possible 

discriminatory lending patterns.’’). 

725Currently, the Bureau, on behalf of the FFIEC 

and HUD, generates and publishes information on 

filers including parent company and top holder 

information. See Fed. Fin. Insts. Examination 

Council, Public Panel—Data Fields with Values and 

Definitions, https://ffiec.cfpb.gov/documentation/ 

2021/panel-data-fields/ (last visited July 27, 2021). 

From 1989 to 1998, Regulation C required 

financial institutions to report their parent entity 

information on transmittal sheets. 54 FR 51356, 

51361, 51368 (Dec. 15, 1989) (adding the transmittal 

sheet requirement, including parent institution 

information, to appendix A to Regulation C); 63 FR 

52140, 52141 (Sept. 30, 1998) (stating that the Board 

believed that the availability of information from 

the FFIEC website makes the continuation of the 

requirement for parent company information on the 

transmittal sheet unnecessary). In 2002, Regulation 

C again required financial institutions to report 

parent information on transmittal sheets on the 

grounds that data users asserted the importance of 

having the parent institution information associated 

with the HMDA data itself, rather than in a separate 

database provided by the National Information 

Center. 67 FR 7221, 7232 (Feb. 15, 2002). 

In the 2014 HMDA NPRM, the Bureau proposed 

to continue requiring that financial institutions 

identify their parent companies. The Bureau stated 

that because information about parent companies 

was not yet available through the LEI, the Bureau 

believed it was necessary to maintain this 

requirement to ensure that financial institutions’ 

submissions can be linked with those of their 

corporate parents. 79 FR 51731, 51861 (Aug. 29, 

2014). However, required reporting of parent 

company information stopped under the 2015 

Continued 

Regulation C includes a similar 

provision in § 1003.5(a)(3)(iv), requiring 

financial institutions to identify the 

appropriate Federal agency. In the 

Regulation C context, the purpose of 

this requirement is to identify the 

agency to which a financial institution 

must report its HMDA data—often the 

financial institution’s Federal 

prudential regulator for depository 

institutions, and other agencies for 

nondepository institutions.722 Here, the 

Bureau believes a requirement to report 

a financial institution’s Federal 

prudential regulator would be 

appropriate for different reasons. The 

reporting of a financial institution’s 

Federal prudential regulator may enable 

analysts to more easily identify other 

information about a financial institution 

that its Federal prudential regulator may 

make publicly available, such as Call 

Report data; further, such additional 

data may be used to perform analyses of 

the characteristics of financial 

institution’s 1071 data by regulator. 

Nondepository institutions generally do 

not have Federal prudential regulators 

and would not report one under this 

proposed requirement. 

Paragraph 109(b)(5) 

Proposed § 1002.109(b)(5) would 

require a financial institution to provide 

its Federal Taxpayer Identification 

Number (TIN). Proposed comment 

109(b)(5)–1 would explain when a 

financial institution should report a new 

Federal TIN in the event that it obtains 

a new Federal TIN (for instance, because 

the financial institution merges with 

another financial institution and adopts 

the Federal TIN of the other financial 

institution). 

Regulation C § 1003.5(a)(3)(iv) 

requires financial institutions to report 

Federal TIN with their HMDA 

submissions, and the Bureau believes 

such a requirement would be 

appropriate here as well. A financial 

institution’s Federal TIN may be used to 

identify other publicly available 

information on a financial institution, 

and combine that data with a financial 

institution’s 1071 register to enhance 

the types of analysis that can be 

conducted to further the two statutory 

purposes of section 1071. 

Paragraph 109(b)(6) 

Proposed § 1002.109(b)(6) would 

require a financial institution to provide 

its LEI. Proposed comment 109(b)(6)–1 

would explain what an LEI is and 

would make clear that financial 

institutions that do not currently have 

an LEI must obtain one, and that 

financial institutions have an ongoing 

obligation to maintain an LEI in order to 

satisfy proposed § 1002.109(b)(6). 

An LEI is a unique, 20-digit identifier 

issued by an entity endorsed or 

otherwise governed by the Global LEI 

Foundation. Regulation C requires 

financial institutions to obtain and use 

an LEI, which facilitates the analysis of 

HMDA data and aids in the recognition 

of patterns by more precisely identifying 

financial institutions and affiliated 

companies.723 The LEI also helps 

financial institutions that report HMDA 

data generate the universal loan 

identifier used to identify application or 

application-level records in Regulation 

C. Similarly, in the 1071 context, a 

financial institution’s LEI would also 

likely facilitate analyses of 1071 data,724

by helping the Bureau and other 

stakeholders better understand a 

financial institution’s corporate 

structure. The Bureau would also 

require, in proposed § 1002.107(a)(1), 

financial institutions to use their LEIs to 

create unique identifiers for covered 

applications. The Bureau believes this, 

in turn, would result in more 

sophisticated and useful analyses of the 

financial institution’s 1071 data. 

Paragraph 109(b)(7) 

Proposed § 1002.109(b)(7) would 

require a financial institution to report 

its RSSD ID number, if applicable. An 

RSSD ID is a unique identifying number 

assigned to institutions, including main 

offices and branches, by the Federal 

Reserve System. All depository 

institutions know and regularly report 

their RSSD ID numbers on FFIEC 

regulatory forms. RSSD ID would help 

users of the 1071 data to link the data 

for a particular financial institution to 

other regulatory data, including the 

connections between a particular 

financial institution with others. The 

Bureau believes that this additional 

information would result in more 

sophisticated and useful analyses of the 

financial institution’s 1071 data. 

Proposed comment 109(b)(7)–1 would 

explain what a RSSD ID number is and 

how financial institutions that have one 

might find it. Financial institutions that 

do not have RSSD IDs, typically 

nondepository institutions, would not 

be required to obtain them, and would 

report ‘‘not applicable’’ in that field. 

Paragraph 109(b)(8) 

Proposed § 1002.109(b)(8) would 

require a financial institution to provide 

certain information on its parent 

entities, if applicable. This information 

would include the name, the LEI (if 

available), and the RSSD ID (if available) 

of the financial institution’s immediate 

parent entity and the financial 

institution’s top-holding parent entity. 

Proposed comments 109(b)(8)–1 and 

–2 would provide guidance on how to 

identify a financial institution’s 

immediate parent entity and a financial 

institution’s top-holding parent entity. 

Proposed comment 109(b)(8)–3 would 

explain that a financial institution 

would report its parent entities’ LEIs if 

they have them, but that no parent 

entity would be required to obtain an 

LEI if it did not already have one. 

Proposed comment 109(b)(8)–4 would 

likewise explain that a financial 

institution would report its parent 

entities’ RSSD ID numbers if they had 

them. 

The Bureau believes that the 

collection of information on a financial 

institution’s structure would further 

both of the statutory purposes of section 

1071. Data on a financial institution’s 

organizational structure that is selfreported would be more accurate than 

generating such information from 

publicly available sources.725


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56498 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

HMDA final rule on the grounds that once the LEI 

is fully implemented, parent entity information was 

expected to become available. 80 FR 66128, 66248 

(Oct. 28, 2015) (citing Fin. Stability Bd., LEI 

Implementation Grp., Fourth Progress Notes on the 

Global LEI Initiative, at 4 (Dec. 11, 2012), http://

www.financialstabilityboard.org/wp-content/ 

uploads/r_121211.pdf?page_moved=1)(noting that 

the LEI Implementation Group is developing 

proposals for additional reference data on the direct 

and ultimate parent(s) of legal entities and on 

relationship data more generally). However, the 

Bureau has subsequently encountered difficulties 

using LEI to obtain parent company information, 

and thus is proposing here to require that it be 

provided directly by financial institutions. 

Better structural information would, 

for instance, improve the accuracy of 

peer analyses, which would facilitate 

fair lending enforcement. Further 

analyzing trends over time would be 

useful for identifying institutions that 

may give rise to fair lending risk. Given 

structural changes to institutions over 

time, information that enables the 

identification of institutions 

consistently and accurately over time is 

important to this trend analysis. 

In addition, the Bureau believes that 

information on a financial institution’s 

structure would advance the business 

and community development purpose 

of section 1071 by facilitating the 

analysis of whether and how corporate 

structure impacts how a financial 

institution provides access to credit to 

small businesses. In particular, this 

structural information could be used to 

understand how regulation in one part 

of a corporate structure impacts 

unregulated entities within the same 

corporate group. 

Proposed § 1002.109(b)(8) would 

result in more accurate and 

comprehensive corporate structure 

information by requiring financial 

institutions to provide not only the 

name of one parent entity, but the 

immediate parent entity of the financial 

institution as well as the top-holding 

parent of the financial institution (for 

some financial institutions, this would 

be a bank holding company). For the 

reasons set out in the section-by-section 

analyses of proposed § 1002.109(b)(6) 

and (7), the reporting of LEI and RSSD 

ID of parent entities would improve the 

ability of regulators and other 

stakeholders to map out more precisely 

and fully the often complex networks of 

a financial institution’s corporate 

structure. This more detailed and 

accurate structural data, in turn, may be 

used to perform more sophisticated and 

useful analyses of the financial 

institution’s 1071 data. In addition, this 

information will help the Bureau 

confirm whether data are appropriately 

being reported by financial institutions 

on behalf of their subsidiaries pursuant 

to proposed § 1002.109(a)(2). 

With respect to proposed 

§ 1002.109(b)(8), the Bureau seeks 

comment on whether it should require 

any other parent entity information to 

be provided by financial institutions 

reporting 1071 data. 

Paragraph 109(b)(9) 

Proposed § 1002.109(b)(9) would 

require a financial institution to report 

the type of financial institution it is, 

selecting the applicable type or types of 

institution from a list in proposed 

comment 109(b)(9)–1. The comment 

would also explain that a financial 

institution shall select all applicable 

types. The list provided in the proposed 

comment includes: (i) Bank or savings 

association, (ii) minority depository 

institution, (iii) credit union, (iv) 

nondepository institution, (v) CDFI, (vi) 

other nonprofit financial institution, 

(vii) Farm Credit System institution, 

(viii) government lender, (ix) 

commercial finance company, (x) 

equipment finance company, (xi) 

industrial loan company, (xii) fintech, 

and (xiii) other. Proposed comment 

109(b)(9)–2 would explain that a 

financial institution reports the type of 

financial institution as ‘‘other’’ where 

none of the enumerated types of 

financial institution appropriately 

describe the applicable type of financial 

institution, and the institution reports 

the type of financial institution as freeform text. 

The Bureau believes that information 

regarding the type of financial 

institution reporting 1071 data would 

greatly assist in the analysis conducted 

by the Bureau and other users of 1071 

data. Information providing further 

details on types of financial institutions 

would help advance the statutory 

purposes of section 1071; fair lending 

analysts might use this information on 

the financial institution type (for 

instance, depository institution 

compared to nondepository institutions) 

as a control variable for their analyses. 

The inclusion of this information may 

also assist in an assessment of the 

business and community development 

needs of an area as it may provide 

analysts a means of determining what 

types of financial institutions serve 

certain geographic areas. 

In addition, the Bureau believes that 

this information, combined with the 

parent entity information required by 

proposed § 1002.109(b)(8), would offer 

more accurate and granular data on 

nondepository institutions within the 

same corporate group as depository 

institutions. Currently, the National 

Information Center database, which 

contains information on the structure of 

corporate groups that contain banks and 

other financial institutions, provides 

little information on nondepository 

institutions. As set out in the section-bysection analysis of proposed 

§ 1002.109(b)(8) above, information on 

corporate structure that financial 

institutions self-report could fill in 

reporting gaps, including more specific 

information on financial institution 

types. 

With respect to proposed 

§ 1002.109(b)(9), the Bureau seeks 

comment on whether it should consider 

removing, modifying, or adding any 

types of financial institutions to the list 

in proposed comment 109(b)(9)–1, 

including in order to manage unique 

privacy interests (such as, for example, 

whether a category for captive finance 

companies that lend to applicants that 

share the same branding should be 

included on the list). The Bureau further 

seeks comment on whether it should 

consider defining any of the types of 

financial institutions in the proposed 

list, in particular whether and how to 

define the term ‘‘fintech.’’ 

Paragraph 109(b)(10) 

Proposed § 1002.109(b)(10) would 

require a financial institution to indicate 

whether it is not a covered financial 

institution under proposed 

§ 1002.105(a) and is thus voluntarily 

reporting covered applications. 

The Bureau believes it is important to 

be able to specifically identify these 

institutions’ transactions in the data set. 

If reporting were restricted to only 

financial institutions required to report, 

the 1071 data would accurately reflect 

the overall population of financial 

institutions subject to 1071. However, 

institutions that do not meet the rule’s 

loan-volume thresholds in proposed 

§ 1002.105(b) may choose to voluntarily 

report 1071 data pursuant to proposed 

§ 1002.5(a)(4)(vii) through (ix). Those 

institutions that voluntarily report data 

may not be representative of all 

potential voluntary reporters and may 

differ from required reporters. Without 

a specific designation, it may not be 

possible to distinguish an institution 

voluntarily reporting data after a single 

year of exceeding the loan-volume 

threshold from an institution reporting 

because it has already exceeded the 

loan-volume threshold in two 

consecutive years. The Bureau believes 

that users of 1071 data would benefit 

from being able to use this information 

as a control variable, resulting in better 

fair lending as well as business and 

community development analyses, to 

account for certain differences that may 

exist as between required and voluntary 

reporters. 


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Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56499 

726SBREFA Panel Report at 47. 

727See GitHub, CFPB/HMDA Platform, https://

github.com/cfpb/hmda-platform (last visited July 

22, 2021). 

728See DockerHub, HMDA, https://

hub.docker.com/u/hmda (last visited July 22, 2021). 

729On March 22–26, 2021, the Bureau hosted a 

HMDA Virtual Tech Sprint to explore other 

potential innovations related to HMDA data 

submission and publication. See https://

www.consumerfinance.gov/rules-policy/innovation/ 

cfpb-tech-sprints/home-mortgage-disclosure-acttech-sprint/. 730SBREFA Outline at 40–41. 

109(c) Procedures for the Submission of 

Data to the Bureau 

ECOA section 704B(g)(1) authorizes 

the Bureau to prescribe rules and issue 

such guidance as may be necessary to 

carry out, enforce, and compile data 

pursuant to section 1071. Section 

704B(g)(3) provides for the Bureau to 

issue guidance to facilitate compliance 

with the requirements of section 1071. 

The SBREFA Panel recommended 

that the Bureau seek comment on the 

recordkeeping and reporting issues 

addressed in the SBREFA Outline,726

including how best to implement them 

in a manner that minimizes cost and 

burden to small financial institutions. 

The Panel also recommended that the 

Bureau explore ways to streamline 

reporting for small financial 

institutions. 

Proposed § 1002.109(c) would direct 

financial institutions to a publicly 

available website containing the 

Bureau’s Filing Instructions Guide, 

which would set out technical 

instructions for the submission of data 

to the Bureau pursuant to proposed 

§ 1002.109. Regulation C § 1003.5(a)(5) 

contains a comparable provision, which 

directs users to a Bureau website that 

sets out instructions for the submission 

of HMDA data, and the Bureau believes 

a similar approach would be 

appropriate here. 

The Bureau intends to develop a 

system to receive, process, and publish 

the data collected pursuant to section 

1071 and proposed subpart B. In doing 

so, the Bureau will benefit from what it 

learned in its multiyear effort in 

developing the HMDA Platform, 

through which entities file data as 

required under HMDA and Regulation 

C. The HMDA Platform satisfies 

regulatory requirements with an entirely 

web-based, open source system,727

using a container-based microservices 

approach 728 and modern cloud 

architectures. It was designed to be 

continuously improved to incorporate 

evolving technologies and better serve 

HMDA data users.729 Publication of the 

HMDA data is designed to meet user 

needs and includes, for example, a Data 

Browser to filter and download datasets 

and explore the data using an 

interactive map. As it did in developing 

the HMDA Platform, the Bureau’s work 

in developing the section 1071 data 

submission system will focus on 

satisfying all legal requirements, 

promoting data accuracy, and reducing 

burden. Also as with HMDA, the Bureau 

anticipates providing a Filing 

Instructions Guide and related materials 

for financial institutions. 

The Bureau seeks comment on this 

aspect of the proposal, including the 

provision of technical instructions for 

data submission via a Bureau website 

and how best to implement the 

provisions of this section in a manner 

that minimizes cost and burden 

particularly to small financial 

institutions while implementing all 

statutory obligations. The Bureau also 

seeks comment on ways it could 

streamline reporting for small financial 

institutions. 

Other Reporting Issues 

Regulation C § 1003.5(a)(1)(i) provides 

that a financial institution shall submit 

its annual loan/application register in 

electronic format to the appropriate 

Federal agency. Regulation C does not 

provide for the submission of HMDA 

data by unaffiliated third parties 

directly on behalf of financial 

institutions in the way that a parent 

institution may submit HMDA data on 

behalf of its subsidiary under 

§ 1003.5(a)(2) and comment 5(a)-3. The 

Bureau understands from financial 

institutions that report HMDA data to 

the Bureau that most institutions use 

third party software vendors in some 

way to help them prepare or submit 

their loan/application registers to the 

Bureau. 

The Bureau seeks comment on 

whether it should permit third parties 

(such as financial software vendors) to 

submit to the Bureau a small business 

lending application register on behalf of 

a financial institution, including 

whether financial institutions should be 

required to designate third parties 

authorized to submit registers on their 

behalf. 

Section 1002.110 Publication of Data 

Proposed § 1002.110 would address 

several issues surrounding publication 

of section 1071 data. First, proposed 

§ 1002.110(a) would address annual 

publication of application-level data on 

the Bureau’s website, subject to 

deletions or modifications based on the 

Bureau’s consideration of privacy 

interests. Second, proposed 

§ 1002.110(b) would state that the 

Bureau may, at its discretion, compile 

and aggregate data submitted by 

financial institutions and may publish 

such compilations or aggregations as the 

Bureau deems appropriate. Third, 

proposed § 1002.110(c) would require a 

covered financial institution to publish 

on its website a statement that its 1071 

data, as modified by the Bureau, are or 

will be available on the Bureau’s 

website. Finally, proposed § 1002.110(d) 

would provide when a covered financial 

institution shall make the notice 

required by proposed § 1002.110(c) 

available to the public and how long it 

shall maintain the notice on its website. 

The Bureau is proposing § 1002.110 to 

implement ECOA section 704B(f)(2)(B) 

and (C), which require the Bureau to 

adopt regulations addressing the form 

and manner that 1071 data are made 

available to the public, and pursuant to 

its authority under 704B(g)(1) to 

prescribe such rules and issue such 

guidance as may be necessary to carry 

out, enforce, and compile data pursuant 

to section 1071. The Bureau is also 

proposing § 1002.110(b) pursuant to 

704B(f)(3), which permits the Bureau, at 

its discretion, to compile and aggregate 

1071 data, and to publish such aggregate 

data. 

110(a) Publication of Small Business 

Lending Application Registers and 

Associated Financial Institution 

Information 

ECOA section 704B(f)(2)(C) requires 

that the Bureau annually make the 1071 

data it receives from financial 

institutions available to the public in a 

such form and in such manner as the 

Bureau determines by regulation. The 

Bureau addressed this issue in the 

SBREFA Outline as part of its 

discussion regarding privacy 

considerations; 730 SER and other 

stakeholder comments regarding privacy 

issues are addressed in part VI below. 

Proposed § 1002.110(a) would state that 

the Bureau shall make available to the 

public generally the data reported to it 

by financial institutions pursuant to 

proposed § 1002.109, subject to 

deletions or modifications made by the 

Bureau, at its discretion, if the Bureau 

determines that the deletion or 

modification of the data would advance 

a privacy interest. (The Bureau is 

proposing to make such determinations 

using a balancing test, as discussed in 

detail in part VI below.) The Bureau 

shall make such data available on an 

annual basis, by publishing it on the 

Bureau’s website. 

The Bureau seeks comment on its 

proposed approach to implementing 

ECOA section 704B(f)(2)(C). 


jspears on DSK121TN23PROD with PROPOSALS2
56500 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

731 Id. at 41–42. 

732SBREFA Panel Report at 34. 

733 Id. at 47. 

734 12 U.S.C. 2803(j)(1). 

110(b) Publication of Aggregate Data 

ECOA section 704B(f)(3) provides that 

the Bureau may, at its discretion 

‘‘compile and aggregate data collected 

under this section for its own use’’ and 

‘‘make public such compilations of 

aggregate data.’’ The Bureau did not 

address this issue at SBREFA. 

Proposed § 1002.110(b) would state 

that the Bureau may, at its discretion, 

compile and aggregate data submitted 

by financial institutions pursuant to 

proposed § 1002.109, and make any 

compilations or aggregations of such 

data publicly available as the Bureau 

deems appropriate. The Bureau believes 

that publication of certain such 

compilations and aggregations may 

provide useful data to the public to 

supplement the Bureau’s publication of 

application-level data pursuant to 

proposed § 1002.110(a). This is 

especially true of application-level data 

fields that the Bureau may choose, using 

its proposed balancing test (described in 

parts VI.C.1 and .2 below) to modify or 

delete before publication pursuant to 

proposed § 1002.110(a). 

The Bureau seeks comment on this 

aspect of its proposal. 

110(c) Statement of Financial 

Institution’s Small Business Lending 

Data Available on the Bureau’s Website 

and 110(d) Availability of Statements 

Background 

ECOA section 704B(f)(2)(B) requires 

that the data compiled and maintained 

by financial institutions shall be ‘‘made 

available to any member of the public, 

upon request, in the form required 

under regulations prescribed by the 

Bureau.’’ 

SBREFA Proposal Under Consideration 

and Feedback Received 

The Bureau stated in the SBREFA 

Outline that it was considering 

proposing an approach in which 

financial institutions could satisfy this 

requirement by referring the public to 

the Bureau’s website where 1071 data 

would be available.731 Under this 

approach, the 1071 data would be 

available with any modifications or 

deletions required based on the 

Bureau’s application of the balancing 

test described in part VI below. The 

Bureau also stated that it considered 

requiring financial institutions to make 

their own data available to the public 

directly, upon request. However, the 

Bureau was concerned that this 

approach could involve greater burden 

for financial institutions, lead to privacy 

risks resulting from errors by individual 

financial institutions implementing any 

modifications or deletions required by 

the Bureau, and be less efficient overall. 

One SER and several industry 

stakeholders expressed strong support 

for the Bureau’s proposal under 

consideration that the public be directed 

to access 1071 data via the Bureau’s 

website, rather than requiring financial 

institutions to provide the data 

themselves upon request.732 These 

stakeholders expressed concern that a 

requirement that financial institutions 

themselves provide 1071 data to the 

public upon request would be 

burdensome, adding complexity to the 

process, making errors more likely, and 

giving rise to data privacy risks. One 

community group asserted that the 

Bureau should require financial 

institutions to provide 1071 data within 

30 days of a request from the public 

and, absent this, that the Bureau should 

make application-level 1071 data 

available to the public quarterly rather 

than annually. 

The SBREFA Panel recommended, 

regarding this issue as well as other 

recordkeeping and reporting issues 

addressed in the SBREFA Outline, that 

the Bureau seek comment on these 

aspects of a 1071 rule, and how best to 

implement them in a manner that 

minimizes cost and burden to small 

financial institutions.733

Proposed Rule 

Proposed § 1002.110(c) would require 

that a covered financial institution make 

available to the public on its website, or 

otherwise upon request, a statement that 

the covered financial institution’s small 

business lending application register, as 

modified by the Bureau pursuant to 

proposed § 1002.110(a), is or will be 

available on the Bureau’s website. The 

Bureau is proposing this approach, 

which is consistent with its approach 

under consideration at SBREFA, for the 

reasons discussed above, including that 

this approach would reduce potential 

burdens on financial institutions 

associated with publishing modified 

data, would reduce privacy risks 

resulting from errors by individual 

financial institutions implementing any 

modifications or deletions required by 

the Bureau, and would be more efficient 

overall. Regulation C (§ 1003.5(c)(1)) 

implements a similar statutory 

requirement regarding the form of data 

reporting and requires financial 

institutions to direct any public requests 

for HMDA data they receive to the 

Bureau; 734 the Bureau believes that a 

similar provision would be appropriate 

here to maintain continuity across 

reporting regimes, and because the 

Bureau believes that this provision 

would help ensure consistent 

implementation of any modification or 

deletion decisions that the Bureau 

determines would advance a privacy 

interest. 

Proposed § 1002.110(c) would also 

state that a financial institution shall 

use language provided by the Bureau, or 

substantially similar language, to satisfy 

this requirement to provide a statement. 

Proposed comment 110(c)–1 would 

provide model language that financial 

institutions can use to comply with 

proposed § 1002.110(c). Proposed 

comment 110(c)–2 would provide 

guidance to financial institutions that 

do not have websites. 

Proposed § 1002.110(d) would 

provide that a covered financial 

institution shall make the notice 

required by proposed § 1002.110(c) 

available to the public on its website 

when it submits a small business 

lending application register to the 

Bureau pursuant to proposed 

§ 1002.110(a), and shall maintain the 

notice for as long as it has an obligation 

to retain its small business lending 

application registers pursuant to 

proposed § 1002.111(a). 

The Bureau seeks comment on its 

proposed approach to implementing 

ECOA section 704B(f)(3), including how 

best to implement proposed 

§ 1002.110(c) and (d) in a manner that 

minimizes cost and burden particularly 

on small financial institutions while 

implementing all statutory obligations. 

Section 1002.111 Recordkeeping 

Proposed § 1002.111 would address 

several aspects of the recordkeeping 

requirements for 1071 data. First, 

proposed § 1002.111(a) would require a 

covered financial institution to retain 

evidence of its compliance with this 

section, which includes a copy of its 

small business lending application 

register, for at least three years after 

submitting the register pursuant to 

proposed § 1002.109. Second, proposed 

§ 1002.111(b) would require a financial 

institution to maintain, separately from 

the rest of the application and 

accompanying information, an 

applicant’s responses to a financial 

institution’s inquiries required by ECOA 

section 704B(b)(1) (i.e., whether the 

applicant is a minority-owned business 

or a women-owned business, and 

regarding the ethnicity, race, and sex of 

the applicant’s principal owners). 

Finally, proposed § 1002.111(c) would 

require that, in compiling and 

maintaining any records under 


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735SBREFA Outline at 39. 

736SBREFA Panel Report at 47. 

737Regulation C § 1003.5(a)(1). 

738 12 U.S.C. 2803(j)(6). 739SBREFA Panel Report at 47–48. 

proposed §§ 1002.107 and 1002.111(b), 

or reporting data pursuant to proposed 

§ 1002.109, a financial institution shall 

not include personally identifiable 

information concerning any individual 

who is, or is connected with, an 

applicant. 

The Bureau is proposing § 1002.111 to 

implement ECOA section 704B(f)(2)(A), 

which requires financial institutions to 

compile and maintain 1071 data for at 

least three years; 704B(b)(2), which 

requires financial institutions to 

maintain a record of the responses to the 

inquiry required by 704B(b)(1), separate 

from the application and accompanying 

information; and 704B(e)(3), which 

provides that in compiling and 

maintaining 1071 data, a financial 

institution may not include personally 

identifiable information concerning an 

individual who is, or is connected with, 

an applicant. The Bureau is also 

proposing § 1002.111 pursuant to its 

authority under 704B(g)(1) to prescribe 

such rules and issue such guidance as 

may be necessary to carry out, enforce, 

and compile data pursuant to section 

1071. 

111(a) Record Retention 

ECOA section 704B(f)(2)(A) requires 

that information compiled and 

maintained under section 1071 be 

retained for not less than three years 

after the date of preparation. In the 

SBREFA Outline, the Bureau stated that 

it was considering proposing that a 

financial institution retain its 1071 data 

for at least three years after they are 

submitted to the Bureau.735 The Bureau 

received little feedback on this issue; a 

few stakeholders opined that the threeyear retention period was acceptable. 

The SBREFA Panel recommended, 

regarding this issue as well as other 

recordkeeping and reporting issues 

addressed in the SBREFA Outline, that 

the Bureau seek comment on these 

aspects of a 1071 rule, and how best to 

implement them in a manner that 

minimizes cost and burden to small 

financial institutions.736

Proposed § 1002.111(a) would require 

that a financial institution retain a copy 

of its small business lending application 

register for three years after the register 

is submitted to the Bureau pursuant to 

proposed § 1002.109. This proposed 

approach is consistent with the 

approach that the Bureau considered 

proposing at SBREFA. By way of 

comparison, under Regulation C, 

financial institutions must retain the 

loan/application registers that they 

submit to the Bureau for three years.737

This reflects the requirement in HMDA 

itself that a LAR be retained for three 

years after it is made available.738

Proposed comment 111(a)–1 would 

provide examples of what evidence of 

compliance with the proposed provision 

is likely to include. Proposed comment 

111(a)–2 would require that a creditor 

that is voluntarily, under 

§ 1002.5(a)(4)(vii) and (viii), collecting 

information pursuant to subpart B but is 

not required to report that data to the 

Bureau, complies with proposed 

§ 1002.111(a) by retaining evidence of 

compliance with subpart B for at least 

three years after June 1 of the year 

following the year that data was 

collected. 

The Bureau seeks comment on its 

proposed approach to implementing 

ECOA section 704B(f)(2)(A), including 

how best to implement proposed 

§ 1002.111(a) in a manner that 

minimizes cost and burden particularly 

on small financial institutions while 

implementing all statutory obligations. 

111(b) Certain Information Kept 

Separate From the Rest of the 

Application 

ECOA section 704B(b)(2) requires 

financial institutions to maintain a 

record of the ‘‘responses to [the] 

inquiry’’ required by 704B(b)(1) separate 

from the application and accompanying 

information. As discussed below and 

consistent with the approach set forth in 

E.2 of the Overview to this part V, the 

Bureau proposes to interpret the term 

‘‘responses to such inquiry’’ in 

704B(b)(2) to be the applicant’s 

responses to inquiries regarding 

protected demographic information— 

that is, whether the applicant is a 

minority-owned business or a womenowned business, and the ethnicity, race, 

and sex of the applicant’s principal 

owners. 

In the SBREFA Outline, the Bureau 

discussed this statutory provision but 

did not present a proposal under 

consideration to address it. Some SERs 

quoted this statutory language in written 

feedback, but none provided feedback 

on the particular issue of keeping 

certain information separate from the 

rest of the application. One trade 

association stakeholder noted that, 

under HMDA and Regulation C, banks 

are permitted to inquire about and 

collect required data points (which 

include information such as the 

ethnicity, race, and sex of applicants’ 

principal owners) on and with the 

application. This stakeholder urged the 

Bureau to permit the same for 1071, and 

further requested a safe harbor for a 

bank that inquires and collects required 

data points on or with an application. 

The SBREFA Panel recommended, 

regarding this issue as well as other 

recordkeeping and reporting issues 

addressed in the SBREFA Outline, that 

the Bureau seek comment on this aspect 

of a 1071 rule, and how best to 

implement it in a manner that 

minimizes cost and burden to small 

financial institutions.739

Proposed § 1002.111(b) would state 

that a financial institution shall 

maintain, separately from the rest of the 

application and accompanying 

information, an applicant’s responses to 

the financial institution’s inquiries to 

collect data pursuant to proposed 

subpart B regarding whether an 

applicant for a covered credit 

transaction is a minority-owned 

business under proposed 

§ 1002.107(a)(18) or a women-owned 

business under proposed 

§ 1002.107(a)(19), and regarding the 

ethnicity, race, and sex of the 

applicant’s principal owners under 

proposed § 1002.107(a)(20). 

Proposed comment 111(b)–1 would 

explain that a financial institution may 

satisfy this requirement by keeping an 

applicant’s responses to the financial 

institution’s request pursuant to 

proposed § 1002.107(a)(18) through (20) 

in a file or document that is discrete or 

distinct from the application and its 

accompanying information. For 

example, such information could be 

collected on a piece of paper that is 

separate from the rest of the application 

form. In order to satisfy the requirement 

in proposed § 1002.111(b), an 

applicant’s responses to the financial 

institution’s request pursuant to 

proposed § 1002.107(a)(18) through (20) 

need not be maintained in a separate 

electronic system, nor need they be 

removed from the physical files 

containing the application. However, 

the financial institution may 

nonetheless need to keep this 

information in a different electronic or 

physical file in order to satisfy the 

requirements of proposed § 1002.108. 

As discussed in detail above in E.2 in 

the Overview of this part V, the Bureau 

believes the best reading of the statutory 

provisions that mention the inquiry 

made under ECOA section 704B(b)(1)— 

in 704B(b)(2) as well as in 704B(c) 

regarding the right to refuse and 704B(d) 

regarding the firewall—is that they refer 

to applicants’ responses to the inquiries 

regarding minority-owned and womenowned business status in proposed 


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740See 80 FR 66128, 66192–93 (Oct. 28, 2015). 

741SBREFA Outline at 39. 

742SBREFA Panel Report at 34. 

743See, e.g., Gramm-Leach-Bliley Act, 15 U.S.C. 

6801 et seq.; Regulation P, 12 CFR part 1016. 

744SBREFA Panel Report at 47. 

§ 1002.107(a)(18) and (19), and 

regarding the ethnicity, race, and sex of 

applicants’ principal owners in 

proposed § 1002.107(a)(20). Each of 

these three data points require financial 

institutions to request demographic 

information that has no bearing on the 

creditworthiness of the applicant. 

Moreover, a financial institution could 

not inquire about this demographic 

information absent section 1071’s 

mandate to collect and report the 

information, and ECOA prohibits a 

financial institution from discriminating 

against an applicant on the basis of the 

information. The Bureau accordingly 

believes that the best effectuation of 

congressional intent is to apply section 

1071’s special-protection provisions to 

apply to this demographic information, 

regardless of whether the statutory 

authority to collect it originates in 

704B(b)(1) (women-owned business 

status and minority-owned business 

status) or 704B(e)(2)(G) (race, sex, and 

ethnicity of principal owners). The 

Bureau similarly believes that Congress 

did not intend these special protections 

to apply to any of the other applicantprovided data points proposed in 

§ 1002.107(a), which the financial 

institution is permitted to request 

regardless of coverage under section 

1071, which are not the subject of 

Federal antidiscrimination law, and 

many of which financial institutions 

currently use for underwriting purposes. 

With respect to the stakeholder’s 

request that the section 1071 rule mirror 

HMDA’s approach to collection of 

ethnicity, race, and sex data, the Bureau 

notes that there is no requirement in 

HMDA that is comparable to ECOA 

section 704B(b)(2)’s requirement that 

certain information be kept separate 

from the application and accompanying 

information; Regulation C thus 

anticipates that the demographic 

information required under HMDA can 

be collected as part of the 

application.740 The Bureau recognizes 

from stakeholder comments identified 

in the section-by-section analysis of 

proposed § 1002.107(c)(1) above that 

there may be potential difficulties in 

satisfying the proposed requirements 

regarding the time and manner of 

collecting applicant-provided data 

while not being able to ask for that 

information on the application itself. 

Proposed comment 111(b)–1 is intended 

to clarify, and facilitate compliance 

with, the statutory directive that 

financial institutions must keep certain 

information separate from the credit 

application. 

The Bureau seeks comment on its 

proposed approach to implementing 

ECOA section 704B(b)(2), including 

how best to implement proposed 

§ 1002.111(b) in a manner that 

minimizes cost and burden, particularly 

on small financial institutions, while 

implementing all statutory obligations. 

The Bureau also seeks comment on 

whether, for financial institutions that 

determine that underwriters or other 

persons should have access to 

applicants’ demographic information 

pursuant to proposed § 1002.108(b), it 

should likewise waive the requirement 

in proposed § 1002.111(b) to keep that 

information separate from the 

application and accompanying 

information. 

111(c) Limitation on Personally 

Identifiable Information Retained Under 

This Section 

Background 

ECOA section 704B(e)(3) provides 

that in compiling and maintaining any 

record of information under section 

1071, a financial institution may not 

include in such record the name, 

specific address (other than the census 

tract), telephone number, electronic 

mail address, or any other personally 

identifiable information (PII) concerning 

any individual who is, or is connected 

with, an applicant. 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated it was considering proposing a 

prohibition on including certain PII 

about any individuals associated with 

small business applicants in the small 

business lending application register a 

financial institution is required to 

compile, maintain, and report to the 

Bureau (other than the information 

specifically required to be collected and 

reported pursuant to section 1071, such 

as the ethnicity, race, and sex of 

principal owners). The Bureau also 

stated that this prohibition would not 

apply to PII collected by financial 

institutions outside of their specific 

1071 data records.741

SERs and other stakeholders offered 

limited feedback on this issue.742 One 

SER requested clarification on this 

statutory provision, specifically asking 

whether financial institutions were 

permitted to keep PII in their own loanlevel records. A trade association 

supported a ban on including PII in the 

1071 data. Another stated that the 

Bureau should issue a clarifying 

provision for excluding PII in compiling 

and maintaining any record of 

information from the different stages in 

the process (e.g., bank systems, 

regulatory submission file). Two 

community group stakeholders 

supported a prohibition on including 

personally identifiable information in 

1071 data to reduce potential privacy 

concerns surrounding release of 1071 

data. 

Some stakeholders expressed concern 

regarding a different issue related to 

data privacy. Federal and State laws 

protect the financial and data privacy of 

individuals, typically by imposing 

obligations on financial institutions to 

provide their customers notice and an 

opportunity to opt out in advance of the 

disclosure of their nonpublic personal 

information to unaffiliated third 

parties.743 Several industry stakeholders 

expressed concern that reporting 1071 

data to the Bureau may cause them to 

violate other data privacy laws, 

including State data privacy laws. 

The SBREFA Panel recommended, 

regarding this issue as well as other 

recordkeeping and reporting issues 

addressed in the Outline, that the 

Bureau seek comment on these aspects 

of a 1071 rule, and how best to 

implement them in a manner that 

minimizes cost and burden to small 

financial institutions.744

Proposed Rule 

The Bureau is proposing in 

§ 1002.111(c) that in compiling and 

maintaining any records under 

proposed § 1002.107 or § 1002.111(b), or 

reporting data pursuant to proposed 

§ 1002.109, a financial institution shall 

not include any name, specific address, 

telephone number, email address, or 

any PII concerning any individual who 

is, or is connected with, an applicant, 

other than as required pursuant to 

proposed § 1002.107 or § 1002.111(b). 

The prohibition on the inclusion of PII 

in ECOA section 704B(e)(3), which 

covers the ‘‘compiling and maintaining 

any record of information,’’ implicates 

proposed §§ 1002.107, 1002.109, and 

1002.111, which together would address 

the compilation, maintenance, and 

reporting of 1071 data by financial 

institutions. 

Proposed comment 111(c)–1 would 

clarify that the prohibition in proposed 

§ 1002.111(c) applies to data compiled 

and maintained pursuant to § 1002.107, 

data in the small business lending 

application register submitted by the 

financial institution to the Bureau under 

proposed § 1002.109, the version of the 


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745See, e.g., Gramm-Leach-Bliley Act section 

502(e)(8), 15 U.S.C. 6802(e)(8), and Regulation P 

§ 1016.15(a)(7)(i) (stating that the limitations on 

disclosing nonpublic personal information to 

unaffiliated third parties do not apply if the 

information is disclosed to comply with Federal, 

State, or local laws, rules and other applicable legal 

requirements); California Consumer Privacy Act, 

Cal. Civ. Code 1798.145(a)(1) (noting that the 

obligations imposed on businesses by CCPA ‘‘shall 

not restrict a business’ ability to . . . comply with 

federal, state, or local laws’’). 

746 15 U.S.C. 1691d(f). 

747Existing § 1002.11. 

748 15 U.S.C. 1691c. 

749 15 U.S.C. 1691e. 

750The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 34–36. 

751Bureau of Consumer Fin. Prot., CFPB Issues 

Public Statement On Home Mortgage Disclosure Act 

Compliance (Dec. 21, 2017), https://www.consumer

finance.gov/about-us/newsroom/cfpb-issues-publicstatement-home-mortgage-disclosure-actcompliance/ (noting that the Bureau did not intend 

to require data resubmission unless data errors were 

material, or assess penalties with respect to errors 

for HMDA data collected in 2018 and reported in 

2019). 

register that the financial institution 

maintains under proposed 

§ 1002.111(a), and the separate record of 

certain information created pursuant to 

proposed § 1002.111(b). 

Proposed comment 111(c)–2 would 

address the types of information 

(including PII) that a financial 

institution is prohibited from including 

in the data it compiles and maintains 

pursuant to proposed § 1002.107, in its 

records under proposed § 1002.111(b), 

or in data reported to the Bureau under 

proposed § 1002.109. The examples of 

types of PII identified in proposed 

comment 111(c)–2 are illustrative and 

not exhaustive. 

Proposed comment 111(c)–3 would 

clarify that the prohibition in proposed 

§ 1002.111(c) does not extend to the 

application or any other records that the 

financial institution maintains. This 

comment is intended to address the 

request by a SER and another 

stakeholder that the Bureau clarify that 

this prohibition does not extend more 

broadly to a financial institution’s 

application or loan-related files. 

Proposed comment 111(c)–4 would 

clarify that the prohibition in proposed 

§ 1002.111(c) does not bar financial 

institutions from providing to the 

Bureau, pursuant to proposed 

§ 1002.109(b)(3), the name and business 

contact information of the person who 

may be contacted with questions about 

the financial institution’s submission. 

The Bureau seeks comment on its 

proposed approach to implementing 

ECOA section 704B(e)(3), including how 

best to implement this requirement in a 

manner that minimizes cost and burden, 

particularly on small financial 

institutions, while implementing all 

statutory obligations. Regarding 

comments by stakeholders that 

reporting 1071 data to the Bureau could 

give rise to a potential conflict with the 

data protection and privacy laws 

prohibiting the disclosure of nonpublic 

personal information to unaffiliated 

third parties, the Bureau notes that such 

laws typically provide an exemption for 

disclosures made pursuant to Federal 

and State law.745 The Bureau seeks 

comment on whether the requirements 

in this proposed rule could conflict with 

other data privacy or data protection 

laws, and whether the Bureau might 

need to use its preemption authority 

under ECOA,746 Regulation B,747 and/or 

section 1041(a)(1) of the Dodd-Frank 

Act to ensure that financial institutions 

do not violate State law in reporting 

1071 data to the Bureau. The Bureau 

also seeks comment on whether it 

should include a provision to preempt 

any State data privacy or data protection 

laws that would prohibit the collection, 

maintenance, and reporting to the 

Bureau of 1071 data. 

Section 1002.112 Enforcement 

Proposed § 1002.112 would address 

several issues related to the enforcement 

of violations of the requirements of 

proposed subpart B. First, proposed 

§ 1002.112(a) would state that a 

violation of section 1071 or subpart B of 

Regulation B is subject to administrative 

sanctions and civil liability as provided 

in sections 704 and 706 of ECOA. 

Second, proposed § 1002.112(b) would 

provide that a bona fide error in 

compiling, maintaining, or reporting 

data with respect to a covered 

application is an error that was 

unintentional and occurred despite the 

maintenance of procedures reasonably 

adapted to avoid such an error. This 

proposed provision also addresses the 

maintenance of procedures reasonably 

adapted to avoid such errors. Third, 

proposed § 1002.112(c) would identify 

four safe harbors under which certain 

errors—namely, certain types of 

incorrect entries for census tract, NAICS 

code, small business status, and 

application date—would not constitute 

violations of ECOA or Regulation B. 

The Bureau is proposing § 1002.112 to 

implement sections 704 and 706 of 

ECOA, pursuant to its authority under 

ECOA section 704B(g)(1) to prescribe 

such rules and issue such guidance as 

may be necessary to carry out, enforce, 

and compile data pursuant to section 

1071 and pursuant to its authority under 

704B(g)(2) to adopt exceptions to any 

requirement of section 1071 and to 

exempt any financial institution or class 

of financial institutions from the 

requirements of section 1071, as the 

Bureau deems necessary or appropriate 

to carry out the purposes of section 

1071. 

112(a) Administrative Enforcement and 

Civil Liability 

A violation of section 1071 is subject 

to the enforcement provisions of ECOA, 

of which section 1071 is a part. ECOA 

contains administrative enforcement 

provisions in section 704,748 and it 

provides for civil liability in section 

706.749 The enforcement provisions in 

existing Regulation B (§ 1002.16(a)(1) 

and (2)) cross-reference and paraphrase 

these administrative enforcement and 

civil liability provisions of ECOA. 

Proposed § 1002.112(a) would provide 

that a violation of section 1071 or 

subpart B of Regulation B is subject to 

administrative sanctions and civil 

liability as provided in sections 704 and 

706 of ECOA, where applicable. 

Regarding stakeholder concerns about 

private litigants bringing actions for 

non-compliance, the Bureau believes 

that its administrative enforcement 

mechanisms would be appropriate and 

adequate to address most instances of 

non-compliance by financial 

institutions that report 1071 data to the 

Bureau, based on its experience with 

Regulation C and HMDA. The Bureau 

believes that proposed § 1002.112(b) 

addresses the concerns raised by 

stakeholders that requested that 

penalties for non-compliance not be 

assessed in the first year that 1071 data 

is collected, given the likelihood of 

unintentional errors as covered financial 

institutions learn how to implement this 

rule. 

The Bureau seeks comment on its 

proposed approach to administrative 

enforcement and civil liability. 

112(b) Bona Fide Errors 

SBREFA Proposal Under Consideration 

and Feedback Received 

During the SBREFA process, SERs 

and other industry stakeholders 

expressed concern about private 

litigants suing them for non-compliance 

with the 1071 rule.750 In addition, 

several SERs requested that the Bureau 

not assess penalties for the first year of 

1071 data collection and reporting, as it 

did following the 2015 HMDA final 

rule; prior to the compliance date for 

that rule, the Bureau issued a policy 

statement announcing it would not seek 

penalties for errors for the first calendar 

year (2018) of data collected under the 

amended Regulation C.751 Stakeholders 


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752See, e.g., § 1002.16(c). 

753 15 U.S.C. 1691e(e). 

754Fed. Fin. Insts. Examination Council, 

Interagency Examination Procedures: HMDA (Apr. 

2019), https://files.consumerfinance.gov/f/ 

documents/cfpb_supervision-and-examinationmanual_hmda-exam-procedures_2019-04.pdf. 

755Home Mortgage Disclosure (Regulation C), 80 

FR 66128, 66269 (Oct. 28, 2015). 

asked the Bureau to emulate that 

approach for 1071. Other stakeholders 

expressed concern about the potential 

consequences of committing what they 

viewed as technical or inadvertent 

errors in collecting or reporting 1071 

data. One financial institution 

stakeholder suggested that the 1071 rule 

adopt or emulate the good faith error 

provisions set out in Regulation C, 

including § 1003.6(b)(1), which provides 

that an error in compiling or recording 

data for a covered loan or application is 

not a violation of HMDA or Regulation 

C if the error was unintentional and 

occurred despite the maintenance of 

procedures reasonably adapted to avoid 

such an error. Stakeholders also referred 

to the existing error-related exemptions 

in ECOA and Regulation B.752 ECOA’s 

civil liability provision states that 

creditors will not be liable for acts done 

or omitted in good faith in conformity 

with any official rule, regulation, or 

interpretation thereof by the Bureau.753

Proposed Rule 

Proposed § 1002.112(b) would 

provide that a bona fide error in 

compiling, maintaining, or reporting 

data with respect to a covered 

application is an error that was 

unintentional and occurred despite the 

maintenance of procedures reasonably 

adapted to avoid such an error. A bona 

fide error is not a violation of ECOA or 

subpart B. A financial institution is 

presumed to maintain procedures 

reasonably adapted to avoid errors with 

respect to a given data field if the 

number of errors found in a random 

sample of the financial institution’s 

submission for the data field does not 

equal or exceed a threshold specified by 

the Bureau for this purpose in proposed 

appendix H. However, an error is not a 

bona fide error if either there is a 

reasonable basis to believe the error was 

intentional or there is other evidence 

that the financial institution did not 

maintain procedures reasonably adapted 

to avoid such errors. 

The Bureau believes that a similar 

approach to Regulation C, modified and 

combined with the approach taken by 

Federal agencies in HMDA 

examinations, would be appropriate 

here. Regulation C § 1003.6(b)(1) 

provides that an error in compiling or 

recording data for a covered loan or 

application is not a violation of HMDA 

or Regulation C if the error was 

unintentional and occurred despite the 

maintenance of procedures reasonably 

adapted to avoid such an error. In an 

examination of a financial institution for 

compliance with Regulation C, a 

financial institution may make a certain 

number of unintentional errors in a 

testing sample of applications for a 

given data field in the institution’s loan/ 

application register (LAR), the HMDA 

analog to the small business lending 

application register, before it must 

resubmit its LAR. These tolerance 

thresholds are based on the number of 

loans or applications in a LAR as set out 

in the HMDA tolerances table in the 

FFIEC’s Interagency HMDA examination 

procedures.754

For instance, as described in the 

HMDA tolerances table, a bank that 

submitted 45 applications is subject to 

a threshold of three inadvertent errors 

per data field based on the review of a 

random sample of 30 applications in the 

bank’s LAR; a bank that submitted 

45,000 applications would be subject to 

a threshold of four inadvertent errors 

per data field based on a sample of 79 

applications. The tolerances thresholds, 

as a percentage of the random sample of 

applications reviewed, become more 

stringent as the number of total 

applications rises. 

The Bureau would provide a similar 

table of thresholds in proposed 

appendix H and incorporate it in the 

bona fide error provision as set out in 

proposed § 1002.112(b). Under this 

proposed provision and the table of 

thresholds in proposed appendix H, 

financial institutions that report a 

number of errors equal to or below the 

applicable thresholds are presumed to 

have in place procedures reasonably 

adapted to avoid errors; those that 

report a number of errors above the 

applicable thresholds are not presumed 

to have in place procedures reasonably 

adapted to avoid errors. The Bureau 

believes that this approach would be 

broadly consistent with the approach it 

has taken for HMDA.755 The Bureau also 

believes that this approach would 

address the concerns expressed by 

stakeholders regarding liability for some 

data reporting errors, especially in the 

earlier years of reporting, as processes 

are first being implemented. Moreover, 

the Bureau believes that this provision 

will help to ensure the accuracy of the 

data submitted by requiring the 

maintenance of appropriate procedures; 

at the same time, this provision will 

prevent financial institutions from being 

subjected to liability for some difficultto-avoid errors that could drive those 

institutions from the small-business 

lending market. Therefore, the Bureau 

believes this provision is necessary to 

carry out, enforce, and compile data 

pursuant to section 1071, as well as 

necessary or appropriate to carrying out 

section 1071’s purposes. 

Proposed comment 112(b)–1 would 

explain that a financial institution is 

presumed to maintain procedures 

reasonably adapted to avoid errors with 

respect to a given data field if the 

number of errors found in a random 

sample of the financial institution’s 

submission for the data field does not 

equal or exceed a threshold specified by 

the Bureau for this purpose. Proposed 

comment 112(b)–1 would also explain 

that the Bureau’s thresholds appear in 

column C of the table in proposed 

appendix H, and that the size of the 

random sample shall depend on the size 

of the financial institution’s small 

business lending application register, as 

shown in column A of the table in 

appendix H. 

Proposed comment 112(b)–2 would 

provide that, for purposes of 

determining bona fide errors under 

§ 1002.112(b), the term ‘‘data field’’ 

generally refers to individual fields, but 

that, with respect to information on the 

ethnicity or race of an applicant or 

borrower, or co-applicant or coborrower, a data field group may consist 

of more than one field. If one or more 

of the fields within an ethnicity or race 

field group have errors, they count as 

one (and only one) error for that data 

field group. 

Proposed comment 112(b)–3 would 

provide that an error that meets the 

criteria for one of the four safe harbor 

provisions in proposed § 1002.112(c) 

would not be counted as an error for 

purposes of determining whether a 

financial institution has exceeded the 

error threshold for a given data field. 

The Bureau seeks comment on its 

proposed approach to bona fide errors, 

including whether the tolerance levels 

in proposed appendix H are 

appropriate. 

112(c) Safe Harbors 

Proposed § 1002.112(c) would 

establish four safe harbor provisions, 

providing that certain types of errors 

would not constitute violations of ECOA 

or Regulation B. Proposed 

§ 1002.112(c)(1) would provide a safe 

harbor for an incorrect entry for census 

tract obtained by correct use of a 

geocoding tool provided by the FFIEC or 

the Bureau. Proposed § 1002.112(c)(2) 

would provide a safe harbor for an 

incorrect NAICS code determined by a 

financial institution under certain 

circumstances. Proposed 


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756SBREFA Outline at 41–42. 

§ 1002.112(c)(3) would provide a safe 

harbor for the collection of applicants’ 

protected demographic information 

pursuant to proposed § 1002.107(a)(18) 

through (20) after an initially erroneous 

determination that an applicant is a 

small business. Proposed 

§ 1002.112(c)(4) would provide a safe 

harbor for the reporting of an 

application date that is within three 

calendar days of the actual application 

date. 

As described in further detail below, 

the Bureau is proposing the four safe 

harbors established in proposed 

§ 1002.112(c) pursuant to its authority 

under ECOA and as amended by section 

1071. Section 703 of ECOA provides the 

Bureau the authority to prescribe 

regulations to carry out the purposes of 

ECOA, including such adjustments and 

exceptions for any class of transactions 

that in the judgment of the Bureau are 

necessary or proper to effectuate the 

purposes of ECOA, to prevent 

circumvention or evasion thereof, or to 

facilitate or substantiate compliance 

therewith. Section 704B(g)(1) provides 

that the Bureau shall prescribe such 

rules as may be necessary to carry out, 

enforce, and compile data pursuant to 

section 1071. Section 704B(g)(2) 

authorizes the Bureau to adopt 

exceptions to any requirement of section 

1071 and to exempt any financial 

institution or class of financial 

institutions from the requirements of 

section 1071, as the Bureau deems 

necessary or appropriate to carry out the 

purposes of section 1071. 

112(c)(1) Incorrect Entry for Census 

Tract 

The Bureau received feedback on the 

SBREFA Outline,756 concerning a 

provision in Regulation C providing for 

a good faith error exemption in 

inadvertently selecting the wrong 

census tract for a property. In response, 

the Bureau is proposing 

§ 1002.112(c)(1), which would provide 

that an incorrect entry for census tract 

is not a violation of ECOA or this 

subpart if the financial institution 

obtained the census tract by correctly 

using a geocoding tool provided by the 

FFIEC or the Bureau. Regulation C 

§ 1003.6(b)(2) contains a similar 

provision, and the Bureau believes a 

similar approach would be appropriate 

here. Especially in light of the years that 

financial institutions have already been 

relying on the FFIEC geocoding tool in 

the HMDA context, the Bureau believes 

financial institutions would be justified 

in expecting not to be held liable for 

reporting erroneous information 

provided by the FFIEC or Bureau. 

Additionally, the Bureau believes that 

this proposed safe harbor will 

ultimately improve the accuracy of the 

data submitted by encouraging the use 

of reliable FFIEC geocoding tools, and 

preventing financial institutions from 

being subjected to liability for some 

difficult-to-avoid errors that could drive 

those institutions either to eschew these 

useful tools or exit the small business 

lending market. Therefore, the Bureau 

believes this provision is necessary to 

carry out, enforce, or compile data 

pursuant to section 1071, and necessary 

or appropriate to carry out section 

1071’s purposes. 

Proposed comment 112(c)(1)–1 would 

explain that the safe harbor provision 

under proposed § 1002.112(c)(1) would 

not extend to a financial institution’s 

failure to provide the correct census 

tract number for a covered application 

on its small business lending 

application register, as required by 

proposed § 1002.107(a)(13), because the 

FFIEC or Bureau geocoding tool did not 

return a census tract for the address 

provided by the financial institution. In 

addition, proposed comment 112(c)(1)– 

1 would explain that this safe harbor 

provision would not extend to a census 

tract error that results from a financial 

institution entering an inaccurate 

address into the FFIEC or Bureau 

geocoding tool. 

The Bureau seeks comment on its 

proposed approach to this safe harbor. 

112(c)(2) Incorrect Entry for NAICS 

Code 

As discussed in the section-by-section 

analysis of proposed § 1002.107(a)(15) 

above, the Bureau is proposing to 

require financial institutions to collect 

an applicant’s 6-digit NAICS code. A 

financial institution would be permitted 

to rely on an applicant’s representations 

or on other information regarding its 

NAICS code as described in proposed 

comments 107(a)(15)–3 and –4. 

Proposed § 1002.112(c)(2) would apply 

when a financial institution does not 

rely on such information, but instead 

the financial institution identifies the 

NAICS code for an applicant and the 

identified NAICS code is incorrect. 

Specifically, proposed § 1002.112(c)(2) 

would provide that the incorrect entry 

for that institution-identified NAICS 

code is not a violation of subpart B, 

provided that the first two digits of the 

NAICS code are correct and the 

financial institution maintains 

procedures reasonably adapted to 

correctly identify the subsequent four 

digits. 

The Bureau is proposing this safe 

harbor pursuant to its statutory 

authority under section 704B(g)(1) and 

(2). This safe harbor would address 

comments from several stakeholders 

who stated that correctly classifying an 

applicant’s NAICS code can be difficult, 

as the business may change over time, 

codes may have overlapping definitions, 

small businesses often do not know 

their NAICS code, and classifications 

may be prone to human error. The 

Bureau believes that this proposed safe 

harbor would also alleviate concerns 

about NAICS codes classifications being 

subject to change based on SBA 

rulemaking (in situations where the 

SBA does not change the 2-digit sector 

code). The Bureau believes that this 

proposed safe harbor will help to ensure 

the accuracy of the data submitted by 

requiring the maintenance of 

appropriate procedures and requiring 

that the most crucial first two digits be 

correct in every instance; at the same 

time, the proposed safe harbor will 

prevent financial institutions from being 

subjected to liability for some difficultto-avoid errors. Therefore, the Bureau 

believes this provision is necessary and 

appropriate to carry out section 1071 

and its purposes. 

The Bureau seeks comment on its 

proposed approach to this safe harbor. 

As discussed in the section-by-section 

analysis of proposed § 1002.107(a)(15) 

above, the Bureau seeks comment on its 

proposal to collect 6-digit NAICS codes 

with the safe harbor described in 

proposed § 1002.112(c)(2). The Bureau 

also seeks comment on whether 

requiring a 3-digit NAICS code with no 

safe harbor would be a better 

alternative. 

112(c)(3) Incorrect Determination of 

Small Business Status 

Proposed § 1002.112(c)(3) would 

provide that a financial institution that 

initially determines that an applicant is 

a small business, as defined in proposed 

§ 1002.106(b), but then later concludes 

the applicant is not a small business, 

does not violate ECOA or Regulation B 

if it collected information pursuant to 

subpart B regarding whether an 

applicant for a covered credit 

transaction is a minority-owned 

business or a women-owned business, 

and the ethnicity, race, and sex of the 

applicant’s principal owners. Proposed 

§ 1002.112(c)(3) would further provide 

that a financial institution seeking to 

avail itself of this safe harbor shall 

comply with the requirements of 

subpart B as otherwise required 

pursuant to proposed §§ 1002.107, 

1002.108, and 1002.111 with respect to 

the collected information. 

The Bureau is proposing this safe 

harbor pursuant to its authority under 


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757 Id. at 26. 

758 Id. at 42. 

759The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 36–37. 

section 703(a) of ECOA, which allows 

the Bureau to provide for certain 

exceptions to Regulation B ‘‘as in the 

judgment of the Bureau are necessary or 

proper to effectuate the purposes of 

[ECOA], to prevent circumvention or 

evasion thereof, or to facilitate or 

substantiate compliance therewith.’’ 

The Bureau believes the proposed safe 

harbor is needed to address situations 

where the financial institution initially 

determines that an applicant is a small 

business and believes it is required 

under the 1071 rule to collect protected 

demographic information, but later 

concludes that the applicant is not a 

small business when it, for example, 

obtains updated gross annual revenue 

information. In such situations, the 

financial institution may be uncertain 

about whether it ‘‘may obtain 

information required by a regulation’’ 

under existing § 1002.5(a)(2), which 

could deter financial institutions from 

complying with the 1071 rule. The 

Bureau believes that this safe harbor 

would facilitate compliance with ECOA 

by eliminating a situation in which 

financial institutions might be deterred 

from appropriately collecting 

applicants’ protected demographic 

information due to the possibility that 

their understanding of an applicant’s 

small business status might change 

during the course of the application 

process. 

Proposed § 1002.112(c)(3) would 

make it clear that a financial institution 

does not violate the existing Regulation 

B general prohibition against inquiring 

about the race, national origin, or sex of 

an applicant as long as the financial 

institution complies with the 

requirements of the subpart B, including 

the requirements set forth in proposed 

§§ 1002.107, 1002.108, and 1002.111 

with respect to the collected 

information. Proposed comment 106(b)– 

1 would clarify that the financial 

institution does not report the 

application on its small business 

lending application register pursuant to 

§ 1002.109. 

The Bureau seeks comment on its 

proposed approach to this safe harbor. 

112(c)(4) Incorrect Application Date 

Proposed § 1002.107(a)(2) would 

require financial institutions to report 

application date. In the SBREFA 

Outline, the Bureau stated that it was 

considering proposing providing 

financial institutions a grace period of 

several days on either side of the date 

reported to reduce the compliance 

burden of pinpointing an exact date on 

which an application was received.757

As discussed in the section-by-section 

analysis of proposed § 1002.107(a)(2) 

above, several SERs and other 

stakeholders were strongly in favor of 

the Bureau providing such a grace 

period to reduce compliance burden. 

In light of SER and other stakeholder 

feedback, proposed § 1002.112(c)(4) 

would provide that a financial 

institution does not violate proposed 

subpart B if it reports on its small 

business lending application register an 

application date that is within three 

calendar days of the actual application 

date pursuant to proposed 

§ 1002.107(a)(2). The Bureau believes 

that this proposed provision will ensure 

the level of accuracy needed for the 

resulting data to be useful in carrying 

out section 1071’s purposes and 

minimize the risk that financial 

institutions will be held liable for 

difficult-to-avoid errors, which might 

otherwise affect their participation in 

the small business lending market. 

Therefore, the Bureau believes this 

provision is necessary and appropriate 

to carry out section 1071 and its 

purposes. The Bureau seeks comment 

on its proposed approach to this safe 

harbor. 

Section 1002.113 Severability 

Proposed § 1002.113 would provide 

that the provisions of subpart B are 

separate and severable from one 

another, and that if any provision is 

stayed or determined to be invalid, the 

remaining provisions shall continue in 

effect. 

This is a standard severability clause 

of the kind that is included in many 

regulations to clearly express agency 

intent about the course that is preferred 

if such events were to occur. 

Section 1002.114 Effective Date, 

Compliance Date, and Special 

Transitional Rules 

Proposed § 1002.114 would address 

when the proposed rule would be 

effective and when financial institutions 

would be required to comply with the 

rule, as well as how financial 

institutions could choose to comply 

with the rule during this transitional 

period. Proposed § 1002.114(a) would 

state that this small business lending 

data collection rule would become 

effective 90 days after the final rule is 

published in the Federal Register. 

Proposed § 1002.114(b) would provide 

that compliance with the rule would not 

be required until approximately 18 

months after the final rule is published 

in the Federal Register. Proposed 

§ 1002.114(c)(1) would permit covered 

financial institutions to begin collecting 

information pursuant to proposed 

§ 1002.107(a)(18) through (20) beginning 

12 months prior to the compliance date. 

Proposed § 1002.114(c)(2) would permit 

a financial institution to use a different 

time period to determine whether it is 

a covered financial institution under 

proposed § 1002.105(b) as of the 

compliance date. 

The Bureau is proposing § 1002.114 

pursuant to its authority under ECOA 

section 704B(g)(1) to prescribe such 

rules and issue such guidance as may be 

necessary to carry out, enforce, and 

compile data pursuant to section 1071. 

The Bureau is also proposing 

§ 1002.114(c) pursuant to its authority 

under section 703(a) of ECOA to 

prescribe regulations to carry out the 

purposes of ECOA and provide 

exceptions as in the judgment of the 

Bureau are necessary or proper to 

effectuate the purposes of or facilitate or 

substantiate compliance with ECOA. 

114(a) Effective Date and 114(b) 

Compliance Date 

Background 

Section 1071 does not specify an 

implementation period, though 

pursuant to ECOA section 704B(f)(1), 

financial institutions must report 1071 

data to the Bureau on an annual basis. 

In the SBREFA Outline, the Bureau 

noted that it sought to ensure that 

financial institutions have sufficient 

time to implement the 1071 rule, and 

stated that it was considering proposing 

that financial institutions have 

approximately two calendar years for 

implementation.758

SBREFA Proposal Under Consideration 

and Feedback Received 

SER and stakeholder feedback 

regarding the two-year period for 

implementation under consideration 

was mixed.759 Some found the two-year 

period to be adequate, some requested 

more time, and a few urged for less. 

Some provided related feedback about 

adopting a grace period for data errors 

in the first year(s) after the 1071 rule 

becomes effective. 

A number of stakeholders agreed that 

two years was sufficient time to 

implement a 1071 rule. SERs generally 

supported a two-year implementation 

period. Several SERs with completely 

online operations felt that two years was 

sufficient time to implement the 

eventual 1071 rule; some estimated that 

they could do it in less time. A large 

number of industry stakeholders 

(including national and regional trade 


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760 Id. at 48. 

associations, community banks, fintech 

lenders, and others) accepted a two-year 

implementation period as adequate or 

said that two years was the minimum 

amount of time needed to implement 

1071 (though some of these stakeholders 

also requested more time, as discussed 

below). A few qualified their statements, 

however, as dependent on the Bureau 

not adopting additional data points 

beyond those discussed in the SBREFA 

Outline or not making further changes 

to the rule once it is finalized. 

A number of other stakeholders 

argued that two years was inadequate 

time to implement a 1071 rule. Some 

other SERs that do not have primarily 

online operations and do not have 

experience with other Federal data 

reporting regimes such as HMDA said it 

would be hard to project how long 

implementation would take, but that it 

could potentially take three years or 

more. One SER said that two years 

would not be enough as currently there 

are no data collection vendors for 1071 

compliance. Another SER said clear and 

concise definitions were important and 

expressed frustration that definitive 

answers to compliance-related questions 

(whether from the Bureau or third-party 

vendors) can be hard to come by, which 

could stymie implementation efforts. 

One SER suggested that it was overly 

optimistic for other SERs (mostly CDFIs) 

to say they would be able to implement 

1071 quickly. 

Some of the industry stakeholders 

mentioned above requested more time, 

up to three years, and suggested that 

two years was the bare minimum they 

required to implement a 1071 rule, 

given the need to create new systems, 

policies and procedures, to change their 

products as needed, and to train 

personnel in compliance. One large 

bank trade association stakeholder 

requested three years coupled with a 

two-year grace period. 

Several trade associations 

representing community banks and 

credit unions asserted that two years 

was inadequate for smaller financial 

institutions that had no experience with 

HMDA or similar reporting regimes. 

These commenters suggested tiered 

implementation, with larger financial 

institutions (or HMDA reporters) 

reporting earlier and smaller financial 

institutions later. Similarly, two smaller 

trade associations asserted that smaller 

and mission-based lenders should have 

up to three years to implement 1071. 

A number of stakeholders argued that 

two years was too much time to 

implement a 1071 rule. Several 

community group stakeholders opposed 

a two-year implementation period as too 

long and instead supported a one-year 

period. These groups opposed a longer 

implementation period on the grounds 

that ten years have elapsed since DoddFrank Act was passed and the need for 

data to analyze disparities in small 

business lending is urgent. A State-level 

trade association suggested a one-year 

period for larger financial institutions 

and a longer period for smaller financial 

institutions. 

Some stakeholders requested a grace 

period associated with the first year of 

implementation. A few SERs suggested 

that the Bureau adopt a grace period of 

some kind during which financial 

institutions would not be penalized for 

erring in trying to comply with a 1071 

regulation. This grace period would be 

akin to the first year in which the 2015 

revisions to Regulation C were effective, 

when examinations were used to 

troubleshoot and perfect data reporting 

rather than penalize reporters. Two 

other industry stakeholders similarly 

requested a safe harbor for any data 

collection errors for the first one or two 

years following the rule’s effective date. 

The SBREFA Panel recommended 

that the Bureau seek comment on the 

sufficiency of a two-year 

implementation period, and in 

particular what aspects of a 1071 rule 

might require more or less time to 

implement.760 The Panel further 

recommended that the Bureau seek 

comment on ways to facilitate 

implementation for small financial 

institutions, particularly those that have 

had no experience with any kind of 

Federal data reporting regime. 

Proposed Rule 

The Bureau is proposing in 

§ 1002.114(a) that its small business 

lending data collection rule become 

effective 90 days after the final rule is 

published in the Federal Register. At 

that time, the rule would become part of 

the Code of Federal Regulations; this 

would permit financial institutions to 

avail themselves of the special 

transitional rule in proposed 

§ 1002.114(c)(2), discussed below. 

However, pursuant to proposed 

§ 1002.114(b), compliance with the final 

rule would not be required until 

approximately 18 months after the final 

rule is published in the Federal 

Register. 

The Bureau’s proposed approach is a 

compromise between the two-year 

implementation period under 

consideration at SBREFA that a slight 

majority of stakeholders found 

acceptable and the shorter one-year 

implementation period requested by 

certain stakeholders. The Bureau 

believes that the statutory purposes of 

section 1071 are better served by an 

earlier compliance date that would, in 

turn, result in earlier publication of data 

by the Bureau. The Bureau 

acknowledges the preference of various 

SERs and other stakeholders for a 

compliance period of two or more years 

to comply. The Bureau notes, however, 

that some SERs and other industry 

stakeholders said that they could be 

ready in less than two years. The Bureau 

agrees with the stakeholders that 

asserted that a shorter implementation 

period is preferable given the length of 

time that has elapsed since the passage 

of section 1071 of the Dodd-Frank Act. 

The Bureau notes that it does not 

anticipate setting the compliance date at 

exactly 18 months following publication 

of the final rule in the Federal Register. 

Rather, the Bureau expects to specify a 

date certain for a compliance date, 

which it anticipates will be 

approximately 18 months after the final 

rule is published. Thus, for example, if 

the Bureau published the final rule in 

June 2023, the Bureau would set the 

compliance date at January 1, 2025. 

If the final rule were published early 

or late in the year, because proposed 

§ 1002.114(b) would require compliance 

approximately 18 months after 

publication of the final rule, the 

compliance date would be set in midyear. For instance, if the final rule were 

published in the Federal Register in 

March 2023, the compliance date would 

be in September 2024. Based on this 

possibility, the Bureau is considering 

whether to permit or require financial 

institutions to collect data on a partial 

year basis in the remainder of the first 

year following the compliance date, as 

the section-by-section analysis of 

proposed § 1002.109(a)(1) addresses. For 

example, if the compliance date were 

July 1, 2024, the Bureau would permit 

or require all financial institutions to 

collect and report data pursuant to 

proposed § 1002.109(a) for the period 

July 1 to December 31, 2024, and 

financial institutions would report that 

data by June 1, 2025 (pursuant to 

proposed § 1002.109(a)(1)(i)). After 

2024, financial institutions would 

comply with proposed § 1002.109(a), 

which requires the collection of 1071 

data on a calendar year basis. 

The Bureau believes that permitting 

or requiring a partial year collection in 

the initial year of compliance would 

further the purposes of section 1071 by 

expediting the collection and, 

potentially, the publication of data to be 

used to further the fair lending and 

community development purposes of 

the statute. 


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The Bureau seeks comment on its 

proposed effective date of 90 days 

following publication of an eventual 

final rule and its proposed compliance 

date of approximately 18 months after 

the publication of its final rule to 

implement section 1071. In particular, 

the Bureau seeks comment on which 

aspects of the Bureau’s proposed rule 

might require more or less time to 

implement, and ways in which the 

Bureau could facilitate implementation 

for small financial institutions, 

especially those that have had no 

experience with other Federal data 

reporting regimes. The Bureau further 

seeks comment on two alternatives: (a) 

Whether the Bureau should adopt a 

compliance date of two years after the 

publication of the final rule; and (b) 

whether the Bureau should adopt 

different compliance dates based on the 

size of a financial institution (e.g., one 

year for large financial institutions, two 

years for smaller institutions). 

114(c) Special Transitional Rules 

The Bureau is proposing two 

transitional rules in § 1002.114(c) to 

facilitate the compliance of financial 

institutions with subpart B. Proposed 

§ 1002.114(c)(1) would permit covered 

financial institutions to collect 

information regarding applicants’ 

minority-owned business status, 

women-owned business status, and the 

race, sex, and ethnicity of applicants’ 

principal owners under proposed 

§ 1002.107(a)(18) through (20) beginning 

12 months prior to the compliance date. 

Proposed § 1002.114(c)(2) would 

provide that to determine if it is a 

covered financial institution as of the 

compliance date, a financial institution 

is permitted to use its originations of 

covered credit transactions for small 

businesses in the second and third 

preceding calendar years (rather than its 

originations in the two immediately 

preceding calendar years). 

The Bureau believes that these 

transitional rules are necessary to carry 

out, enforce, and compile data pursuant 

to section 1071, will carry out the 

purposes of ECOA, and are necessary or 

proper to effectuate the purposes of 

ECOA and facilitate or substantiate 

compliance therewith. 

114(c)(1) Collection of Information Prior 

to the Compliance Date 

Proposed § 1002.114(c)(1) would 

provide that a financial institution that 

will be a covered financial institution as 

of the compliance date in proposed 

§ 1002.114(b) is permitted, but not 

required, to collect information 

regarding whether an applicant for a 

covered credit transaction is a minorityowned business under proposed 

§ 1002.107(a)(18), a women-owned 

business under proposed 

§ 1002.107(a)(19), and the ethnicity, 

race, and sex of the applicant’s principal 

owners under proposed 

§ 1002.107(a)(20) beginning 12 months 

prior to the compliance date. A financial 

institution collecting such information 

pursuant to proposed § 1002.114(c)(1) 

must do so in accordance with the 

requirements set out in proposed 

§§ 1002.107(18) through (20) and 

1002.108. The Bureau believes that this 

provision would give financial 

institutions time to test their procedures 

and systems for compiling and 

maintaining this information in advance 

of actually being required to collect and 

subsequently report it to the Bureau. 

Under this proposed provision, 

financial institutions would have time 

to adjust any procedures or systems that 

may result in the inaccurate compilation 

or maintenance of applicants’ protected 

demographic information, the collection 

of which is required by section 1071 but 

otherwise generally prohibited under 

ECOA and Regulation B. (Financial 

institutions could of course collect the 

other information that would be 

required by this proposed rule at any 

time, without needing express 

permission in Regulation B to do so.) 

The Bureau believes that this provision 

would facilitate compliance and 

improve the quality and accuracy of the 

1071 data reported to the Bureau and 

therefore is necessary to carry out, 

enforce, and compile data pursuant to 

section 1071, and will carry out the 

purposes of ECOA, and is necessary or 

proper to effectuate the purposes of 

ECOA and facilitate or substantiate 

compliance therewith. 

The Bureau seeks comment on the 

approach in this proposal. 

114(c)(2) Determining Whether a 

Financial Institution is a Covered 

Financial Institution for Purposes of 

This Subpart 

Proposed § 1002.114(c)(2) would 

provide that for purposes of determining 

whether a financial institution is a 

covered financial institution under 

proposed § 1002.105(b) as of the 

compliance date specified in proposed 

§ 1002.114(b), a financial institution 

would be permitted, but not required, to 

use its originations of covered credit 

transactions for small businesses in the 

second and third preceding calendar 

years (rather than its originations in the 

two immediately preceding calendar 

years). The Bureau believes that this 

proposed provision would provide 

greater clarity and certainty to financial 

institutions as to whether or not they 

would be covered financial institutions 

as of the compliance date. This may be 

particularly important for those 

financial institutions that originate a 

volume of covered credit transactions 

close to the threshold under proposed 

§ 1002.105(b). The Bureau believes this 

provision is necessary to carry out, 

enforce, and compile data pursuant to 

section 1071. 

The Bureau seeks comment on the 

approach in this proposal. 

Appendix E to Part 1002—Sample Form 

for Collecting Certain ApplicantProvided Data Under Subpart B 

Background 

ECOA section 704B(b) requires 

financial institutions to inquire whether 

applicants are women-owned 

businesses, minority-owned businesses, 

or small businesses, and to maintain a 

record of the responses to that inquiry 

separate from the applications and 

accompanying information. 

Additionally, ECOA section 704B(e) 

requires financial institutions to 

compile, maintain, and report certain 

information, including the ethnicity, 

race, and sex of an applicant’s principal 

owners. Section 1071 does not set out 

what categories should be used when 

collecting and reporting this 

information. 

ECOA section 704B(c) provides that 

applicants for credit may refuse to 

provide information requested pursuant 

to 704B(b), including minority-owned 

and women-owned business status. 

Under ECOA section 704B(d)(2), if a 

financial institution determines that an 

underwriter, employee, or officer 

involved in making a determination 

‘‘should have access’’ to any 

information provided by the applicant 

pursuant to a request under section 

704B(b), the financial institution must 

provide a notice of ‘‘the access of the 

underwriter to such information,’’ along 

with notice that the financial institution 

may not discriminate on the basis of 

such information. 

SBREFA Proposal Under Consideration 

and Feedback Received 

In the SBREFA Outline, the Bureau 

stated that it was considering 

developing a sample data collection 

form to assist industry in collecting the 

principal owners’ ethnicity, race, and 

sex and to communicate an applicant’s 

right to refuse to provide such 

information. The Bureau stated in the 

SBREFA Outline that this sample data 

collection form would also include the 

definition of principal owner and clarify 

that it is possible, depending on the 

factual circumstances, that no one will 


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761SBREFA Outline at 32. 

762 Id. at 19. 

763 Id. at 38. 

764SBREFA Panel Report at 45–46. 

765 Id. at 43, 47. 

be identified as a principal owner.761 It 

also stated that the Bureau was 

considering proposing simplified 

applicant-facing materials to aid 

industry in collecting minority-owned 

business status and women-owned 

business status. Specifically, for these 

applicant-facing materials and industry 

clarifications, the Bureau stated in the 

SBREFA Outline that it was considering 

proposing the following definitions: (1) 

‘‘Ownership’’ to mean directly or 

indirectly having an equity interest in a 

business (i.e., directly or indirectly, 

through any contract, arrangement, 

understanding, relationship, or 

otherwise, owning an equity interest in 

the business); (2) ‘‘control’’ of a business 

to mirror the CDD rule, where it means 

having significant responsibility to 

control, manage, or direct a business; 

and (3) the ‘‘accrual of net profit or loss’’ 

with reference to generally accepted 

accounting practices and any applicable 

Internal Revenue Service standards.762

Finally, the Bureau stated in the 

SBREFA Outline that it was considering 

developing model disclosures that 

financial institutions could use when 

providing the notice under ECOA 

section 704B(d)(2).763

Some SERs requested that the Bureau 

develop a uniform collection form to 

assist financial institutions with the 

collection of reporting of minorityowned business status, women-owned 

business status, and the race, sex, and 

ethnicity of principal owners. One SER 

suggested developing a sample data 

collection form similar to the one used 

for HMDA data collection and including 

the same disclosures. One commenter 

noted that the use of a model form may 

increase the uniformity and consistency 

of reporting demographic information. 

Another commenter suggested that any 

model form should include an 

explanation of why the financial 

institution is requesting the information 

and a statement of the applicant’s right 

to refuse to provide the information. 

One SER asked that, if the Bureau 

provided sample language for the notice 

to be provided pursuant to ECOA 

section 704B(d)(2), that the Bureau 

provide it in English as well as in other 

languages, such as Spanish. One SER 

stated that sample language for a notice 

should include a statement that 

underwriter access to demographic 

information is not detrimental and that 

such access is necessary due to the 

small size of the lender. 

The SBREFA Panel recommended 

that the Bureau consider creating 

sample data collection forms that, to the 

extent possible, simply and clearly 

explain the information being requested 

for purposes of the minority-owned 

business data point, the women-owned 

business data point, and the principal 

owners’ ethnicity, race, and sex data 

point. It also said that the Bureau 

should additionally consider providing 

these sample data collection forms in 

other languages, such as Spanish.764

The Panel also recommended that the 

Bureau consider developing sample 

disclosure language that financial 

institutions could use to provide some 

context as to why applicants are being 

asked to provide demographic 

information, in order to encourage 

applicants to respond.765

Proposed Rule 

Consistent with the SBREFA Panel’s 

recommendation, the Bureau is 

proposing a sample data collection form 

that financial institutions could use to 

collect minority-owned business status, 

women-owned business status, and 

principal owners’ ethnicity, race, and 

sex. As suggested in the feedback from 

SERs, the proposed sample data 

collection form would be similar to the 

HMDA data collection form and would 

include a notice of the applicant’s right 

to refuse to provide the information as 

well as an explanation of why the 

financial institution is requesting the 

information. The sample data collection 

form would also include the definitions 

of minority individual, minority-owned 

business, principal owner, and womenowned business as they would be 

defined in proposed § 1002.102(l), (m), 

(o), and (s), respectively. Although the 

Bureau is not currently proposing a 

sample data collection form in Spanish 

or any language other than English, the 

Bureau requests comment on whether a 

sample data collection form in Spanish 

or in another language other than 

English would be useful to financial 

institutions in the context of their 1071 

obligations. 

Additionally, to aid financial 

institutions with the collection of the 

information in proposed 

§ 1002.107(a)(21), the sample data 

collection form would include a 

question about the applicant’s number 

of principal owners. 

Finally, consistent with the SBREFA 

Panel’s recommendation, the Bureau is 

proposing that the sample data 

collection form would include language 

that a financial institution could use to 

satisfy the notice requirement under 

ECOA section 704B(d)(2) if it 

determines that one or more employees 

or officers should have access to the 

applicant’s protected demographic 

information pursuant to proposed 

§ 1002.108(b)(2). 

The Bureau is proposing appendix E 

pursuant to its authority under ECOA 

section 704B(g)(1) to prescribe such 

rules and issue such guidance as may be 

necessary to carry out, enforce, and 

compile data pursuant to section 1071, 

in order to facilitate compliance with 

the statutory requirements to collect 

minority-owned and women-owned 

business status, and the ethnicity, race, 

and sex of principal owners pursuant to 

704B(b)(1) and (e)(2)(G). Further, the 

Bureau is proposing appendix E 

pursuant to its obligation in 704B(g)(3) 

to issue guidance to facilitate 

compliance with the requirements of 

section 1071, including assisting 

financial institutions in working with 

applicants to determine whether the 

applicants are women-owned or 

minority-owned businesses. 

The Bureau seeks comment on the 

proposed sample data collection form, 

including the proposed language for the 

notice under ECOA section 704B(d)(2). 

The Bureau generally requests comment 

on whether additional clarification 

regarding any aspect of the sample data 

collection form or the related notice 

provided pursuant to 704B(d)(2) is 

needed. The Bureau also seeks comment 

on whether the sample data collection 

form should identify the Bureau to 

applicants as a potential resource in 

connection with their applicable legal 

rights or for additional information 

about the data collection, including 

concerns regarding non-compliance. In 

addition, the Bureau seeks comment on 

whether financial institutions need 

additional information on how to adapt 

this form for use in digital modes of data 

collection, and, if so, what specific 

information would be most useful. 

Appendix F to Part 1002—Instructions 

for Collecting and Reporting Small 

Business Applicants’ Minority-Owned 

and Women-Owned Business Status 

Under Subpart B 

ECOA section 704B(b) requires 

financial institutions to inquire whether 

applicants for credit are women-owned 

businesses, minority-owned businesses, 

or small businesses and to maintain a 

record of the responses to that inquiry 

separate from the applications and 

accompanying information. However, 

section 1071 does not include specific 

instructions on how a financial 

institution should collect or report such 

information. 

The Bureau is proposing appendix F 

to provide instructions to aid financial 


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766See ECOA section 704B(e)(1), (f)(2) (detailing 

requirements for compilation, maintenance, and 

publication of information). 

institutions when collecting minorityowned business status pursuant to 

proposed § 1002.107(a)(18) and womenowned business status pursuant to 

proposed § 1002.107(a)(19). 

The Bureau is proposing appendix F 

pursuant to its authority under ECOA 

section 704B(g)(1) to prescribe such 

rules and issue such guidance as may be 

necessary to carry out, enforce, and 

compile data pursuant to section 1071, 

in order to facilitate compliance with 

the statutory requirements to collect 

minority-owned and women-owned 

business status pursuant to 704B(b)(1). 

Further, the Bureau is proposing 

appendix F pursuant to its obligation in 

704B(g)(3) to issue guidance to facilitate 

compliance with the requirements of 

section 1071, including assisting 

financial institutions in working with 

applicants to determine whether the 

applicants are women-owned or 

minority-owned businesses. 

The Bureau seeks comment on the 

proposed instructions, and generally 

requests comment on whether 

additional clarification regarding any 

aspect of the proposed instructions is 

needed. The Bureau further requests 

comment on whether additional or 

different instructions are needed for 

financial institutions that choose not to 

use a paper data collection form to 

collect minority-owned business status 

or women-owned business status, such 

as collecting such information using a 

web-based or other electronic data 

collection form, or over the telephone. 

The Bureau also seeks comment 

regarding the challenges faced by both 

applicants and financial institutions by 

the data collection instructions 

prescribed in appendix F and 

specifically requests comment on ways 

to improve the data collection of 

minority-owned business status and 

women-owned business status. 

Appendix G to Part 1002—Instructions 

for Collecting and Reporting Ethnicity, 

Race, and Sex of Small Business 

Applicants’ Principal Owners Under 

Subpart B 

ECOA section 704B(e) requires 

financial institutions to compile, 

maintain, and report certain 

information, including the ethnicity, 

race, and sex of an applicant’s principal 

owners, but does not provide specific 

instructions on how a financial 

institution should do so. 

The Bureau is proposing appendix G 

to provide instructions to aid financial 

institutions when collecting principal 

owners’ ethnicity, race, and sex 

pursuant to proposed § 1002.107(a)(20). 

The Bureau is proposing appendix G 

pursuant to its authority under ECOA 

section 704B(g)(1) to prescribe such 

rules and issue such guidance as may be 

necessary to carry out, enforce, and 

compile data pursuant to section 1071, 

to facilitate compliance with the 

statutory requirements to collect the 

ethnicity, race, and sex of principal 

owners pursuant to 704B(e)(2)(G), and 

pursuant to 704B(g)(3), which directs 

the Bureau to issue guidance designed 

to facilitate compliance with the 

requirements of section 1071. 

The Bureau seeks comment on the 

proposed instructions, and generally 

requests comment on whether 

additional clarification regarding any 

aspect of the proposed instructions is 

needed. The Bureau further requests 

comment on whether additional or 

different instructions are needed for 

financial institutions that chose not to 

use a paper data collection form to 

collect, principal owners’ ethnicity, 

race, and sex, such as collecting such 

information using a web-based or other 

electronic data collection form or over 

the telephone. The Bureau also seeks 

comment regarding the challenges faced 

by both applicants and financial 

institutions by the data collection 

instructions prescribed in appendix G 

and specifically requests comment on 

ways to improve the data collection of 

principal owners’ ethnicity, race, and 

sex. 

Appendix H to Part 1002—Tolerances 

for Bona Fide Errors in Data Reported 

Under Subpart B 

The Bureau is proposing appendix H, 

which would set out a Threshold Table, 

as referred to in proposed § 1002.112(b) 

and proposed comment 112(b)–1. As 

these provisions would explain, a 

financial institution is presumed to 

maintain procedures reasonably adapted 

to avoid errors with respect to a given 

data field if the number of errors found 

in a random sample of a financial 

institution’s data submission for a given 

data field do not equal or exceed the 

threshold in column C of the Threshold 

Table. 

Under the Threshold Table in 

proposed appendix H, column A would 

list the size of the financial institution’s 

small business lending application 

register in ranges of application register 

counts (e.g., 25 to 50, 51–100, 101–130, 

etc.). The applicable register count range 

would then determine both the size of 

the random sample, under column B, 

and the applicable error threshold, 

under column C. The error threshold of 

column C, as proposed comment 

112(b)–1 would explain, identifies the 

maximum number of errors that a 

particular data field in a financial 

institution’s small business lending 

application register may contain such 

that the financial institution is 

presumed to maintain procedures 

reasonably adapted to avoid errors with 

respect to a given data field. Column D 

would be illustrative, showing the error 

threshold as a percentage of the random 

sample size. 

Proposed appendix H would also 

include examples of how financial 

institutions would use the Threshold 

Table. 

For the reasons set out in the sectionby-section analysis of proposed 

§ 1002.112(b), the Bureau is proposing 

appendix H pursuant to its authority 

under ECOA section 704B(g)(1) to 

prescribe such rules and issue such 

guidance as may be necessary to carry 

out, enforce, and compile data pursuant 

to section 1071, and its authority under 

704B(g)(2) to adopt exceptions to any 

requirement of section 1071 and to 

exempt any financial institution or class 

of financial institutions from the 

requirements section 1071 as the Bureau 

deems necessary or appropriate to carry 

out the purposes of section 1071. 

The Bureau seeks comment on this 

proposed appendix H. In particular, the 

Bureau seeks comment on whether the 

register count ranges in column A, the 

random sample sizes in column B, and 

the error thresholds in column C are 

appropriate. The Bureau further seeks 

comment on whether a covered 

financial institution should be required 

to correct and resubmit data for a 

particular data field, if the institution 

has met or exceeded the thresholds 

provided in appendix H. 

VI. Public Disclosure of 1071 Data 

A. Introduction 

Section 1071 of the Dodd-Frank Act 

amended ECOA to require financial 

institutions to collect and report to the 

Bureau data about applications for 

credit for women-owned, minorityowned, and small businesses, and for 

those data to be subsequently disclosed 

to the public.766


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767ECOA section 704B(e)(4). 

768See SBREFA Outline at 40–41. 

769The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 34–36. 

The Bureau is proposing that financial 

institutions not compile, maintain, or 

submit any name, specific address, 

telephone number, email address or any 

personally identifiable information 

concerning any individual who is, or is 

connected with, an applicant, other than 

as would be required pursuant to 

proposed § 1002.107. Nonetheless, 

publication of the data fields proposed 

in § 1002.107(a) in an unedited, 

application-level format could 

potentially affect the privacy interests 

and lead to the re-identification of, and 

risk of harm to, small businesses, related 

natural persons, and financial 

institutions. 

Section 1071 states that the Bureau 

may, ‘‘at its discretion, delete or modify 

data collected under [section 1071] 

which is or will be available to the 

public, if the Bureau determines that the 

deletion or modification of the data 

would advance a privacy interest.’’ 767

For the reasons discussed below, the 

Bureau is proposing to adopt a 

balancing test as the method by which 

it would implement its ‘‘discretion’’ to 

delete or modify data before making the 

data available to the public. 

However, the Bureau does not yet 

have any data under section 1071 and 

the Bureau does not believe that there 

are any comparable datasets that it 

could use as an adequate proxy for 1071 

data to which it could apply the 

balancing test at this time. The Bureau 

is thus setting forth herein a partial 

analysis under the balancing test, for 

public comment. With several 

exceptions, discussed in part VI.C.6 

below, the Bureau is not at this time 

proposing specific modifications or 

deletions for the public applicationlevel 1071 data. After the Bureau 

receives at least one full year of 1071 

data from financial institutions 

following the compliance date of the 

final rule, the Bureau intends to issue a 

policy statement (informed by 

comments received on the partial 

analysis in this proposal), in which the 

Bureau would set forth its intended 

modifications and deletions. 

B. Background 

1. SBREFA Outline 

In the SBREFA Outline, the Bureau 

stated it was considering proposing to 

use a balancing test for purposes of 

deciding how to exercise its discretion 

to modify or delete data prior to 

publication.768 The Bureau explained 

that data would be modified or deleted 

if disclosure of the data in unmodified 

form would pose risks to privacy 

interests that are not justified by the 

benefits of public disclosure in light of 

the statutory purposes of section 1071. 

If the risks of disclosing unmodified 

data are not justified by the benefits 

under the balancing test, the Bureau 

explained it would determine whether 

modifications could appropriately 

diminish the risks. The Bureau further 

explained that it was considering 

proposing to apply this balancing test to 

the privacy interests of non-natural 

persons (e.g., small business applicants 

or financial institutions), with respect to 

protecting sensitive commercial 

information, as well as the privacy 

interests of natural persons (e.g., 

principal owners), with respect to 

protecting personal information. 

As an alternative to a balancing test, 

the Bureau had considered an approach 

in which it would modify data prior to 

publication if an identified privacy risk 

crosses some significance threshold, 

without assessing that risk against the 

benefit of disclosure. The Bureau 

explained that such an approach, 

however, could be inconsistent with the 

express disclosure purposes of the 

statute. 

2. SBREFA Feedback 

The Bureau received feedback on its 

privacy proposals under consideration 

from SERs and other commenters; 769

the SBREFA Panel also made 

recommendations regarding privacy. 

Comments related to the design and 

implementation of the balancing test 

itself are described immediately below. 

Comments addressing general issues 

related to benefits, privacy risks, and 

potential modifications of data fields are 

described further below in part VI.C. 

Comments addressing the benefits of 

specific data fields the Bureau 

considered as part of the SBREFA 

process are discussed in the section-bysection analysis of proposed 

§ 1002.107(a), in part V above. 

Comments addressing the privacy risks 

and potential modifications of specific 

data fields are discussed below in part 

VI.C. 

With respect to the balancing test 

itself, several SERs expressed the view 

that it would be difficult to balance 

transparency and fairness in the 

marketplace with privacy interests. A 

SER and another industry commenter 

suggested that the balancing test 

described in the SBREFA Outline would 

not adequately protect privacy interests 

because it appeared to be subjective, 

dependent on the limitations of agency 

expertise, and subject to change. A 

community group commenter 

maintained that financial institution 

privacy did not appear to have been a 

concern for Congress in section 1071. 

One industry commenter 

recommended that the Bureau consider 

the alternative approach of not 

balancing privacy risks against the 

benefits of disclosure because of the 

heightened privacy risks in the small 

business market (relative to consumer 

privacy risks), particularly in 

geographies where re-identification risk 

is higher. Another industry commenter 

expressed the view that excluding 

community banks from collection and 

reporting would provide a more 

straightforward approach to protecting 

privacy. On the other hand, a 

community group maintained that the 

benefits of public disclosure would 

always justify any alleged privacy risks. 

Commenters also addressed 

information security concerns and 

potential conflicts with other privacy 

laws. Two SERs raised concerns that the 

transmission of 1071 data to the Bureau 

could give rise to the risk of a data 

security breach involving personally 

identifiable information or information 

that would directly identify a small 

business. One SER requested that 

financial institutions be held harmless if 

there were a data security breach for 

which the Bureau was responsible. 

Another industry commenter expressed 

the concern that some applicants would 

be hesitant to provide information in 

light of data security concerns. Another 

requested that the Bureau describe and 

seek comment on its data security 

safeguards. 

Commenters also addressed 

procedural issues surrounding the 

implementation of the Bureau’s privacy 

analysis. Several industry commenters 

requested that the Bureau not bifurcate 

the analysis of privacy issues into a 

separate notice-and-comment 

rulemaking, which was the approach 

the Bureau took with respect to data 

fields reported under the 2015 HMDA 

Final Rule. One commenter stated that 

a full explanation of the balancing test 

design and its application would help 

financial institutions consider potential 

reputational risks associated with data 

disclosure. One industry stakeholder 

stated that the Bureau should take what 

the stakeholder described as a 

transparent approach to decisions about 

public disclosure. Another stakeholder 

stated that if privacy issues are raised 

after implementation of a rulemaking, 

the Bureau should, as the stakeholder 

described, promptly limit publication of 

data that might be released to the 


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770See SBREFA Panel Report at 47–48. 

771See id. 

772See id. 

773ECOA section 704B(e)(4). 

774See ECOA section 704B(a) (statutory 

purposes), (e)(4) (deletion or modification 

authority), (f)(1) (reporting requirement), (f)(2)(C) 

(publication requirement). 775See, e.g., Carpenter v. United States, 484 U.S. 

19, 26 (1987) (‘‘Confidential information acquired 

or compiled by a corporation in the course and 

conduct of its business is a species of property to 

which the corporation has the exclusive right and 

benefit . . . .’’) (citation omitted). 

776See, e.g., Kewanee Oil Co. v. Bicron Corp., 416 

U.S. 470, 487 (1974) (‘‘A most fundamental human 

right, that of privacy, is threatened when industrial 

espionage is condoned or is made profitable.’’); E.I. 

duPont deNemours & Co. v. Christopher, 431 F.2d 

1012, 1016 (5th Cir. 1970) (‘‘Commercial privacy 

must be protected from espionage which could not 

have been reasonably anticipated or prevented.’’). 

777See, e.g., Tavoulareas v. Wash. Post Co., 724 

F.2d 1010, 1023 (D.C. Cir. 1984), vacated on other 

grounds, 737 F.2d 1170 (D.C. Cir. 1984). 

778See, e.g., Fleck & Assocs., Inc. v. City of 

Phoenix, 471 F.3d 1100, 1105 (9th Cir. 2006). 

779United States v. Morton Salt Co., 338 U.S. 632, 

652 (1950) (‘‘[C]orporations can claim no equality 

with individuals in the enjoyment of a right to 

privacy.’’). 

780 FCC v. AT&T, Inc., 562 U.S. 397, 402–407 

(2011). In FCC, the Court held that corporations lack 

‘‘personal privacy’’ interests under FOIA Exemption 

6, which uses the term ‘‘personal privacy.’’ The 

Court’s opinion was based on the word ‘‘personal’’ 

and limited to the notion of ‘‘personal privacy.’’ 

The Court stated that it was not addressing the 

scope of a non-natural person’s ‘‘privacy interests’’ 

generally under constitutional or common law. Id. 

at 407 (‘‘[T]his case does not call upon us to pass 

on the scope of a corporation’s ‘privacy’ interests 

as a matter of constitutional or common law.’’). 

781See, e.g., Providence J. Co. v. FBI, 460 F. Supp. 

778, 785 (D.R.I. 1978) (‘‘While corporations have no 

public. Other industry commenters 

maintained that decisions about 

modifications or deletions to protect 

privacy should be published following 

notice-and-comment rulemaking, rather 

than by policy statement. 

The SBREFA Panel recommended 

that the Bureau offer more detail in the 

proposal on the balancing test and its 

application to the 1071 data fields.770

The Panel also recommended that the 

Bureau seek comment on how it should 

design and implement the balancing 

test. In addition, the Panel 

recommended that the Bureau seek 

comment on the range of privacy 

concerns articulated by SERs, including 

potential re-identification of small 

businesses and financial institutions, as 

well as the types of harms and 

sensitivities the unmodified release of 

1071 data could cause to financial 

institutions and small business 

applicants.771 Finally, the Panel 

recommended that the Bureau seek 

comment on the potential benefits of 

publishing unmodified 1071 data.772

C. Design, Implementation, and 

Application of Balancing Test 

In light of the feedback from SERs and 

other stakeholders, and for the reasons 

below, the Bureau is proposing to adopt 

a balancing test, consistent with the test 

described in the SBREFA Outline. As 

recommended by the SBREFA Panel, 

the Bureau is providing additional 

detail on the balancing test and how it 

would be applied to the proposed 1071 

data points; this analysis is in 

Preliminary Application of the 

Balancing Test in part VI.C.6 below. As 

discussed under Implementation of the 

Balancing Test in part VI.C.2 below, 

however, the Bureau is not proposing 

specific modifications or deletions for 

most of the proposed data fields because 

data required for a statistical analysis of 

re-identification risk are not yet 

available. 

1. Balancing Test Design 

Under ECOA section 704B(e)(4), the 

Bureau ‘‘may, at its discretion, delete or 

modify data collected under this section 

which is or will be available to the 

public, if the Bureau determines that the 

deletion or modification of the data 

would advance a privacy interest.’’ 773

Congress thus provided the Bureau with 

broad discretion to modify or delete 

data prior to public disclosure to 

advance privacy interests. The Bureau 

continues to believe that a balancing test 

is a reasonable approach for exercising 

this discretion and would effectuate the 

purposes of section 1071 better than the 

alternative approaches discussed in the 

SBREFA Outline and recommended by 

some commenters. As recognized by 

commenters, exercising this discretion 

inherently requires that the Bureau 

reconcile competing policy interests. A 

balancing test approach would help the 

Bureau consider the privacy risks and 

benefits of disclosing data fields, tailor 

modifications or deletions of data 

narrowly to appropriately balance 

privacy risks and benefits in the 

published data, and establish a decision 

framework that is responsive to a broad 

set of stakeholder concerns that might 

evolve over time. The Bureau intends to 

engage with stakeholders, including 

through this proposal, to supplement its 

own expertise in evaluating privacy 

interests for these purposes. 

Alternative approaches recommended 

by stakeholders are summarized in part 

VI.B.2 above. The Bureau is not 

proposing approaches that do not 

consider the benefits of public 

disclosure because it is concerned they 

would result in outcomes inconsistent 

with the statutory purposes. For 

example, deleting all application-level 

data from public release and instead 

publishing aggregate data would 

advance privacy interests but would 

substantially undermine the public 

disclosure purposes of the statute. 

The Bureau also considered the 

suggestion that it exercise its discretion 

to modify or delete application-level 

data prior to publication by exempting 

classes of financial institutions from 

public disclosure. While this would 

address the privacy interests of those 

financial institutions and their 

customers that might arise in certain 

markets, this approach would be too 

narrow because privacy concerns that 

arise for these persons may also arise for 

others, such as small businesses and 

natural persons in other markets. The 

Bureau is not proposing an approach 

that assumes the benefits of disclosure 

will always justify risks to privacy 

interests. The commenter 

recommending this approach did not 

provide a basis for such a conclusion 

with respect to individual data fields, or 

the dataset as a whole. 

With respect to the comment that the 

Bureau not consider the privacy 

interests of financial institutions, 

section 1071 generally provides that the 

Bureau may delete or modify data if it 

determines that doing so ‘‘would 

advance a privacy interest.’’ 774 The 

statute does not define the term 

‘‘privacy interest,’’ however, and the 

Bureau believes it can reasonably be 

interpreted broadly, for purposes of 

section 1071, to include interests of 

non-natural persons with respect to 

certain commercial information. 

Whether a non-natural person has 

cognizable ‘‘privacy interests’’ under the 

Constitution or common law is not a 

settled legal question across all areas of 

the law. Common law recognizes that 

businesses have an interest in protecting 

sensitive commercial information, 

similar to the privacy interests enjoyed 

by natural persons.775 Although the 

courts have typically described these 

interests as property interests, cases 

sometimes describe these types of 

interests as privacy interests.776 Some 

circuits have held that non-natural 

persons have constitutionally protected 

privacy interests,777 while other circuits 

have rejected this notion.778 The 

Supreme Court has held that 

corporations do not have privacy rights 

on par with natural persons,779 and that 

corporations do not have ‘‘personal’’ 

privacy interests; 780 however, it has not 

directly addressed the issue of whether 

a non-natural person has a cognizable 

‘‘privacy interest.’’ The Bureau also 

understands that the interests of many 

small businesses may be closely tied to 

the privacy interests of natural 

persons.781


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privacy, personal financial information is protected, 

including information about small businesses when 

the individual and corporation are identical.’’), 

rev’d on other grounds, 602 F.2d 1010 (1st Cir. 

1979). 

782For context, the privacy interests that may be 

considered under HMDA are limited to the interests 

of ‘‘applicants and mortgagors’’ specifically. See 12 

U.S.C. 2803(h)(1)(E), (h)(3)(B), (j)(2)(B). In contrast, 

section 1071 simply uses the term ‘‘privacy 

interest,’’ without qualification. See ECOA section 

704B(e)(4). 

783The Bureau is aware that ‘‘re-identification’’ 

risk often is used in reference to risks applicable to 

natural persons and that identification of a small 

business in the public application-level 1071 data 

could be characterized as a ‘‘harm’’ or ‘‘sensitivity.’’ 

However, for the ease of administrability, the 

proposed balancing test analyzes risks to both 

natural persons and small businesses as reidentification risks. 

784See 80 FR 66127, 66133–34 (Oct. 28, 2015). 

785See ECOA section 704B(e), (f)(2)(B). 

The Bureau believes it is appropriate 

to consider the privacy interests of nonnatural persons under the 1071 

balancing test. The proposed 1071 data 

points would reveal information about 

non-natural persons—including small 

businesses and financial institutions— 

and Congress did not expressly limit the 

privacy interests the Bureau may 

consider to those of natural persons. Nor 

did Congress expressly limit the privacy 

interests the Bureau may consider to 

those of applicants or borrowers, as it 

did in HMDA.782 Further, courts have 

recognized that non-natural persons 

have privacy interests in certain 

contexts. The Bureau seeks comment on 

its interpretation of ‘‘privacy interests’’ 

under section 1071 and its proposal to 

consider the privacy interests of both 

financial institutions and non-natural 

person applicants. 

Several commenters raised concerns 

about the information security 

implications of reporting data to the 

Bureau. While the Bureau’s information 

security procedures are outside the 

scope of this rulemaking, the Bureau 

takes strong measures to mitigate and 

address any risks to the security of 

sensitive data it receives, consistent 

with the guidance and standards set for 

Federal information security programs, 

and is committed to protecting the 

privacy and information security of the 

1071 data it receives from financial 

institutions. In addition, the Bureau 

does not believe a financial institution 

could be held legally liable for the 

exposure of data due to a breach at a 

government agency or for reporting data 

to a government agency if the institution 

was legally required to provide the data 

to the agency and did so in accordance 

with other applicable law. 

The Bureau acknowledges the 

concern raised by some SERs and other 

stakeholders that some applicants might 

be hesitant to provide information in 

light of data security concerns. 

However, the Bureau does not believe 

that such concerns will broadly 

discourage applicants from seeking 

credit from financial institutions that 

are responsible for reporting data to the 

Bureau. 

For the reasons described above, the 

Bureau proposes to use a balancing test 

to exercise its discretion under ECOA 

section 704B(e)(4) to delete or modify 

data collected under section 1071 which 

is or would be available to the public 

where the Bureau determines that the 

deletion or modification of the data 

would advance a privacy interest. 

Specifically, the Bureau proposes to 

modify or, as appropriate, delete data 

fields from the public application-level 

1071 data where the release of the 

unmodified data would create risks to 

the privacy interests of applicants, 

related natural persons, or financial 

institutions that would not be justified 

by the benefits of such release to the 

public in light of the statutory purposes 

of section 1071. In such circumstances, 

the need to protect the privacy interests 

of applicants, related natural persons, or 

financial institutions would require that 

individual data fields be modified or, as 

appropriate, deleted. Considering the 

public disclosure of 1071 data as a 

whole, the privacy interests of 

applicants, related natural persons, or 

financial institutions would arise under 

the balancing test only where the 

disclosure of 1071 data may both 

substantially facilitate the reidentification of an applicant or related 

natural person, in the data and disclose 

information about such persons, or the 

identified financial institution, that is 

not otherwise public and may be 

harmful or sensitive. Thus, disclosure of 

an unmodified individual data field 

may create a risk to privacy interests if 

such disclosure either would 

substantially facilitate the reidentification of an applicant or related 

natural person; or would disclose 

information about applicants or related 

natural persons, or an identified 

financial institution, that is not 

otherwise public and that may be 

harmful or sensitive.783 This 

interpretation implements ECOA 

section 704(e)(4). 

Where the publication of unmodified 

application-level 1071 data may create 

risks to privacy, the proposed balancing 

test would require that the Bureau 

consider the benefits of disclosure in 

light of section 1071’s purposes and, 

where these benefits do not justify the 

privacy risks the disclosure would 

create, modify the public applicationlevel dataset to appropriately balance 

the privacy risks and disclosure 

benefits. The Bureau would delete the 

data field prior to publishing the 

application-level dataset if other 

modifications would not appropriately 

balance the privacy risks and disclosure 

benefits. An individual data field would 

be a candidate for modification or 

deletion under the proposed balancing 

test if its disclosure in unmodified form 

would create a risk of re-identification 

or a risk of harm or sensitivity. 

The Bureau’s proposed balancing test 

generally resembles the balancing test 

adopted in the 2015 HMDA Final 

Rule,784 with certain adjustments for the 

1071 context. In particular, the Bureau’s 

proposed 1071 balancing test would 

consider the privacy interests of not just 

applicants, but also related natural 

persons who might not be applicants 

(such as principal owners of a business, 

where a legal entity is the applicant), as 

well as the privacy interests of financial 

institutions reporting 1071 data. 

The Bureau’s proposed 1071 

balancing test would not specifically 

consider the risks that a financial 

institution could be identified in the 

public application-level 1071 data. 

Section 1071 requires financial 

institutions to compile and maintain 

data and provides that such information 

be made available to the public upon 

request.785 Accordingly, section 1071 

contemplates that the public would 

know what application data are 

associated with particular financial 

institutions. Because the statute directly 

contemplates disclosure of a financial 

institution’s identity in connection with 

the public application-level dataset, the 

Bureau proposes to disclose financial 

institution identity; the re-identification 

risk element of the analysis would not 

apply to financial institutions. However, 

the Bureau would consider the risk to a 

financial institution that the release of 

1071 data in unmodified form would 

disclose information that may be 

harmful or sensitive to a financial 

institution. 

As recommended by the SBREFA 

Panel, the Bureau seeks comment on the 

design of its proposed balancing test. 

The Bureau also seeks comment on 

whether the balancing test should apply 

to the privacy interests of natural 

persons generally, rather than just those 

of natural persons related to applicants. 

2. Implementation of the Balancing Test 

As noted above, the SBREFA Panel 

and other commenters recommended 

that the Bureau offer more detail in the 

proposal on how the Bureau intends to 

implement and apply its balancing test 


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786See SBREFA Panel Report at 47. 787For purposes of this discussion of the 

proposed balancing test analysis, the term ‘‘unique’’ 

can refer to a combination of values for a particular 

record or a combination of values shared by a few 

records. 

788The Bureau considered whether it could 

analyze re-identification risk using data released 

under the SBA’s Paycheck Protection Program (PPP) 

and U.S. Census data. However, estimating reidentification risk—and making modification and 

deletion decisions designed to reduce reidentification risk—based on existing public data 

sources would be substantively limited. First, the 

more limited scope of the PPP and Census data 

makes it difficult to accurately estimate the reidentification risk associated with all of the data 

points in the eventual 1071 data. Second, a reidentification analysis using existing PPP and 

Census datasets would not cover the same sets of 

small businesses that will appear in the 1071 data. 

789Compare ECOA section 704B(e)(4), with ECOA 

section 704B(f)(2). 

790Section 1071 requires financial institutions to 

compile and maintain data and provides that such 

information be made available to the public upon 

request. See ECOA section 704B(e), (f)(2)(B). 

to the 1071 data fields it is proposing.786

Several industry commenters requested 

that the Bureau apply the balancing test 

directly in the Bureau’s 1071 

rulemaking, rather than after the Bureau 

issues a final rule. Because of data 

limitations discussed below, the Bureau 

is not proposing a full application of the 

balancing test to most of the proposed 

data points. Instead, the Bureau is 

setting forth and seeking comment on its 

analysis of the benefits and harms or 

sensitivities that could arise with 

respect to individual data fields and the 

dataset as a whole. The Bureau is not 

conducting a full analysis of the risks of 

re-identification; the Bureau is 

proposing to determine the extent of reidentification risk after it has obtained 

a full year of reported 1071 data. 

Accordingly, the Bureau is not 

proposing specific modifications or 

deletions for most of the proposed data 

points, but is instead seeking comment 

throughout part VI.C.5 and .6 on the 

types of techniques it is considering. 

The Bureau is not applying the 

proposed balancing test fully to the 

proposed data fields because the lack of 

an existing 1071 dataset, or a 

sufficiently similar dataset, materially 

limits its ability to analyze reidentification risks. Unlike the 

balancing test elements of benefits, 

harms, and sensitivities, the Bureau 

would analyze the re-identification risk 

element, in part, using a statistical 

analysis. Specifically, the Bureau would 

determine whether a particular 

combination of data fields in a dataset 

generates a unique set of records that 

can be accurately matched to records in 

another publicly available dataset 

identifying an applicant or a related 

natural person.787 Where certain data 

fields significantly contribute to reidentification risk, the Bureau can use 

this type of analysis to determine what 

modifications can be made to the data 

fields to reduce re-identification risk— 

that is, by reducing the number of 

unique combinations produced by data 

fields—while maintaining as much data 

utility as possible. 

However, the absence of an existing 

1071 dataset or sufficiently similar data 

significantly impedes the Bureau’s 

ability to preliminarily determine 

whether a proposed 1071 data field, 

individually or in combination with 

others, would substantially facilitate reidentification, or how specifically to 

modify data to reduce that risk. Because 

there does not exist a dataset 

sufficiently similar to what would be 

published under section 1071, a reidentification analysis of data other than 

actual reported 1071 data would not 

provide an accurate basis on which the 

Bureau could apply the balancing test 

and modify or delete the data, as 

appropriate.788 Underestimating the 

degree to which a 1071 data field, 

individually or in combination with 

others, facilitates re-identification risk 

could unnecessarily increase privacy 

risks to an applicant or a related natural 

person, while overestimating reidentification risk could unnecessarily 

reduce data utility. 

In light of these limitations, the 

Bureau considered deferring all analysis 

under the proposed balancing test until 

after the 1071 rule is finalized. 

However, the Bureau is concerned that 

doing so would reduce opportunities for 

public feedback on privacy issues and 

their relationship to the general 1071 

proposal. Although the Bureau lacks 

data that would allow it to perform a 

complete re-identification analysis at 

this time, it believes there is substantial 

value in setting forth its preliminary 

analysis under other aspects of the 

balancing test. Specifically, the Bureau 

has preliminarily analyzed the benefits 

and harms or sensitivities associated 

with the proposed data fields, the 

capacity and motives of third parties to 

match proposed 1071 data fields to 

other identifiable datasets, and potential 

modification techniques it may consider 

to address privacy risks. The Bureau’s 

preliminary analysis of these aspects of 

the balancing test is set forth below. The 

Bureau acknowledges that the public 

will not have an opportunity to 

comment on the Bureau’s intentions 

with respect to specific modifications or 

deletions for each proposed data field 

before a 1071 rule is finalized. However, 

the Bureau believes this limitation 

outweighs the risks of basing 

modifications or deletions on a 

potentially inaccurate re-identification 

analysis. And while a number of 

community groups that provided 

feedback on the Bureau’s SBREFA 

Outline asserted that privacy risks 

would be low, they nonetheless 

recognized the role played by 

modification techniques. The Bureau 

agrees that modification techniques 

could play an important role in 

reducing privacy risks. The Bureau’s 

ability to design effective modifications, 

however, requires application-level data 

that are not currently available. 

As noted above, several industry 

commenters asserted that privacy 

decisions should be finalized by noticeand-comment rulemaking, rather than 

by policy statement. The Bureau 

believes, however, that a policy 

statement would be an appropriate 

vehicle for announcing its intentions 

with respect to modifications and 

deletions of 1071 data. First, under 

section 1071, the Bureau may delete or 

modify data at its discretion, in contrast 

to other provisions in the statute that 

require legislative rulemaking.789

Second, the Bureau’s proposed 

approach with respect to modifications 

and deletions would not impose 

compliance obligations on financial 

institutions; as discussed in the sectionby-section analysis of proposed 

§ 1002.110 above, the Bureau is 

proposing to publish application-level 

data on its website on behalf of financial 

institutions.790

Nonetheless, in the interest of 

obtaining public feedback on the 

qualitative aspects of its balancing test 

analysis, the Bureau is including a 

preliminary detailed analysis for each of 

the proposed data points, described 

under Preliminary Application of the 

Balancing Test in part VI.C.6 below. 

After the first year of 1071 data is 

reported to the Bureau, but before the 

Bureau releases the first year of 1071 

data to the public, it would publish a 

policy statement setting forth its 

intentions with respect to modifications 

and deletions to the public applicationlevel 1071 data. Before publishing that 

policy statement, the Bureau would 

conduct a balancing test analysis based 

on feedback to this proposal as well as 

a quantitative analysis of reidentification risk using reported 1071 

data. At this time, the Bureau does not 

intend to re-propose its balancing test 

analysis for public comment prior to 

issuing the policy statement, in the 

interest of making data publicly 

available in a timely manner. 

While the Bureau is seeking public 

feedback on its analysis below, 

preserving the ability to exercise its 


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791See SBREFA Panel Report at 24, 33, 48. 

792See SBREFA Outline at 40–41. 

793See id. 794See ECOA section 704B(a). 

795See SBREFA Panel Report at 36. 

796See id. 

discretion to modify or delete data 

through policy statements allows the 

Bureau to manage the relationship 

between privacy risks and benefits of 

disclosure more actively. The Bureau 

believes this flexibility may be 

especially important in the event the 

Bureau becomes aware of developments 

that might contribute to privacy risks. 

The privacy landscape is constantly 

evolving, and risks to applicant privacy 

created by the publication of the 

application-level 1071 data may change 

as the result of technological advances 

and other external developments. For 

example, a new source of publicly 

available records may become 

accessible, increasing or decreasing 

privacy risks under the balancing test, 

or the Bureau may discover evidence 

suggesting that third parties are using 

the 1071 data in unforeseen, potentially 

harmful ways. Potential uses of the 

application-level 1071 data in 

furtherance of the statute’s purposes 

may also evolve, such that the benefits 

associated with the disclosure of certain 

data may increase to an extent that 

justifies providing more information to 

the public in less modified form. As 

recommended by the SBREFA Panel, 

the Bureau seeks comment on its 

approach described above for 

implementing the balancing test.791

3. Disclosure Benefits 

In the SBREFA Outline, the Bureau 

explained that, under the balancing test 

it was considering, data would be 

modified or deleted if disclosure in 

unmodified form would pose risks to 

privacy interests that are not justified by 

the benefits of public disclosure in light 

of the statutory purposes of section 

1071.792 The Bureau sought feedback on 

the data points generally, as well as the 

benefits of public disclosure to financial 

institutions for each of the data points 

under consideration.793 Feedback on the 

benefits of public disclosure of the data 

points under consideration during the 

SBREFA process is described in the 

applicable section-by-section analysis of 

proposed § 1002.107(a)(1) through (21) 

in part V above. Feedback on the 

benefits of public disclosure of the 1071 

dataset as a whole is described below. 

Under the proposed balancing test, 

the Bureau would consider the benefits 

of disclosure of the application-level 

1071 data to the public in light of the 

statutory purposes of section 1071. As 

described above, the 1071 data would be 

the most comprehensive dataset 

available to analyze trends within the 

U.S. small business lending industry. 

The Bureau expects that users of 1071 

data would rely on this information to 

help achieve the statutory purposes of 

section 1071: (1) Facilitating the 

enforcement of fair lending laws; and (2) 

enabling communities, governmental 

entities, and creditors to identify 

business and community development 

needs and opportunities of womenowned, minority-owned, and small 

businesses.794 This would make 1071 

data the foremost data source that 

governmental entities, researchers, 

economists, industry, and community 

groups rely on to achieve 1071’s 

purposes and to analyze the small 

business lending market. The Bureau 

received feedback provided by SERs, 

other commenters, and the SBREFA 

Panel on the potential benefits of 

disclosure. Comments related to the 

overall benefits of data disclosure, the 

fair lending benefits, and business and 

community development benefits are 

described below. 

Some SERs and industry stakeholders 

generally supported the public 

disclosure of 1071 data to promote the 

monitoring of equal access to credit for 

small businesses, and narrowing the 

information gap between lenders and 

borrowers, community groups, and 

public officials. A number of SERs 

expressed the view that data 

transparency in the small business 

lending market is critical to advance the 

goals of fair lending enforcement and 

access to credit for small businesses, 

especially those that are minorityowned and women-owned. One SER 

stated that the data currently available 

are limited, and that section 1071 has 

the opportunity to address lending 

disparities. The SER also explained that 

data transparency and fairness could 

address lending practices that tend to 

exclude women-owned and minorityowned businesses, exacerbating a racial 

wealth gap. An industry stakeholder 

supported the public disclosure of 1071 

data to promote the monitoring of equal 

access to credit for women- and 

minority-owned businesses. 

Several SERs also underscored the 

importance of public disclosure of 1071 

data in furthering the 1071 rule’s 

business and community development 

purpose. One SER stated that the 1071 

rule could be a model for the 

marketplace and pro-innovation if 

implemented with checks and balances. 

Another SER said that more 

transparency would help governments 

and creditors understand what strategies 

are successful in reaching womenowned and minority-owned small 

businesses and shed light on the 

marketplace and pricing overall.795

Other SERs emphasized the importance 

of publishing pricing information 

(specifically captured as APR), together 

with product type for understanding the 

cost and availability of financing 

products to small businesses, the 

importance of NAICS codes or other 

industry information for determining 

which industries are getting funding 

generally, and the importance of census 

tract or other geographic information for 

understanding the extent of lending to 

small businesses in low-to-moderate 

income neighborhoods.796

However, several industry 

commenters expressed the belief that 

there were no, or few, benefits to 

publishing 1071 data in general, in 

addition to raising general concerns 

about privacy risks, discussed under 

Risks to Privacy Interests in part VI.C.4 

below. Several commenters maintained 

that the benefits of public disclosure 

would be limited due to concerns about 

the data points the Bureau was 

considering and the absence of other 

data points that could, in the view of 

these commenters, reduce the risk of 

misinterpretation of the data. SERs and 

industry commenters also questioned 

the benefits associated with individual 

data points, as described in the 

applicable section-by-section analysis of 

proposed § 1002.107(a)(1) through (21) 

in part V above. 

Community group commenters 

supported public disclosure of 1071 

data. One commenter expressed the 

view that robust data collection would 

allow the public to gain a much greater 

understanding of gaps in lending to 

borrowers in the marketplace, and easily 

identify unmet borrowing needs. The 

commenter explained that the 1071 

dataset would cover more types of loans 

from more institutions than existing 

CRA data (which had been used for 

similar kinds of analyses in the past), 

potentially giving the Bureau a 

comprehensive view of the small 

business lending market. The 

commenter also explained that data 

collection under the proposal would 

build an understanding of the credit 

needs and financing outcomes of small 

businesses in the lending marketplace 

through information from data fields 

such as amount applied for, action 

taken, and amount approved or 

originated. Additionally, several 

community group commenters asserted 

that transparency through public 

disclosure would benefit responsible 

financial institutions by allowing them 


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797See id. at 48. 

798See id. at 47. 

799See SBREFA Outline at 40. 

to distinguish themselves from others 

and providing a means for discovering 

and addressing problematic practices 

earlier. 

The Bureau has considered these 

comments and the ways in which public 

disclosure of the proposed 1071 data 

fields would facilitate the enforcement 

of fair lending laws. Market 

transparency through publication of the 

application-level 1071 data would help 

to identify potential fair lending 

violations and address discrimination in 

small business lending. For example, 

the ability to compare pricing is a 

central outcome in many fair lending 

analyses, which often aim to determine 

if similarly situated applicants face 

higher prices due to a prohibited basis 

under ECOA, such as ethnicity, race, 

and sex. In supporting the inclusion of 

pricing as a discretionary data point, 

one community group explained that 

collecting data on price would facilitate 

enforcement of fair lending laws by 

identifying discrimination in lending 

through information on whether an 

application was approved and at what 

price. The 1071 data would also be used 

by public officials, researchers, and 

community groups to identify 

potentially discriminatory lending 

patterns and to enforce antidiscrimination statutes. For example, 

data on action taken would be used in 

fair lending analyses to identify 

potential disparities in denial rates 

among similarly situated applicants. 

Additionally, public disclosure of the 

1071 data fields would enable data users 

to advocate that financial institutions 

maintain robust fair lending policies 

and practices and could also increase 

the prospect of self-correction when 

financial institutions conduct their own 

analyses to assess potential fair lending 

risks. At the same time, greater 

transparency could provide explanatory 

context for lending decisions, which 

may help protect responsible lenders 

from inaccurate assumptions based on 

more limited public data. 

Moreover, data users, such as 

community groups, researchers, and 

public officials, would be able to use 

1071 data to help determine whether 

certain types of credit are 

disproportionately available to different 

groups. For example, one community 

group commenter explained that 

because credit cards and other types of 

high-interest credit are widely used by 

small businesses, information on the 

types of credit applied for or originated 

could reveal the extent to which 

women-owned or minority-owned small 

businesses can access term loans or are 

served disproportionately by credit 

cards or other small business credit 

products that generally carry higher 

interest rates. The same commenter also 

explained that data users may be able to 

use the 1071 data to investigate whether 

certain products or businesses are 

disproportionately supported by 

government guarantee programs in 

business and community development 

and possibly help to develop more 

targeted programs. 

The Bureau has also considered the 

ways in which publication of the 

application-level 1071 data would 

promote the business and community 

development purpose of 1071. The 

Bureau believes that the public 

application-level 1071 data would 

provide useful and robust data, allowing 

data users to appropriately and 

efficiently focus resources on particular 

areas of need. For example, reporting of 

information about rates of denial, and 

the associated reasons for denial of a 

business credit application, combined 

with data fields commonly used to help 

make underwriting decisions, such as 

gross annual revenue and time in 

business, would improve the public’s 

ability to generally understand financial 

institutions’ decision-making and to 

identify underserved areas of the 

market. The Bureau also believes that 

the public application-level 1071 data 

could yield information helpful in 

understanding the economic health of 

communities. NAICS codes, for 

example, could provide information 

about rates at which particular types of 

businesses are applying for and 

receiving credit in general, and which 

types of lending products are being 

requested, when combined with credit 

type. This information would also allow 

data users to identify trends in the small 

business market that could provide 

evidence as to the health of the overall 

economy. Understanding these potential 

indicators would also help public 

officials focus efforts to help creditors 

serve the lending needs of communities 

and give government officials 

information to efficiently distribute 

resources to vulnerable small business 

applicants. Finally, pricing information, 

such as total origination charges for 

different types of credit, would also 

allow data users to better understand 

pricing decisions and the cost of credit 

to small businesses. Information about 

credit purpose would allow data users 

to better understand why small 

businesses are using credit, thus helping 

communities determine whether 

creditors are serving the small business 

lending needs of their communities and 

also helping public officials to target 

public investment to better attract 

private investment and innovation. As 

recommended by the SBREFA Panel, 

the Bureau seeks comment on its 

understanding of the benefits of public 

disclosure of the 1071 data described 

above.797

4. Risks to Privacy Interests 

The Bureau has considered the risks 

to privacy that may be created by the 

public disclosure of the 1071 data that 

would be reported to the Bureau under 

the proposal. Based on its analysis to 

date, the Bureau believes that public 

disclosure of the unmodified 

application-level dataset, as a whole, 

might create risks to privacy interests 

under the 1071 balancing test. As 

described in more detail below, this is 

due to the presence of unique data fields 

in the dataset that the Bureau believes 

could create re-identification risk and 

the presence of individual data fields 

that the Bureau believes would create a 

risk of harm or sensitivity. Accordingly, 

the Bureau intends to consider whether 

modifications or deletions to the public 

application-level 1071 data would 

reduce these risks to privacy and 

appropriately balance them with the 

benefits of disclosure for section 1071’s 

purposes. 

As recommended by the SBREFA 

Panel, the Bureau seeks comment on the 

range of privacy concerns articulated by 

SERs, including potential reidentification of small businesses and 

financial institutions, as well as the 

types of harms and sensitivities the 

unmodified release of 1071 data could 

cause to financial institutions and small 

business applicants, which are 

described further below.798

i. Re-Identification Risk 

In the Bureau’s SBREFA Outline, the 

Bureau explained that, while 

information that directly identifies 

natural persons, such as name, address, 

date of birth, or Social Security number 

would not be collected pursuant to 

section 1071 requirements, publication 

of 1071 data under consideration in an 

unmodified, application-level format 

potentially could be used to re-identify 

small business applicants and related 

natural persons or potentially harm 

their privacy interests.799 One SER 

stated that there has not been a single 

demonstrated incident of reidentification using HMDA data, and 

that privacy concerns could be 

addressed through modification 

techniques. However, many SERs and 

several industry stakeholders explained 

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800The term is not intended to indicate that the 

adversary’s motives are necessarily malicious or 

adverse to the interests of others. See, e.g., Nat’l 

Inst. of Standards & Tech., De-Identification of 

Personal Information (2015), http://

nvlpubs.nist.gov/nistpubs/ir/2015/NIST.IR.8053.pdf 

(using the term ‘‘adversary’’). 

801For purposes of this discussion, an identified 

dataset is one that directly identifies a natural or 

non-natural person. 

802HMDA data have a large number of records 

with unique combinations of data fields. See 84 FR 

649, 654 n.33 (Jan. 31, 2019) (citing a 2005 Board 

study finding that more than 90 percent of the loan 

records in a given year’s HMDA data are unique— 

that is, an individual lender reported only one loan 

in a given census tract for a specific loan amount). 

803See 82 FR 44586, 44593 (Sept. 25, 2017). The 

Bureau explained that, although there is variance by 

jurisdiction, such records are often available 

electronically and typically identify a borrower 

through documents such as the mortgage or deed 

of trust. These documents typically include the loan 

amount, the financial institution, the borrower’s 

name, and the property address, and may include 

other information. 

identification of natural persons and 

businesses, particularly in low-density 

geographies, like rural areas. Some 

stakeholders stated that it would be 

difficult to predict whether reidentification could arise, particularly 

as technology evolves. 

The Bureau is concerned about two 

re-identification scenarios. First, a third 

party may use common data fields to 

match a 1071 record to a record in 

another dataset that contains the 

identity of the applicant or related 

natural person. The Bureau uses the 

term ‘‘adversary’’ when referring to such 

third parties.800 Second, an adversary 

may rely on pre-existing personal 

knowledge to recognize an applicant’s 

record in the unmodified 1071 data. 

Re-identification based on matching. 

Under the first scenario, it may be 

possible to match a 1071 record to an 

identified dataset, either directly or 

through a combination of intermediate 

datasets.801 The 1071 data that would be 

reported under the proposal, like the 

data reported under HMDA and 

Regulation C, may contain data fields 

that create re-identification risk.802

However, successfully re-identifying a 

1071 record would require several steps 

and may present a significant challenge. 

First, an adversary generally would 

have to isolate a record that is unique 

within the 1071 data. A 1071 record is 

unique when the values of the data 

fields associated with it are shared by 

zero or few other 1071 records. As 

discussed above, the Bureau believes 

actual 1071 data are needed to perform 

an accurate re-identification analysis. 

Thus, the Bureau does not intend to 

apply the balancing test until after it has 

analyzed re-identification risk with at 

least a full year of reported 1071 data. 

A 1071 record having unique 

combinations of values would not 

automatically result in its reidentification; an adversary would also 

have to find a record corresponding to 

the applicant or related natural person 

in another dataset by matching similar 

combinations of data fields. Once a 1071 

record has been matched to a 

corresponding record, an adversary 

would possess any additional fields 

found in the corresponding record but 

not found in the 1071 record, such as, 

possibly, the identity of the applicant. 

However, even after accomplishing such 

a match, an adversary might not have 

accurately re-identified the true 

applicant to whom the 1071 record 

relates. For example, if the 

corresponding record is not the only 

record in the other dataset that shares 

certain data fields with the unique 1071 

record, an adversary would have to 

make a probabilistic determination as to 

which corresponding record belongs to 

the applicant. 

As described below and addressed 

with respect to individual data fields in 

part VI.C.6 further below, the Bureau 

expects that the census tract and NAICS 

code data fields may significantly 

contribute to re-identification risk. 

Geographic and industry information 

are publicly available in a variety of 

sources and in a form that directly 

identifies businesses or in a way that 

could be derived with reasonable 

accuracy. This information is also likely 

to produce unique instances in the data, 

both when used separately and also, 

especially, when combined. Other data 

fields may result in unique 

combinations (particularly when 

combined with census tract), but the 

Bureau would need actual 1071 data to 

analyze their contribution to 

uniqueness. 

In the 1071 context, the Bureau 

believes that particularly relevant 

sources of identified data for matching 

purposes are UCC filings, property 

records, and titles. The Bureau believes 

that such filings could pose a serious reidentification risk because of the 

availability of information about the 

lender, the applicant, and the date of 

transaction. The proposed 1071 data 

fields in unmodified form would 

identify the financial institution as well 

as the action taken date or application 

date. If the action taken date is on or 

near the UCC filing date, for example, 

an adversary might be able to use the 

date and financial institution on the 

UCC filings to identify the applicants of 

originated loans in the public 

application-level 1071 data. The UCC 

filing also typically will have the 

address of the borrower. Combinations 

of lender, action taken date, and census 

tract might result in unique 

combinations of data fields that an 

adversary could connect to a publicly 

available source of information to reidentify the applicant. Therefore, the 

Bureau believes identity of the financial 

institution and the action taken date 

(and application date, which could be a 

proxy for action taken date) may 

significantly contribute to reidentification risk. UCC filings may also, 

although to a lesser extent, contain 

detailed information on the type of loan 

and the amount approved. 

With respect to 1071 loans secured by 

residential and commercial property, 

publicly available real estate transaction 

records and property tax records would 

be particularly relevant sources of 

identified data, as the Bureau described 

in its proposed policy guidance on the 

disclosure of loan-level HMDA data.803

Because some of the data fields in such 

public records are also present in the 

1071 data, the Bureau believes that the 

publication of application-level 1071 

data without any modifications would 

create a risk that these public records 

could be directly matched to a 1071 

record to re-identify an applicant. In 

addition, a business’s own website, 

public directories, or websites that 

review businesses typically include the 

business’s location, time in business, 

and information that could be used to 

derive information about the business’s 

owners. 

UCC filings also frequently include 

the name of the lender, the name of the 

business, and the date that the filing 

was submitted. Though the availability 

differs by State, UCC filings are often 

searchable in State databases, and are a 

source of data frequently mined by data 

brokers. UCC statements are often filed 

against specific collateral and business 

assets generally, especially for products 

like general lines of credit. These types 

of filings would be available more 

broadly than just for loans with very 

specific collateral (like equipment or 

vehicles). Such filings could pose a 

serious re-identification risk because of 

the availability of information about the 

lender, the applicant, and the date of 

transaction. 

Identified public data records in loanlevel datasets for programs like the 

SBA’s 7(a), 8(a), 504, and PPP programs, 

as well as State-level registries of 

women-owned and minority-owned 

businesses for contracting purposes, 

may also contribute to re-identification 

risk. These datasets include information 

such as loan program guarantee 

information, industry or NAICS code, 

demographic information about the 

business owners, time in business, and 


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804See generally Fed. Trade Comm’n, Data 

Brokers: A Call for Transparency and 

Accountability (May 2014), https://www.ftc.gov/ 

system/files/documents/reports/data-brokers-calltransparency-accountability-report-federal-tradecommission-may-2014/140527databrokerreport.pdf 

(describing the types of products offered and the 

data sources used by data brokers). 

805Cf. 82 FR 44586, 44594 (Sept. 25, 2017) 

(explaining that the delay between action taken and 

publication of reported HMDA data ranges from 

three to 15 months). 

number of workers. Time in business 

and number of workers could also likely 

significantly contribute to reidentification risk, especially in 

combination with other data fields like 

census tract and NAICS code. 

Other publicly available sources of 

data similar to those included in the 

proposed 1071 data, but only for certain 

types of credit, include loan-level 

performance datasets made available by 

the Government-Sponsored Enterprises 

(GSEs). The GSE datasets include 

information such as borrower 

demographic information, loan program 

guarantee information, pricing data, 

loan term, loan purpose, and the year of 

action taken. Asset-backed securities 

datasets for securitized mortgage and 

auto loans are made available by the 

Securities and Exchange Commission 

through the Electronic Data Gathering, 

Analysis, and Retrieval (EDGAR) 

system. These datasets include 

information about the lender, the date of 

action taken, pricing data, loan term, 

loan amount applied for and approved. 

These datasets are available online with 

limited restrictions on access. But these 

datasets do not include the name of the 

borrower; as described above, this 

means that an adversary who is able to 

match a record in one of these datasets 

to a record in the 1071 data would need 

to make an additional match to an 

identified dataset to re-identify an 

applicant. And some of these datasets 

contain restrictions on use, such as a 

prohibition on attempting to re-identify 

borrowers. 

Private datasets, which could be made 

available in identified or de-identified 

form, that could be matched to the 1071 

data are also available. For example, 

data brokers collect information about 

small businesses from a wide range of 

sources and sell it for a variety of 

purposes, including marketing, identity 

verification, and fraud detection.804

These datasets typically include data 

collected from commercial, government, 

and other publicly available sources and 

may contain data about the business, 

including industry code, information 

about geography, and estimates of gross 

annual income, number of workers, and 

information about related natural 

persons, including the race and 

ethnicity of business owners. Some of 

these datasets contain restrictions on 

use, such as requiring a legitimate 

business purpose, and some may 

prohibit attempts to re-identify 

borrowers. 

In addition to considering the steps an 

adversary would need to complete to reidentify the 1071 data and the various 

data sources that may be required to 

accomplish re-identification, including 

their limitations, the Bureau also has 

considered the capacity, incentives, and 

characteristics of potential adversaries, 

including those that may attempt reidentification for harmful purposes. In 

particular, a potential competitor of a 

small business or a firm with other 

commercial interests may seek 

information about a business’s 

expansion strategy or financial 

condition, including whether it was able 

to obtain credit approval. This could be 

part of routine market monitoring or to 

gain a specific commercial advantage. 

These potential adversaries could 

possess the resources to use private 

datasets in addition to publicly 

available records to re-identify the 1071 

data. However, the Bureau has 

considered the extent to which much of 

the commercial benefit to be obtained 

by re-identifying the 1071 data may be 

more readily available from private 

datasets to which these potential 

adversaries already have access without 

the need for recourse to the 1071 data. 

In many cases, information from other 

datasets may be timelier than that found 

in the 1071 data.805 Furthermore, some 

of these potential adversaries may 

refrain from re-identifying the 1071 data 

for reputational reasons or because they 

have agreed to restrictions on using data 

from the additional datasets described 

above for re-identification purposes. 

Additionally, while some academics, 

researchers, and journalists might use 

de-identified 1071 data, some may be 

interested in re-identifying the 1071 

data for research purposes. These 

persons may differ in their capacity to 

re-identify an applicant in the 1071 

data. However, as mentioned above, 

some private datasets may have 

contractual terms prohibiting their use 

for re-identification purposes and 

therefore these persons may be 

restricted from actually using the 1071 

data to re-identify applicants. Further, 

those academics or journalists with 

significant resources may be affiliated 

with organizations that have 

reputational or institutional interests 

that would not be served by reidentifying the 1071 data. These factors 

may reduce the risk of re-identification 

by such persons. 

The Bureau has considered whether 

parties intending to commit identity 

theft or financial fraud may have the 

incentive and capacity to re-identify the 

1071 data. As discussed under Risk of 

Harm or Sensitivity in part VI.C.4.ii 

below, the Bureau believes that the 1071 

data would be of minimal use for these 

purposes. Further, these potential 

adversaries are not law abiding and may 

have easier, albeit illegal, ways to secure 

data for these purposes than attempting 

to re-identify application-level 1071 

data. 

Re-identification based on personal 

knowledge. In addition to the possibility 

of re-identifying applicants through 

matching 1071 data to other datasets, 

some potential adversaries may be able 

to re-identify a particular applicant or 

related natural person in the 1071 data 

by relying on personal knowledge about 

the applicant or natural person. The 

unmodified 1071 data would include 

location and demographic information, 

such as the race, sex, and ethnicity of 

principal owners, and industry 

information. These types of information 

may be likely to be known to a potential 

adversary who is familiar with a specific 

applicant or related natural person. 

Therefore, such a potential adversary 

may be able to re-identify a known 

applicant or related natural person 

without attempting to match a 1071 

record to another data source. This 

potential adversary could include a 

customer, competitor, or person with 

other commercial ties to the applicant, 

or a neighbor or acquaintance of a 

related natural person, and the interest 

in re-identification may range from mere 

curiosity to the desire to embarrass or 

otherwise harm the applicant. These 

potential adversaries may possess a high 

level of specific knowledge about the 

characteristics of a particular applicant 

or related natural person. Adversaries 

who can re-identify an applicant or 

natural person based on personal 

knowledge would be able to 

complement their existing knowledge 

with the full 1071 application-level 

data, and therefore could contribute to 

risks of harm or sensitivity. 

Pre-existing personal knowledge 

possessed by such a potential adversary 

would be limited to information about 

a subset of applicants and related 

natural persons. Thus, any reidentification attempt by such an 

adversary would likely target or impact 

a more limited number of applicants or 

natural persons, compared to the large 

numbers of applicants or natural 

persons who could be re-identified by 


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806There may be more potential adversaries with 

personal knowledge than those with the ability to 

do any kind of sophisticated matching to other 

datasets, but it is not possible to predict. 

807See 84 FR 649, 658 (Jan. 31, 2019); see also 

82 FR 44586, 44593 n.55 (Sept. 25, 2017). 

808 In addition, as the Bureau believed in the 

HMDA context, some of the information contained 

in the unmodified 1071 data for applicants may 

permit an adversary to re-identify an applicant 

despite the lack of publicly available records. For 

example, if an applicant withdraws an application 

and obtains a loan secured by the same property 

from another institution, it may be possible to link 

the 1071 data for the withdrawn application with 

the data for the origination, as much of the property 

and applicant information would be identical. See 

84 FR 649, 658 (Jan. 31, 2019); see also 82 FR 

44586, 44593 n.55 (Sept. 25, 2017). 

809Applications involving certain investment 

properties would be excluded from 1071 reporting. 

As discussed in the section-by-section analysis of 

proposed § 1002.104(b) above, proposed comment 

104(b)–4 would exclude an extension of credit that 

is secured by 1–4 individual dwelling units that the 

applicant or one or more of the applicant’s 

principal owners does not, or will not, occupy. 

810See SBREFA Outline at 40–41. 

811 In this section, we summarize comments about 

harm and sensitivity that relate to the 1071 data 

generally. In the individual data field sections 

below, we summarize comments about risks of 

harm and sensitivity that relate to particular data 

fields. 

adversaries possessing sophisticated 

matching techniques.806

Although the Bureau believes that 

location, protected demographic 

information, and industry information 

may be more likely to be known than 

other information in the 1071 data, it is 

impossible to predict the exact content 

of any pre-existing personal knowledge 

that such a potential adversary may 

possess. This uncertainty creates 

challenges for evaluating the degree to 

which individual data fields contribute 

to the risk of re-identification by such a 

potential adversary. For these reasons, 

the discussions of re-identification risk 

in the Bureau’s analysis of data points 

below generally focus on the risk of reidentification based on matching, not on 

personal knowledge. The Bureau seeks 

comment on how the Bureau could 

assess re-identification risk arising from 

adversaries with personal knowledge. 

Applications that do not result in 

originations. In its final policy guidance 

on the disclosure of loan-level HMDA 

data, the Bureau explained that the risk 

of re-identification to applicants is 

significantly lower for applications that 

do not result in originated loans.807 The 

Bureau explained that the lack of public 

information about applications 

significantly reduces the likelihood that 

an adversary could match the record of 

a HMDA loan application that was not 

originated to an identified record in 

another dataset. The Bureau has not 

identified any publicly available 

information about applications for 

business loans. As discussed under 

Implementation of the Balancing Test in 

part VI.C.2 above, the Bureau lacks data 

necessary to perform a complete reidentification analysis at this time. 

However, the unmodified 1071 data 

might contain data fields that facilitate 

the re-identification of applicants. For 

example, the census tract and NAICS 

code data fields could result in unique 

combinations that an adversary could 

use to match to an identified public 

record, such as a business directory.808

Overlap between HMDA and 1071 

data generally. As noted above in the 

section-by-section analysis of proposed 

§ 1002.104(a), the Bureau anticipates 

that some applications would be 

reported under both HMDA and 

1071.809 The public loan-level HMDA 

dataset contains data fields in addition 

to, or that overlap with, the proposed 

1071 data fields, and the proposed 1071 

data includes data fields that are not 

included in the public loan-level HMDA 

dataset. The Bureau recognizes that, in 

cases of overlap, some 1071 data fields 

may require additional analysis with 

respect to risks of harm or sensitivity 

and re-identification posed by such 

overlap. When the Bureau performs a 

full re-identification analysis, it intends 

to consider the potential for 

applications reported under 1071 to be 

matched to loans reported under 

HMDA. The Bureau seeks comment on 

this issue and the implications of 

potential re-identification risk and 

potential risk of harm or sensitivity for 

applications reported under both 

section 1071 and HMDA. 

ii. Risk of Harm or Sensitivity 

In the SBREFA process, the Bureau 

sought feedback on the nature and scope 

of privacy interests of non-natural 

persons (e.g., small business applicants 

and financial institutions) and natural 

persons (e.g., principal owners of small 

businesses) that the Bureau should 

consider under its potential balancing 

test, including the types of sensitive 

commercial information that could be 

exposed by publishing the data points 

(individually or in combination) under 

consideration.810

A number of SERs and other 

stakeholders addressed the risk of harm 

or sensitivity from the disclosure of 

1071 data in unmodified form.811

Several SERs and other stakeholders 

stated that the disclosure of 1071 data 

could create a risk of harm or sensitivity 

for small businesses and related natural 

persons. Several SERs stated that public 

knowledge of borrowing activity (even 

without any other potential harms) 

would be very concerning to some small 

businesses as some small business 

owners consider that information 

sensitive or deeply personal. Some 

stakeholders stated that the disclosure 

of a banking relationship could raise 

harm or sensitivity concerns because it 

might lead to adverse inferences about 

the business’s financial condition. One 

SER stated that small business owners 

valued their privacy just as much as 

consumers. Several industry 

commenters stated that 1071 data might 

reveal information about a small 

business’s strategy or financial 

condition, as well as information about 

the personal characteristics or financial 

conditions of related natural persons, 

which the commenters stated could 

contribute to identity theft. 

Several community group 

stakeholders stated, in contrast, that the 

risk of harm or sensitivity from 

publishing 1071 data would be minimal 

because some of the data are already 

publicly available. These stakeholders 

also stated that financial institutions 

likely exaggerate privacy concerns of 

small businesses or natural persons. 

With respect to concerns that 

publication of data could facilitate 

targeted marketing of predatory lending 

products, a community group stated that 

rather than fostering predatory 

practices, public disclosure would deter 

them by enabling the public to identify 

problematic pricing or loan terms and 

conditions and prevent them from 

becoming more widespread. 

In addition to addressing the risks of 

harm and sensitivity to small 

businesses, several SERs and other 

stakeholders addressed potential risks of 

harm and sensitivity to financial 

institutions from the disclosure of 1071 

data. Several SERs stated that 1071 data 

could be used to generate marketing 

lists and that this would result in 

creditors taking other financial 

institutions’ customers away. One SER 

stated that, because of this, financial 

institutions may stop lending to small 

businesses in certain markets. In 

contrast, two SERs stated that it was 

relatively easy to obtain information on 

other financial institutions’ small 

business lending activity. Two SERs 

stated that they were more concerned 

about the privacy of small business 

applicants or borrowers than the privacy 

of financial institutions, but that both 

mattered. In addition, one industry 

stakeholder expressed concern that 

disclosing the type or purpose of 

financing and the amount applied for 

and approved could facilitate reidentification of borrowers, particularly 

in rural areas or small towns. The 

commenter also expressed concern that 

disclosing this information could harm 


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812To the extent a section 1071 record could be 

associated with an identified applicant or related 

natural person, and successfully matched to another 

de-identified dataset to re-identify such a dataset, 

harmful or sensitive information in that dataset that 

is not otherwise public may also be disclosed. 

813However, where a data field is already 

publicly available, disclosing that data field in the 

1071 data may enable the matching of 1071 data to 

other datasets that may not be controlled by the 

Bureau, which could substantially facilitate reidentification or the disclosure of harmful or 

sensitive information. 

814As noted above, however, to the extent a 

section 1071 record could be associated with an 

identified applicant or related natural person and 

could also successfully be matched to a deidentified dataset to re-identify such a dataset, 

community banks located in such areas. 

The commenter stated that this could 

happen because small businesses in 

such areas are likely to perceive that 

this information could cause them to be 

re-identified, and that they would 

respond by seeking financing with a 

large creditor in another town or online, 

rather than their community bank. 

A few industry commenters expressed 

concern that the 1071 data could reveal 

information such as a financial 

institution’s client lists, terms and 

conditions, insights about the financial 

institution’s strategy in particular 

geographic areas, or, for certain 

financial institutions, sensitive supply 

management data. A community group 

commenter stated that public disclosure 

of 1071 data would not have significant 

negative effects on competition and 

could provide lenders with insights that 

could allow them to become more 

competitive. 

Some SERs expressed concern that 

1071 data could be used against 

financial institutions in litigation by 

class action attorneys or to harm their 

public reputations. One SER expressed 

concern that public disclosure of 1071 

data could cause financial institutions 

to face more litigation, which, in the 

SER’s view, would increase the cost of 

credit for small businesses. Another SER 

expressed concern that data users could 

misinterpret pricing information. For 

example, according to the SER, data 

users might infer discrimination based 

on higher pricing for an applicant, when 

the pricing was in fact unrelated to the 

applicant’s race. The SER stated that the 

purpose of section 1071 was to help 

small businesses and asserted that 

releasing full 1071 data would present 

an opportunity for third parties to sue 

or criticize financial institutions. 

Several industry commenters stated 

that data about loan terms would be 

sensitive because they would invite 

criticism of or litigation over disparities 

without accounting for various 

legitimate business reasons for 

disparities and increase compliance 

costs. Other industry commenters stated 

that publication of 1071 data would lead 

financial institutions to artificially 

lower prices, standardize underwriting, 

or reduce access to credit to limit 

exposure to fair lending litigation or 

reputational risk. One community group 

stated that it did not believe the 

purposes of section 1071 required the 

Bureau to take into account such 

financial institution concerns about 

litigation or reputational risk, 

compliance costs, or impacts on 

underwriting. One industry stakeholder 

stated that the Bureau could address 

these risks by providing clear guidance 

about how it would use 1071 data in its 

fair lending supervisory program. 

The Bureau has considered whether, 

if an application-level record in the 

public 1071 data were to be reidentified, 1071 data reported to the 

Bureau would disclose information 

about an applicant, related natural 

person, or financial institution that is 

not otherwise public and may be 

harmful or sensitive.812 Specifically, the 

Bureau has evaluated whether the 1071 

data could be used for harmful purposes 

such as fraud or identity theft or the 

targeted marketing of products and 

services that may pose risks that are not 

apparent. The Bureau has also evaluated 

whether the 1071 data could cause 

competitive harm to small business 

applicants or to financial institutions. 

Furthermore, even where the disclosure 

of the data field is unlikely to lead to 

financial or other tangible harms, the 

Bureau has evaluated whether certain 

1071 data fields may be viewed as 

sensitive if associated with a particular 

applicant, related natural person, or 

financial institution. In evaluating the 

potential sensitivity of a data field, the 

Bureau has considered whether 

disclosure of the data field could cause 

dignitary or reputational harm to small 

business applicants and related natural 

persons. The Bureau has also evaluated 

whether disclosure of the data field 

could cause reputational harm to 

financial institutions. 

As discussed above and as noted by 

several community group stakeholders, 

some identifiable information about 

small business lending is currently 

available to the general public. Such 

information is available both in public 

records and in private datasets with 

varying barriers to access and 

restrictions on use. In evaluating the 

risk of harm or sensitivity created by the 

publication of the application-level 

1071 data, the Bureau’s analysis has 

considered the degree to which such 

disclosure would increase this risk 

relative to the risk that already exists, 

absent the public availability of 1071 

data. Accordingly, the Bureau has 

considered whether the data that would 

be reported to the Bureau are typically 

publicly available in an identifiable 

form. The Bureau has also considered 

whether there are any barriers to 

accessing such data or restrictions on its 

use. In general, the Bureau believes that, 

where a data field is already publicly 

available, the risk of harm or sensitivity 

from the disclosure of that data field in 

the 1071 data is reduced.813

In evaluating the risk of harm or 

sensitivity created by the publication of 

the application-level 1071 data, the 

Bureau also has considered the 

likelihood that the application-level 

1071 data would be re-identified. As 

discussed under Re-Identification Risk 

in part VI.C.4.i above, the Bureau 

generally believes that successful reidentification of application-level 1071 

data would require several steps and 

may present a significant challenge. To 

the extent that the risk that reidentification would be accomplished is 

low, the risk of disclosing harmful or 

sensitive information would be reduced. 

The Bureau agrees with commenters 

who stated that the disclosure of 1071 

data could potentially create a risk of 

harm or sensitivity not only to natural 

persons, such as the owner of a small 

business that is a sole proprietorship, 

but also to non-natural persons. As 

discussed under Balancing Test Design 

in part VI.C.1 above, when considering 

the risk of harm or sensitivity, the 

Bureau’s proposed balancing test would 

consider the risks to non-natural 

persons, including financial 

institutions. 

The Bureau has considered whether 

the 1071 data could be used for harmful 

purposes such as fraud or identity theft 

or the targeted marketing of products 

and services that may pose risks that are 

not apparent. As noted above, several 

SERs and other stakeholders stated that 

the 1071 data could potentially be used 

for these purposes. The Bureau’s 

preliminary view is that the unmodified 

application-level 1071 data would be of 

minimal use for purposes of 

perpetrating identity theft or financial 

fraud against applicants or related 

natural persons. The 1071 data would 

not include information typically 

required to open new accounts in the 

name of a small business’s principal 

owner, such as Social Security number, 

date of birth, place of birth, passport 

number, or driver’s license number. 

Additionally, the 1071 data would not 

include information useful to perpetrate 

existing account fraud, such as account 

numbers or passwords.814


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harmful or sensitive information in that dataset that 

is not otherwise public may also be disclosed. 

815 Knowledge-based authentication (KBA) is a 

method of authentication which seeks to prove the 

identity of someone accessing a service, such as an 

account at a financial institution. KBA requires the 

knowledge of information about someone to prove 

that a person attempting to access a service is that 

person. 

However, while the Bureau believes 

that the unmodified 1071 data would be 

of minimal use for perpetrating fraud or 

identity theft, the Bureau acknowledges 

that almost any information relating to 

a small business could, theoretically, be 

used for these purposes. As a result, the 

unmodified 1071 data could provide at 

least some additional data that could be 

used for these purposes. For example, 

the 1071 data could potentially be used 

in a phishing attack against an applicant 

by a perpetrator purporting to be the 

financial institution, or for knowledgebased authentication purposes.815 While 

much information that may be useful for 

phishing or knowledge-based 

authentication—such as the name of the 

financial institution and the date of 

action taken—may already be available 

from UCC filings, the 1071 data may 

contain additional information that may 

be useful for such purposes, such as 

information about the type of loan and 

loan terms. However, some of this 

information may also be available from 

private data sources. The Bureau also 

notes that, based on the Bureau’s 

expertise and analysis, the publication 

of HMDA data—which contains many 

data fields that are similar to data fields 

that would be disclosed under section 

1071—has not resulted in any 

measurable increase in fraud or identity 

theft against mortgage applicants. 

As several of the SERs and other 

stakeholders suggested, the Bureau has 

also considered whether the unmodified 

application-level 1071 data would 

provide information that is not already 

public and could be used for the 

targeted marketing of products and 

services that may pose risks that are not 

apparent. Although the 1071 data could 

be used to market products and services 

that would be beneficial for small 

businesses—perhaps increasing 

competition among creditors that could 

help small businesses receive better 

terms—they could also be used to target 

potentially vulnerable small businesses 

with marketing for products and 

services that may pose risks that are not 

apparent. While, as a community group 

stakeholder stated, the 1071 dataset may 

generally be useful for identifying 

predatory lending practices in the small 

business lending market, the Bureau 

believes that the targeted marketing of 

products that may pose risks that are not 

apparent is a harmful purpose for which 

1071 data could potentially be used. 

For example, data users might 

perceive certain 1071 data to reveal 

negative information about an 

applicant’s financial condition or 

vulnerability to scams relating to debt 

relief or credit repair. Information about 

a loan might also be used for a practice 

known as ‘‘stacking,’’ in which some 

creditors have been alleged to obtain 

lead lists based on publicly available 

information and offer follow-on loans or 

advances that add to the debt burden 

carried by small businesses. Some 

creditors might also use the data for 

deceptive marketing practices. However, 

the utility of the 1071 data for predatory 

marketing practices may be limited by 

the delay between action taken on a 

loan and publication of the applicationlevel 1071 data. 

As several of the SERs and other 

stakeholders suggested, the Bureau has 

also considered whether the unmodified 

1071 data would result in competitive 

harm to small business applicants or 

related natural persons. The 1071 data, 

if re-identified, may disclose some 

general information about a small 

business’s use of credit that is not 

currently available to the general public. 

As discussed in the individual data field 

sections below, the Bureau 

acknowledges that certain 1071 data 

points in unmodified form could reflect 

negatively on the financial condition of 

a business or its owners. 

As several of the SERs and other 

stakeholders recommended, the Bureau 

has also considered whether the 

unmodified 1071 data would result in 

competitive harm to financial 

institutions. As discussed below with 

respect to the financial institution 

identifying information that would be 

reported pursuant to proposed 

§ 1002.109(b), the Bureau is proposing 

to identify the financial institution in 

the public application-level 1071 data. 

Therefore, the 1071 data could reveal 

general information about a financial 

institution’s lending practices that is not 

widely available to the general public. 

Data fields such as census tract, NAICS 

code, credit type, and pricing could 

disclose information about where a 

financial institution is doing business, 

what industries it is doing business 

with, what kinds of products it is 

offering, and what kinds of prices it is 

charging, respectively. Additionally, as 

several SERs stated, if a small business 

applicant were to be re-identified, a 

financial institution’s competitors could 

identify the small businesses to which 

the financial institution is offering or 

providing credit. 

The Bureau acknowledges that the 

increased transparency into small 

business lending provided by 1071 data 

could reveal general information about 

a financial institution’s lending 

practices that is not widely available to 

the general public, and that this 

information could be useful to others, 

including other financial institutions. 

For example, if the 1071 data were reidentified, a financial institution could 

potentially offer credit to a particular 

small business at a lower price than 

they received from another financial 

institution. However, the Bureau does 

not believe the unmodified applicationlevel 1071 data would include key 

inputs for or be detailed enough to 

substantially facilitate the reverseengineering of a financial institution’s 

proprietary lending models. (For 

example, it would not include 

information about an applicant’s credit 

history.) Financial institution concerns 

with disclosure of information about 

general lending practices are discussed 

in greater detail under Balancing Risks 

and Benefits in part VI.C.5 below. 

As noted above, an industry 

commenter expressed concern that 

disclosing information about applicants 

in rural areas could lead them to seek 

financing elsewhere. However, from the 

perspective of a small business, seeking 

financing with a lender in another 

community would not necessarily 

reduce the risk that someone in the 

small business’s community may 

ultimately re-identify them in the 1071 

data because the 1071 data would be 

reported with respect to the location of 

the business, as discussed in the 

section-by-section analysis of proposed 

§ 1002.107(a)(13) above (census tract). 

As discussed above, with respect to the 

concern about re-identification risk to 

applicants and related natural persons, 

the Bureau would determine the extent 

of re-identification risk when it has 

obtained a full year of reported 1071 

data and would state its intentions, at 

that time, about whether certain 1071 

data fields should be modified or 

deleted prior to public disclosure. 

Some SERs expressed the concern, 

further detailed above, that 1071 data 

could harm financial institutions by 

increasing the amount of litigation 

against financial institutions. The 

Bureau acknowledges this risk, which is 

discussed in greater detail under 

Balancing Risks and Benefits in part 

VI.C.5 below, and in part VI.C.6.xviii 

with respect to the application of the 

proposed balancing test to financial 

institution identifying information. 

In addition to considering whether 

the disclosure of a data field could lead 

to financial or other tangible harms, 


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816See SBREFA Outline at 41. 

817 Id. at 40–41. 

818See SBREFA Panel Report at 35–36. 

819See id. at 35. 

820See id. 

such as those described above, the 

Bureau has also considered whether the 

1071 data fields might be viewed as 

sensitive. As noted above, several SERs 

and other stakeholders stated that 

disclosure of the unmodified 1071 data 

would divulge data that may be 

sensitive to applicants, related natural 

persons, or financial institutions. In 

assessing whether a data field creates a 

risk of sensitivity, the Bureau has 

evaluated whether its disclosure could 

lead to dignitary or reputational harm to 

small business applicants or related 

natural persons. For example, as several 

industry commenters stated, if the 1071 

data were re-identified, the data could 

reveal information that casts a negative 

light on a small business’s financial 

condition, such as the fact that a loan 

was denied due to a business’s credit 

characteristics or cashflow. This 

information could be embarrassing to 

the small business and its owners. 

The Bureau has also evaluated 

whether the disclosure of a data field 

could cause reputational harm to 

financial institutions. As noted above, 

some SERs expressed concern that 1071 

data could harm a financial institution’s 

reputation by leading data users to draw 

unfounded inferences about 

discrimination. The Bureau notes that 

several of the 1071 data fields, if 

disclosed in unmodified form, would 

help address this concern by serving as 

control variables. For example, many 

financial institutions consider a small 

business’s revenue when assessing the 

risk of extending credit. As a result, 

disclosing gross annual revenue data 

would help ensure that data users who 

are evaluating potential disparities in 

underwriting or pricing can compare 

small businesses with similar revenues, 

thereby controlling for a factor that 

might provide a legitimate explanation 

for some disparities. The Bureau also 

notes that it does not expect that 1071 

data alone could generally be used to 

determine whether a lender is 

complying with fair lending laws. The 

Bureau expects that, when regulators 

conduct fair lending examinations, they 

would analyze additional information 

before reaching a determination about 

an institution’s compliance with fair 

lending laws. 

In assessing the risk of sensitivity, the 

Bureau has also considered general 

societal and cultural expectations with 

respect to what information is available 

to the general public. For example, 

disclosing gross annual revenue in 

unmodified form could disclose 

sensitive information because it could 

reflect the financial condition of a small 

business or, where a small business is 

a sole proprietorship, a natural person. 

This type of information about a 

business’s or natural person’s financial 

condition is typically not available to 

the general public. 

The Bureau also acknowledges the 

comments stating that some small 

businesses and their owners would 

consider the very fact that they sought 

credit sensitive, or would consider the 

disclosure of a banking relationship 

sensitive because others may draw 

adverse inferences about the small 

business’s financial condition. These are 

concerns about sensitivity that would 

result merely from the re-identification 

of the applicant, rather than from the 

disclosure of particular data fields. The 

Bureau seeks to address these concerns 

by mitigating the risk of reidentification, as described under ReIdentification Risk in part VI.C.4.i 

above. 

The Bureau seeks comment on its 

approach to assessing the risks of harm 

and sensitivity presented by the 

disclosure of unmodified 1071 data. 

5. Balancing Risks and Benefits 

Under the approach described in the 

SBREFA Outline, the Bureau would 

delete or modify 1071 data if disclosure 

of the data in unmodified form would 

pose risks to privacy interests that are 

not justified by the benefits of public 

disclosure in light of the statutory 

purposes of section 1071.816 If the risks 

of disclosing unmodified data are not 

justified by the benefits under the 

balancing test, the Bureau would 

determine whether modifications or 

deletions could appropriately balance 

the risks and benefits. In the SBREFA 

Outline, the Bureau explained that it 

was considering various approaches that 

would appropriately advance privacy 

interests while still providing users with 

data useful to fulfilling the purposes of 

section 1071. The Bureau explained that 

these approaches could include various 

statistical disclosure limitation 

techniques when justified under the 

balancing test, such as those that mask 

the precise value of data points to 

prevent the disclosure of certain data 

elements. The Bureau also sought 

feedback generally on how it could 

mitigate concerns arising from reidentification risk.817

Several community group 

commenters stated that the Bureau 

should make as much data publicly 

available as possible to maximize data 

utility. One commenter stated that 

privacy concerns could be addressed 

through the prohibition on collecting 

personally identifiable information and 

increasing coverage of 1071 reporters 

and products. But this commenter, 

several SERs, and many other industry 

commenters expressed support for 

modifying or deleting the data from the 

public application-level 1071 data to 

balance privacy risks with the benefits 

of public disclosure. Commenters 

provided a wide variety of feedback on 

what kind of techniques would be 

appropriate, including publishing data 

in ranges, aggregating data, differential 

privacy, and data-swapping.818 In 

addition, several industry commenters 

recommended that the Bureau reduce 

rule coverage to limit harms, such as by 

using asset thresholds and exclusions 

for types of financial institutions. By 

contrast, a community group commenter 

recommended that the Bureau expand 

the rule’s coverage to increase the 

number of observations and reduce reidentification risk. One SER 

recommended a process by which 

covered financial institutions could 

identify certain application records that 

might present heightened reidentification risk and trigger further 

analysis by the Bureau before full 

application-level data are published.819

Another SER suggested that the Bureau 

set a minimum sample size before 

publishing application-level data for 

some rural markets to avoid harm.820

Balancing risks and benefits 

generally. As noted previously, the 

Bureau intends to apply the proposed 

balancing test after it receives the first 

year of data reported pursuant to an 

eventual 1071 rule. For data fields the 

public disclosure of which the Bureau 

believes would create risks to privacy 

interests of applicants, related natural 

persons, or financial institutions, either 

because a field increases reidentification risk or poses a risk of 

harm or sensitivity, the Bureau intends 

to assess these risks against the benefits 

of disclosure. Where the Bureau 

determines that the disclosure of an 

individual data field, alone or in 

combination with other fields, would 

create risks to privacy that are not 

justified by the benefits of disclosure to 

1071’s purposes, the Bureau would 

consider whether it could appropriately 

balance the privacy risks and disclosure 

benefits through modification 

techniques or whether the field should 

be deleted from the public dataset. The 

Bureau also would evaluate the risks 

and benefits of disclosing a data field in 

light of modifications or deletions 

considered for other data fields. 


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821See ECOA section 704B(f)(2)(B). 

822See ECOA section 704B(a). 

823See, e.g., ECOA section 706 (providing for 

civil liability). 

824See ECOA section 704B(f)(2). 

825 Differential privacy provides a way to measure 

the contribution of any one record to the aggregate 

statistics disclosed in a way that makes reidentification risk easily quantifiable and allows 

those involved in the data production to keep reidentification risk under a certain risk tolerance. 

The Bureau is mindful of the 

connection between the risk of reidentification and the risk of harm or 

sensitivity. To the extent that the risk of 

re-identification created by disclosure of 

the 1071 data is reduced, the risk of 

disclosing harmful or sensitive 

information also would be reduced. 

Conversely, to the extent that the public 

application-level 1071 data would not 

disclose information that is harmful or 

sensitive, the consequences of reidentification would be reduced. Where 

the Bureau determines that modification 

of a data field is appropriate, the 

Bureau’s consideration of the available 

forms of modification for the 1071 data 

would also be informed by the 

operational challenges associated with 

various forms of modification and the 

need to make application-level data 

available to the public in a timely 

manner. 

The Bureau is also aware of concerns 

raised by SERs and other stakeholders, 

described under Risk of Harm or 

Sensitivity in part VI.C.4.ii above, that 

disclosing the proposed 1071 data in 

unmodified form could increase risks of 

litigation or reputational harm to 

financial institutions, and reveal 

information that could cause 

competitive harm to financial 

institutions. However, in applying the 

balancing test, the Bureau generally 

intends to give significant weight to the 

benefits of disclosure relative to these 

risks. 

In general, the Bureau believes that 

deleting or modifying data because the 

data would disclose general information 

about a financial institution’s lending 

practices—compared with information 

that could substantially facilitate, for 

example, the reverse-engineering of a 

financial institution’s proprietary 

lending models—would be inconsistent 

with section 1071. As noted above, the 

statute directly contemplates disclosure 

of financial institution identity in 

connection with the public applicationlevel dataset.821 Each of the data fields 

prescribed by the statute—with the 

exception of the application number— 

could provide some insight into a 

financial institution’s lending practices. 

If the Bureau were to exclude data on 

this basis, it would exclude virtually all 

of the statutorily required 1071 data 

points from the public data. This would 

significantly frustrate both of the 

statutory purposes of section 1071 

because it would prevent the public 

from using the data to identify potential 

fair lending violations, and it would 

prevent communities and creditors from 

using the 1071 data to identify business 

and community development needs and 

opportunities of small businesses.822

For example, this information could 

benefit more competitive creditors, as 

well as small businesses in obtaining 

credit at a lower cost. 

While the Bureau acknowledges 

financial institutions’ concern about the 

litigation and reputational risks 

involving section 1071 data, the Bureau 

does not believe that this concern 

justifies the exclusion of data from 

public disclosure. One of the statutory 

purposes of section 1071 is to facilitate 

enforcement of fair lending laws, which 

authorize enforcement by parties other 

than the Bureau.823 Additionally, 

section 1071 contemplates that financial 

institutions would make their own 

application-level data available to the 

public, which necessarily entails their 

identification.824

Modification techniques generally. In 

light of the purposes of section 1071, the 

Bureau intends to modify or delete the 

1071 data only as needed under the 

balancing test prior to public disclosure. 

The Bureau recognizes, as explained by 

community groups, that modifications, 

to varying degrees, may negatively 

impact the utility of the data for the fair 

lending and business and community 

development purposes of the statute. 

However, the proposed balancing test is 

designed to ensure that decisions to 

modify or delete the public applicationlevel 1071 data take these benefits into 

account. Below, the Bureau addresses 

general issues related to modification 

techniques in the context of this 

proposal. These techniques are 

discussed in greater detail with respect 

to specific data points further below. 

Where no specific modification 

technique is described with respect to 

particular data points, the Bureau has 

not identified an obvious modification 

technique other than potentially 

swapping, suppression, or deletion, 

which are discussed below under Other 

techniques. 

While certain information that 

directly identifies applicants or related 

natural persons generally would not be 

collected under the proposal, the 

Bureau does not believe this feature of 

the proposal would be sufficient to 

eliminate privacy risks that would arise 

from publishing the data in unmodified 

form, as discussed in greater detail 

under Risks to Privacy Interests in part 

VI.C.4 above. The Bureau also does not 

believe that privacy risks can be 

adequately resolved through rule 

coverage (e.g., using asset thresholds 

and exclusions for types of financial 

institutions). While some reidentification risk could be reduced by 

increasing the number of loans reported 

to the Bureau, the Bureau does not 

believe the effects of doing so are 

necessarily predictable because reidentification risk depends on the 

characteristics of the data. Further, 

increasing the number of loans would 

not address risks of harm or sensitivity 

to re-identified applicants or natural 

persons. Suggestions for addressing 

privacy risks through exemptions are 

discussed under Balancing Test Design 

in part VI.C.1 above. 

Aggregate data. The Bureau does not 

intend to address privacy risks for 

application-level 1071 data through 

aggregate disclosures at this time. As 

discussed in the section-by-section 

analysis of proposed § 1002.110(a) 

above, and as required by section 1071, 

the Bureau is proposing to make 

available to the public the information 

submitted to it by financial institutions 

pursuant to proposed § 1002.109, 

subject to deletions or modifications 

made by the Bureau. As discussed in the 

section-by-section analysis of proposed 

§ 1002.110(b) above, and as authorized 

by the statute, the Bureau may, at its 

discretion, compile and aggregate 

information submitted by financial 

institutions pursuant to proposed 

§ 1002.109, and make any compilations 

or aggregations of such data publicly 

available as the Bureau deems 

appropriate. The Bureau initially 

anticipates making the data collected 

under section 1071 available at the 

application level—with appropriate 

potential modifications and deletions— 

rather than providing aggregate data 

with counts and averages for each data 

field. The Bureau may consider 

releasing aggregated data in the future, 

after it determines whether narrower 

modifications or deletions could 

address privacy risks. The Bureau 

received some suggestions to consider 

‘‘differential privacy’’ techniques.825

Such techniques are typically used in 

connection with aggregate statistics to 

reduce the identifiability of more 

granular data. The Bureau seeks 

comment on whether differential 

privacy techniques might be appropriate 

for application-level data. 

Recoding. The Bureau intends to 

consider various methods to ‘‘recode’’ 

the proposed data fields as necessary 


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826 Data users would need to carefully understand 

the method behind the modifications and plan 

analyses to account for the fact that the suppressed 

data would necessarily not reflect all small business 

loans in a given year. 

827For example, with respect to the amount 

applied for data field, a recoding technique would 

release the values of the data field in broad 

categories, for instance ‘‘$100,000–$150,000.’’ In 

such case, the broader category provides less 

information but reflects the true value of the 

underlying data. Noise addition, by contrast, would 

involve the Bureau manipulating (in a standardized 

and documented way) the actual values of loan 

amount. An application’s loan amount may be 

released as $85,000 in the public dataset when the 

true value was $78,000. 

828Even if, for instance with additive random 

noise, the data maintain the underlying average 

value, users would need to take into account the 

change in the variance associated with the 

modification. While the Bureau can provide all the 

required information to make these adjustments, 

they would require a level of data analysis 

sophistication that may not be possessed by all 

potential users of the eventual 1071 data. 

829See SBREFA Panel Report at 48. 

under the balancing test. Recoding 

techniques decrease the number of 

distinct categories for a data field. In the 

context of the 1071 data fields, recoding 

would involve providing the value of a 

data field in a higher-level category that 

increases the number of records within 

a given combination. Some data fields 

like census tract and NAICS code have 

structures that permit recoding without 

developing new 1071-specific recoding 

categories. For example, if the Bureau 

were to determine that the reidentification risk presented by the 

census tract data field does not justify 

the benefits of unmodified disclosure, 

the Bureau could instead provide 

geography at the county level, for 

example, since census tracts are 

designed to be non-overlapping 

subdivisions of a county. 

The Bureau also intends to consider 

recoding through the use of bins or 

intervals of values for data fields that, in 

unmodified form, would have 

continuous values (such as data fields 

for amount applied for, amount 

approved, gross annual revenue, or 

number of workers). Unmodified 

continuous data fields can be highly 

identifying, depending on the data field, 

but binning these values can reduce the 

risk of re-identification substantially. 

An additional approach for continuous 

data fields would be to top- or bottomcode the data field to prevent extreme 

values from being released that may be 

particularly identifiable. This approach 

could be performed alone or in 

conjunction with recoding the data into 

intervals. 

Other techniques. The Bureau might 

also consider ‘‘targeted suppression’’ 

techniques. Targeted suppression makes 

certain values of data points unavailable 

for records when a certain combination 

of values is held by too few records. The 

Bureau might consider, for example, 

treating certain values of data points as 

‘‘not available’’ if the application is the 

only small business application from a 

particular census tract. Targeted 

suppression can be applied in several 

ways. One way would be to remove the 

value of a field that makes the record 

identifiable. For example, if census tract 

and NAICS code identify a record, the 

microdata could delete the value of the 

NAICS code for any applications that 

are in cells deemed sensitive. A second 

approach could leave the census tract 

and NAICS code but suppress the values 

of other data points. This method would 

reduce the potential harm if the record 

were re-identified. A third approach 

could be to remove the record from the 

dataset entirely. In general, suppression 

is a more common approach for 

aggregate data than for application-level 

data. 

One drawback to targeted suppression 

is that it complicates data analysis for 

any end user. For example, with respect 

to the public application-level 1071 

data, a data user would be presented 

with millions of rows, but in certain 

rows and for certain data points, values 

would be missing.826 Another drawback 

is that suppression would need to be 

done in a way such that the remaining 

unmodified data do not provide a user 

with the ability to back out the modified 

field, sometimes involving 

complementary suppression or deleting 

values of other applications to ensure 

that the missing value cannot be 

reengineered. The Bureau seeks 

comment on whether targeted 

suppression techniques could preserve 

the benefits of the public applicationlevel 1071 data, and, if so, what the 

Bureau should consider as the 

minimum cell size to implement 

targeted suppression. 

The Bureau seeks comment on other 

modification techniques, such as ‘‘data 

swapping’’ (sometimes called 

‘‘switching’’). Data swapping involves 

finding two records that are similar on 

several dimensions and swapping the 

values for other data fields between the 

two records. In effect, data swapping 

would require that the Bureau preserve 

certain data fields while swapping 

others. Another set of techniques for 

addressing privacy risks for continuous 

data would involve adding ‘‘random 

noise’’ to the reported values. For 

example, under ‘‘additive noise 

techniques,’’ a random value is added to 

the existing value of the data field. 

Under ‘‘multiplicative noise 

techniques,’’ the true value is multiplied 

by a random value. The Bureau seeks 

comment on whether such techniques 

would preserve the benefits of the 

public application-level 1071 data. A 

drawback to these approaches is that 

data would be released with values that 

do not match the true values of the 

underlying data.827 Data users would 

need to take such modifications into 

account when performing any 

analyses.828

The Bureau has considered the SER 

recommendation for allowing financial 

institutions to identify records that 

might present heightened reidentification risk. The Bureau 

appreciates this suggestion but is not 

proposing it because privacy risks are 

likely common to many types of 

applicants, related natural persons, and 

financial institutions and such risks 

should be addressed in a broader 

context, such as through this proposal. 

The Bureau’s proposed process for 

obtaining public input on the balancing 

test is discussed under Implementation 

of the Balancing Test in part VI.C.2 

above. 

6. Preliminary Application of the 

Balancing Test to Public ApplicationLevel 1071 Data 

As explained above, the Bureau does 

not yet have data under section 1071 

and does not believe that there are 

comparable datasets that it could use as 

an adequate proxy for 1071 data to 

which it could apply the balancing test 

at this time. However, as recommended 

by the SBREFA Panel, the Bureau is 

providing additional detail on how it 

would apply the balancing test to the 

1071 data fields as set forth in the 

proposal.829

In accordance with the proposed 

balancing test described above, privacy 

risks may not be justified by the benefits 

of disclosure if disclosing the data field 

in unmodified form would substantially 

facilitate the re-identification of 

applicants and related natural persons, 

or disclose information about an 

applicant, related natural persons, or a 

financial institution that is not 

otherwise public and may be harmful or 

sensitive. The Bureau has proposed 

modifications or deletions for the 

proposed financial institution 

identifying information (other than 

contact information for natural persons), 

and the proposed use of free-form text 

for certain data. The Bureau also is 

proposing not to disclose the proposed 

unique identifier in unmodified form. 

However, because the Bureau is not 

conducting a full re-identification 

analysis at this time, it has not 

determined whether the privacy risks of 

disclosing the other proposed data fields 


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830ECOA section 704B(e)(3). 

831See 82 FR 44586, 44599 (Sept. 25, 2017); see 

also 84 FR 649, 660 (Jan. 31, 2019). 832See 84 FR 649, 660 (Jan. 31, 2019). 

in unmodified form in the public 

application-level 1071 data would be 

justified by the benefits of disclosure. 

Accordingly, the Bureau has not yet 

determined whether data fields—other 

than those for the proposed unique 

identifier data point, the proposed 

financial institution identifying 

information, and the proposed free-form 

text that would be used to report some 

of the data—should be deleted, 

modified, or published in unmodified 

form. 

The Bureau is setting forth its 

preliminary analysis below to provide 

transparency and obtain public 

feedback. The Bureau seeks comment on 

its analysis of the public disclosure 

benefits and privacy risks for each data 

field. Specifically, the Bureau seeks 

comment on the following issues with 

respect to each data field, individually 

or in combination with others: (1) 

Whether there are additional benefits of 

unmodified public disclosure in light of 

the purposes of the statute; (2) whether 

disclosure in unmodified form would 

reveal additional information that might 

be considered harmful or sensitive by an 

applicant, related natural person, or 

financial institution; and (3) whether 

disclosure in unmodified form would 

significantly contribute to the risk that 

an applicant or related natural person 

might be re-identified. The Bureau seeks 

comment on other modification 

techniques it could use, and whether 

deletion would appropriately balance 

the benefits of disclosure with privacy 

risks. 

i. Unique Identifier 

Proposed § 1002.107(a)(1) would 

require financial institutions to collect 

and report an alphanumeric identifier, 

starting with the legal entity identifier of 

the financial institution, unique within 

the financial institution to the specific 

covered application, and which can be 

used to identify and retrieve the specific 

file or files corresponding to the 

application for or extension of credit. 

Disclosing the unique identifier in the 

public application-level 1071 data in 

unmodified form would help data users 

conducting fair lending analysis or 

seeking to identify business and 

community development needs or 

opportunities. This data field would 

allow data users to run analyses that 

quickly compare specific records to 

detect trends or disparities. The unique 

identifier would also provide data users 

a way to identify, distinguish, and 

organize credit and application data, 

which is invaluable for data processing. 

Disclosing the unique identifier in the 

1071 data in unmodified form by itself 

would likely disclose minimal, if any, 

information about an applicant or 

related natural person that may be 

harmful or sensitive if such person were 

re-identified, or that may be harmful or 

sensitive to an identified financial 

institution. As noted above, section 

1071 prohibits financial institutions 

from including in 1071 records certain 

personally identifiable information that 

directly identifies a natural person 

applicant or someone connected with 

the applicant.830 In addition the Bureau 

is proposing to prohibit financial 

institutions from reporting information 

that would directly identify a small 

business. For these reasons, the Bureau 

does not expect that the unique 

identifier would be considered harmful 

or sensitive. 

A few industry stakeholders 

expressed concern that small businesses 

could be identified if application or loan 

numbers were added to UCC filings. 

Although publicly available datasets do 

not presently include the unique 

identifier data field, financial institution 

legal entity identifiers are publicly 

available, and the Bureau is aware of 

rare instances in which a loan number 

is included in UCC filings. In addition, 

as the Bureau noted in its policy 

guidance on the disclosure of loan-level 

HMDA data, many jurisdictions 

publicly disclose real estate transaction 

records in an identified form, and the 

Bureau believes many financial 

institutions include loan numbers on 

these publicly recorded documents.831

The Bureau believes inclusion of the 

proposed unique identifier, rather than 

application or loan numbers, would 

limit the possibility of using application 

or loan number to match 1071 data to 

those publicly recorded documents, 

thus reducing risk of re-identification. 

However, there is a risk that, after 

financial institutions begin to report 

data under section 1071, they may 

replace the loan numbers currently 

assigned to small business loans with 

the unique identifier and, if they do, the 

unique identifier could be included on 

publicly recorded documents. 

Especially considering the uniqueness 

of the identifiers, this data field on a 

publicly recorded document could be 

used to match a 1071 record to an 

identified public record directly and 

reliably. 

In light of these potential reidentification risks, the Bureau proposes 

not to publish the proposed unique 

identifier data field in unmodified form. 

The Bureau seeks comment on whether 

there are modifications that would 

appropriately balance identified privacy 

risks and disclosure benefits. The 

Bureau is considering the feasibility of 

disclosing a separate unique identifier 

that the Bureau could create. The 

Bureau is also considering deleting the 

data field from the public applicationlevel 1071 data, but seeks comment on 

whether the proposed deletion would 

create challenges for users of the data 

and, if so, how the Bureau could 

address those challenges other than by 

creating a separate unique identifier. 

The Bureau notes that some of the 

benefits of the unique identifier in 

analyzing the data could be achieved 

through the Bureau’s proposed 

disclosure of LEI, as discussed in part 

VI.C.6.xviii below. The Bureau also 

notes that the universal loan identifier 

reported to the Bureau under HMDA, 

which is similar in function to the 

proposed unique identifier, is currently 

excluded from the public loan-level 

HMDA data.832

The Bureau seeks comment on this 

analysis as well as its proposal not to 

publish the unique identifier in 

unmodified form. 

ii. Application Date 

Proposed § 1002.107(a)(2) would 

require financial institutions to collect 

and report the date the covered 

application was received by the 

financial institution or the date shown 

on a paper or electronic application 

form. 

Disclosing application date in the 

public application-level 1071 data in 

unmodified form would allow data 

users to monitor trends over time in 

small business lending. Application 

date also would provide a disaggregated 

piece of temporal data that can be used 

to identify seasonality in small business 

lending (for example, when combined 

with the pricing data fields to show 

interest rates charged to applicants over 

a specific date range). In fair lending 

analyses, application date would 

provide data users with the means to 

compare level of service (from 

application date to action taken date) 

and identify potential disparities on a 

prohibited basis between applications. 

Application date could also act as a 

control for factors that may provide a 

legitimate explanation for some 

disparities, such as interest rates during 

different time periods or differences in 

general economic conditions or 

institutional practices over time. 

By itself, disclosing application date 

in the 1071 data in unmodified form 

would likely disclose minimal, if any, 

information about an applicant or 


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833A financial institution would be required to 

select the credit product requested from the 

following list: Term loan—unsecured, term loan— 

secured, line of credit—unsecured, line of credit— 

secured, credit card, merchant cash advance, other 

sales-based financing transaction, other, or not 

provided by applicant and otherwise undetermined. 

A financial institution reporting ‘‘other’’ would be 

required to enter the type of credit product as freeform text. The Bureau analyzes free-form text under 

the proposed balancing test in part VI.C.6.xix 

below. 

834A financial institution would be required to 

select the type of guarantee from the following list: 

Personal guarantee—owner(s), personal guarantee— 

non-owner(s), SBA guarantee—7(a) program, SBA 

guarantee—504 program, SBA guarantee—other, 

USDA guarantee, FHA insurance, Bureau of Indian 

Affairs guarantee, other Federal guarantee, State or 

local government guarantee, other guarantee, or no 

guarantee. A financial institution reporting ‘‘other 

guarantee’’ would be required to enter the type of 

guarantee as free-form text. The Bureau analyzes the 

free-form text under the balancing test in a separate 

subsection below. 

related natural person that may be 

harmful or sensitive if such person were 

re-identified, or that may be harmful or 

sensitive to an identified financial 

institution. It is conceivable that an 

adversary such as a competitor or other 

market participant may find it helpful to 

understand when a business is seeking 

credit; for example, to better understand 

the business’s strategy and cash flow 

needs. In addition, marketers and 

creditors could use this information to 

target products to entities recently in the 

market for credit, either to deploy new 

funds or to refinance out of a current 

loan. However, the Bureau does not 

believe that disclosing the application 

date would otherwise disclose sensitive 

information about a small business or its 

owner, or any information that would be 

used for harmful purposes. Any utility 

of this data field for such purposes 

would be curtailed by the time lag in 

public release of the 1071 data. 

The Bureau has not identified 

publicly available datasets that include 

data fields an adversary could directly 

match to the application date field. 

However, an adversary may be able to 

infer a likely origination date based on 

typical time lags between application, 

credit decision, and origination, 

potentially enabling matching to other 

datasets that record these later dates. 

If the Bureau determines that 

application date should be modified, the 

Bureau may consider disclosing the 

application date at a higher level; for 

example, disclosing the month and year 

but not the specific date. In light of the 

potential re-identification risk arising 

from this data field, the Bureau seeks 

comment on whether there are other 

specific modifications it should 

consider, and whether deletion would 

balance the risks and benefits of 

disclosure. 

The Bureau seeks comment on this 

analysis. 

iii. Application Method and Application 

Recipient 

Proposed § 1002.107(a)(3) would 

require financial institutions to collect 

and report the means by which the 

applicant submitted the covered 

application directly or indirectly to the 

financial institution. A financial 

institution would report whether the 

applicant submitted the application in 

person, by telephone, by mail, or online. 

Proposed § 1002.107(a)(4) would require 

financial institutions to collect and 

report whether the applicant submitted 

the covered application directly to the 

financial institution or its affiliate, or 

whether the applicant submitted the 

covered application indirectly to the 

financial institution via a third party. 

Disclosing application method and 

whether the application was submitted 

indirectly in the public applicationlevel 1071 data would further the fair 

lending enforcement purpose of the 

statute. Application method information 

would allow the public to better 

understand the role of the financial 

institution as a creditor and would 

facilitate pricing analyses by helping the 

public identify potential factors in 

pricing outcomes. In addition, proposed 

§ 1002.107(a)(20) would require the 

collection of race or ethnicity 

information for the applicant’s principal 

owner(s) using visual observation or 

surname in certain circumstances. If the 

Bureau finalizes this proposal, 

application method information would 

provide context for the information 

collected. 

Information about application method 

and whether the application was 

submitted directly or indirectly also 

would promote the community and 

business development purposes of the 

statute. This information would 

improve the public’s understanding of 

the structure of small business lending 

originations across the market, the 

methods by which credit is originated 

for particular groups or underserved 

markets, and trends over time (for 

example, the extent to which applicant 

preferences shift from in-person to 

online interactions). 

Disclosing application method and 

whether the application was submitted 

directly or indirectly, in unmodified 

form, would likely disclose minimal, if 

any, information about an applicant or 

related natural person that may be 

harmful or sensitive if such person were 

re-identified. If applicants or related 

natural persons were re-identified, 

application method is likely to be of 

relatively limited utility to an adversary 

because it conveys little information 

about a natural person’s characteristics 

or a business’s financial condition. 

While adversaries interested in targeted 

marketing could direct future marketing 

efforts to a business using the same 

application channel, it is likely that 

marketing firms already possess 

strategic information about the best 

methods for establishing contact. 

Unmodified disclosure of application 

method and whether the application 

was submitted indirectly may reveal 

information that financial institutions 

regard as harmful or sensitive, but, as 

discussed under Risk of Harm or 

Sensitivity in part VI.C.4.ii above, the 

Bureau does not believe that disclosure 

would permit the reverse-engineering of 

a financial institution’s proprietary 

lending models. 

The Bureau has not identified 

publicly available datasets that include 

data fields an adversary could directly 

match to the application method or 

application recipient data fields in 

unmodified form in the public 

application-level 1071 data with respect 

to an applicant or related natural 

person. While the Bureau’s HMDA data 

and the GSE loan-level datasets include 

acquisition channel information in loanlevel data, these datasets do not identify 

applicants or related natural persons. 

Therefore, an adversary would face 

challenges in using application method 

or application recipient information to 

match a section 1071 record to an 

identified publicly available record. 

However, the Bureau seeks comment on 

whether there are other identifiable 

application/loan-level datasets that 

include this information or whether 

HMDA data or the GSE loan-level 

datasets could be matched to other 

identifiable datasets. 

The Bureau seeks comment on this 

analysis. 

iv. Credit Type 

Proposed § 1002.107(a)(5) would 

require financial institutions to collect 

and report to the Bureau certain 

information about the type of credit 

applied for or originated. The proposal 

would require financial institutions to 

report three categories of information 

that together constitute the type of 

credit. First, the proposal would require 

financial institutions to report the type 

of credit product.833 Second, the 

proposal would require financial 

institutions to report the type or types 

of guarantees that were obtained for an 

extension of credit, or that would have 

been obtained if the covered credit 

transaction had been originated.834

Third, the proposal would require 

financial institutions to report the 


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835For example, the ‘‘SBA guarantee—7(a) 

program’’ data field could indicate heightened 

credit risk because this program is intended for 

businesses that have been unsuccessfully applying 

for credit or have had some other difficulty in 

accessing credit. 

836A financial institution would be required to 

report the credit purpose or purposes by selecting 

the purpose or purposes of the covered credit 

transaction applied for or originated from the 

following list: Purchase, construction/improvement, 

or refinance of owner-occupied dwelling(s); 

purchase, construction/improvement, or refinance 

of non-owner-occupied dwelling(s); purchase, 

construction/improvement, or refinance of nondwelling real estate; purchase, construction/ 

improvement, or refinance of owner-occupied, nondwelling real estate; purchase, refinance, or 

rehabilitation/repair of motor vehicle(s) (including 

light and heavy trucks); purchase, refinance, or 

rehabilitation/repair of equipment; working capital 

(includes inventory or floor planning); business 

start-up; business expansion; business acquisition; 

refinance existing debt (other than refinancings 

listed above); line increase; other; not provided by 

applicant and otherwise undetermined; or not 

applicable. A financial institution reporting ‘‘other’’ 

would be required to enter the purpose or purposes 

as free-form text. The Bureau analyzes free-form 

text under the proposed balancing test in part 

VI.C.6.xix below. 

length of the loan term, in months, if 

applicable. 

Disclosing data about the type of 

credit product, type of guarantee, and 

loan term in the public application-level 

1071 data in unmodified form would 

facilitate enforcement of fair lending 

laws by allowing data users to 

determine whether any disparities in 

underwriting or pricing may be due to 

differences in these features of a loan. 

Disclosing these data would also be 

useful for identifying business and 

community development needs. These 

data would enable the public to 

understand whether certain types of 

credit are disproportionately available 

to certain groups. For example, 

information about the presence or lack 

of collateral would provide more 

information about lending patterns in 

different geographic areas and for 

different groups of applicants. 

Furthermore, each of the credit type 

data fields would help the public avoid 

misinterpretations of the 1071 data. In 

addition, information on the 

distribution of government loan 

guarantees (such as those provided in 

SBA programs) across different 

geographic areas and groups of 

applicants could provide information 

about how those programs function on 

the ground, aiding in fulfilling the 

business and community development 

purpose of section 1071. Information 

about the type of guarantee would also 

allow communities, governmental 

entities, and creditors to monitor the use 

of personal guarantees, which carry 

additional risk to the guarantors and 

businesses. Finally, information about 

loan term would provide insights into 

the pricing and sustainability of closedend credit transactions. 

The Bureau believes that data about 

the type of credit product, type of 

guarantee, and loan term could disclose 

information that may be harmful or 

sensitive to applicants or related natural 

persons. A business’s competitors could 

use these data fields—in conjunction 

with the loan amount and pricing data 

fields—to draw inferences about the 

business’s financial condition based on 

whether the business obtained credit on 

favorable or unfavorable terms. The type 

of guarantee data fields could indicate 

heightened credit risk for the 

applicant.835 Credit type data also could 

be used for targeted marketing of 

products and services that may pose 

risks that are not apparent to the 

business or related natural persons. 

Disclosure of the type of credit 

product, type of guarantee, and loan 

term in unmodified form may reveal 

information that financial institutions 

regard as harmful or sensitive, such as 

the types of products they offer or the 

government programs in which they 

participate. However, as discussed 

under Risk of Harm or Sensitivity in part 

VI.C.4.ii above, the Bureau does not 

believe that disclosure of these data 

fields would permit the reverseengineering of a financial institution’s 

proprietary lending models. 

Furthermore, general information about 

the types of credit a financial institution 

is offering is widely available on 

creditor websites and in marketing 

materials. 

The Bureau is aware that certain 

identified datasets include applicationlevel information on the type of credit 

product, type of guarantee, or loan term. 

Government lending programs, such as 

the SBA’s 7(a) and 504 programs, 

publish loan-level data that indicate the 

term of the loan and whether the loan 

is a term loan or a line of credit. In some 

States, UCC filings may include some 

information related to the type of 

collateral. In the Bureau’s view, the 

existing public availability of this 

information decreases the potential 

harm or sensitivity of disclosing 

information about the type of credit 

product, type of guarantee, and loan 

term in the 1071 data. 

The Bureau has identified publicly 

available datasets that include data 

fields an adversary could directly match 

to the credit type data fields in 

unmodified form in the public 

application-level 1071 data with respect 

to an applicant or related natural 

person. As noted above, information 

about the type of credit product, loan 

term, and type of collateral is found in 

many publicly available datasets, 

including data from government lending 

programs and, in some States, UCC 

filings. Therefore, in many cases, an 

adversary could use this information, 

combined with other fields, to match a 

section 1071 record to an identified 

publicly available record. 

If the Bureau determines that the type 

of guarantee should be modified, the 

Bureau may consider disclosing values 

that are more general than the values 

reported to the Bureau. For example, the 

Bureau could disclose ‘‘Federal 

guarantee’’ instead of disclosing the 

specific program. If the Bureau 

determines that the loan term should be 

modified, the Bureau may consider 

recoding loan term data into bins—for 

example, using intervals of two or five 

years—to reduce the potential for reidentification risk. 

The Bureau seeks comment on this 

analysis. 

v. Credit Purpose 

Proposed § 1002.107(a)(6) would 

require financial institutions to collect 

and report to the Bureau the purpose or 

purposes of the credit applied for or 

originated.836

Disclosing the purpose of the credit in 

the public application-level 1071 data in 

unmodified form would facilitate 

enforcement of fair lending laws. 

Because financial institutions may 

generally consider credit used for 

certain purposes to be riskier than credit 

used for other purposes, data about the 

purpose of the credit would help ensure 

that users can compare applicants with 

similar profiles, thereby controlling for 

factors that might provide nondiscriminatory explanations for some 

disparities in credit and pricing 

decisions. Disclosing data about the 

purpose of the credit would also be 

useful for identifying business and 

community development needs and 

opportunities of small businesses. 

Information about the purpose of the 

credit would help the public understand 

whether small businesses face barriers 

accessing credit that they would be 

seeking to use for a particular purpose. 

In conjunction with NAICS code and 

census tract, information about the 

purpose of the credit could help the 

public understand whether small 

businesses in certain industries or in 

certain communities face unique 

challenges accessing credit to, for 

example, purchase equipment or 

expand their businesses. 

Disclosing the purpose of the credit in 

the 1071 data in unmodified form by 

itself would likely disclose minimal, if 

any, information about an applicant or 


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related natural person that may be 

harmful or sensitive if such person were 

re-identified, or that may be harmful or 

sensitive to an identified financial 

institution. However, information about 

the purpose of the credit could be useful 

to adversaries such as a small business’s 

competitors, potential acquirers, or new 

market entrants, since it contains 

information about a business’s strategy 

and performance, such as whether a 

business is expanding or conducting an 

acquisition. Nonetheless, this 

information would generally not be 

detailed enough to cause small 

businesses competitive harm. The value 

of this information to a small business’s 

competitors is also likely to be mitigated 

by the delay between the date of action 

taken on a loan and the publication of 

the application-level 1071 data. 

Disclosure of credit purpose in 

unmodified form may also reveal 

information that financial institutions 

regard as harmful or sensitive, such as 

information that a financial institution 

offers credit that is used for certain 

purposes. However, as discussed under 

Risk of Harm or Sensitivity in part 

VI.C.4.ii above, the Bureau does not 

believe that disclosure would permit the 

reverse-engineering of a financial 

institution’s proprietary lending models. 

The Bureau has not identified 

publicly available datasets that include 

data fields an adversary could directly 

match to the credit purpose data fields 

in unmodified form in the public 

application-level 1071 data with respect 

to an applicant or related natural 

person. Identified public datasets 

pertaining to small business loans 

generally do not contain information 

about the purpose of the credit. 

Therefore, an adversary would have 

difficulty using the credit purpose data 

fields to match a section 1071 record to 

an identified publicly available record 

accurately. 

The Bureau seeks comment on this 

analysis. 

vi. Amount Applied for 

Proposed § 1002.107(a)(7) would 

require financial institutions to collect 

and report to the Bureau the initial 

amount of credit or the initial credit 

limit requested by the applicant. 

Disclosing amount applied for in the 

public application-level 1071 data in 

unmodified form would help facilitate 

enforcement of fair lending laws by 

allowing data users to control for other 

variables in the data. Several industry 

representatives expressed concern that 

these data could lead to 

misinterpretations based on perceived 

disparate treatment as opposed to the 

complex nature of commercial lending. 

For example, financial institutions may 

consider different or additional 

underwriting criteria, depending on the 

amount applied for. Applications for 

large lines of credit might require an indepth cash-flow analysis, while a 

smaller line of credit may be 

underwritten, in part, based on a 

business’s (or business owner’s) credit 

scores. In conjunction with amount 

approved or originated, this data field 

would allow data users to determine the 

difference between the amount an 

applicant requested, and the amount 

approved or originated. This 

information would also help data users 

identify potentially discriminatory 

lending patterns and distinguish them 

from legitimate business factors when 

combined with other data. This type of 

information is important to consider in 

fair lending analyses since the amount 

applied for may affect the likelihood of 

denial or the price of an approved loan. 

Amount applied for would also help 

data users understand lending 

disparities. For example, data users 

would be able to identify potential fair 

lending violations where certain small 

businesses disproportionately receive 

less credit than applied for on a 

prohibited basis. Finally, the amount 

applied for would help communities, 

governmental entities, and creditors 

monitor the demand for credit. 

Specifically, when combined with 

NAICS code and census tract, the 

amount applied for could help data 

users assess the demand for credit in 

particular industries and communities 

and enable data users to devise 

strategies for narrowing or eliminating 

potential inequalities. 

Disclosing amount applied for in the 

1071 data in unmodified form would 

likely disclose information about an 

applicant or related natural person that 

may be harmful or sensitive if such 

person were re-identified. Business 

owners might view details about the 

amount applied for as sensitive, 

particularly where they are concerned 

about the risk of being re-identified as 

an applicant for credit. In addition, the 

amount applied for could also lead to 

targeted marketing of products or 

services that pose risks that are not 

apparent, because it could help lenders 

target small businesses that received 

less credit than they requested with 

offers for loans at higher rates or fees. 

The amount applied for is generally not 

included in other publicly available 

data, so it would likely not be useful to 

adversaries seeking to match 1071 data 

with other publicly available data. 

However, the Bureau believes amount 

applied for would be useful to an 

adversary. For example, a significant 

shortfall between the amount applied 

for and the amount approved could be 

used either by an applicant’s competitor 

or by a consumer, to infer that the 

business has a relatively weak financial 

position. With information on whether 

or not a business is granted a loan, an 

adversary might gain insight into the 

scale of a business’s objectives based on 

the amount applied for and/or 

approved. The relative scarcity of this 

information at present would also 

increase the value to adversaries of reidentification. In addition, as discussed 

under Risk of Harm or Sensitivity in part 

VI.C.4.ii above, the Bureau does not 

believe that disclosure would permit the 

reverse-engineering of a financial 

institution’s proprietary lending models. 

The Bureau has not identified 

publicly available datasets that include 

data fields an adversary could directly 

match to the amount applied for data 

field in unmodified form in the public 

application-level 1071 data with respect 

to an applicant or related natural 

person. 

If the Bureau determines that the 

amount applied for should be modified, 

the Bureau may consider recoding the 

data into bins. For example, the Bureau 

could recode the amount applied for 

into bins of $25,000. 

The Bureau seeks comment on this 

analysis. 

vii. Amount Approved or Originated 

Proposed § 1002.107(a)(8) would 

require financial institutions to collect 

and report to the Bureau: (i) For an 

application for a closed-end credit 

transaction that is approved but not 

accepted, the amount approved by the 

financial institution; or (ii) for a closedend credit transaction that is originated, 

the amount of credit originated; or (iii) 

for an application for an open-end credit 

transaction that is originated or 

approved but not accepted, the amount 

of the credit limit approved. 

Disclosing amount approved or 

originated in the public applicationlevel 1071 data in unmodified form 

would allow users to identify 

potentially discriminatory lending 

patterns in which small business 

applicants might be receiving less credit 

due to a prohibited basis. These data 

would also enable data users to devise 

strategies for narrowing or eliminating 

these inequalities. Additionally, in 

conjunction with amount applied for, 

disclosure of these data fields would 

allow data users to determine if there is 

a difference between the amount 

requested and the amount approved or 

originated. This information would help 

data users identify any potentially 

discriminatory lending patterns in 


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837As discussed in the section-by-section analysis 

of proposed § 1002.107(a)(12) above, the list of 

denial reasons would include the following: 

Business credit characteristics, personal credit 

characteristics (of business owner(s) or 

guarantor(s)), use of loan proceeds (i.e., a nonpermissible purpose), cash flow, collateral 

(insufficient or inappropriate or unacceptable), time 

in business, government criteria, aggregate exposure 

of business and its principal owner(s), unverifiable 

information, other, or not applicable. A financial 

institution reporting ‘‘other’’ would be required to 

enter the denial reason or reasons as free-form text. 

The Bureau analyzes free-form text under the 

proposed balancing test in part VI.C.6.xix below. 

which small businesses might 

disproportionately receive less credit 

than what they applied for on a 

prohibited basis. As described above, 

when combined with the amount 

applied for, these data also could 

provide significant value as a control in 

fair lending analysis. Additionally, due 

to the sometimes complex nature of 

underwriting in commercial lending, 

when combined with credit purpose 

these data would allow users to identify 

potential discrimination when 

comparing loan applications for similar 

purposes. 

The amount approved or originated 

would also be useful for business and 

community development purposes. 

Disparities with respect to the provision 

of credit can significantly impede the 

growth of women-owned and minorityowned businesses. When combined 

with census tract, these data could help 

users understand whether womenowned and minority-owned businesses 

are experiencing issues accessing credit 

in their communities (separate from the 

question of whether potential fair 

lending violations are occurring). When 

combined with NAICS codes, these data 

could help users understand whether 

women-owned and minority-owned 

businesses in particular industries are 

struggling to access credit. In addition, 

these data would allow data users to 

approximate the size of the small 

business lending market. 

Like the amount applied for data 

field, disclosing amount approved or 

originated in the 1071 data in 

unmodified form would likely disclose 

information about an applicant or 

related natural person that might be 

harmful or sensitive if such person were 

re-identified, or that might be harmful 

or sensitive to an identified financial 

institution. The Bureau believes that 

information about the amount approved 

or originated could be useful to 

potential adversaries. For example, for 

creditors, these data fields would 

provide some insight into competitors’ 

lending practices, particularly when 

combined with other data points such as 

gross annual revenue, number of 

workers, time in business, and pricing. 

These data might allow creditors to 

make general inferences about the 

relative risk appetites of their 

competitors. However, as discussed 

under Risk of Harm or Sensitivity in part 

VI.C.4.ii above, the Bureau does not 

believe that disclosure would permit the 

reverse-engineering of a financial 

institution’s proprietary lending models. 

The Bureau has identified publicly 

available datasets that include data 

fields an adversary could directly match 

to the amount approved or originated 

data fields in unmodified form in the 

public application-level 1071 data with 

respect to an applicant or related natural 

person. Credit amount approved or 

originated is often widely available in 

public datasets, such as loan-level data 

for the SBA 7(a) and 504 programs, as 

well as property records and UCC 

filings. Therefore, in unmodified form, 

adversaries would be able to match the 

amount of credit approved or originated 

to an existing public record. 

If the Bureau determines that the 

amount approved or originated should 

be modified, the Bureau may consider 

recoding the data into bins. For 

example, the Bureau could recode the 

data into bins of $25,000. 

The Bureau seeks comment on this 

analysis. 

viii. Action Taken (Type) and Denial 

Reasons 

Proposed § 1002.107(a)(9) and (11) 

would require financial institutions to 

collect and report to the Bureau the 

action taken by the financial institution 

on the covered application, reported as 

originated, approved but not accepted, 

denied, withdrawn by the applicant, or 

incomplete; and if applicable, for 

denied applications, the principal 

reason or reasons the financial 

institution denied the covered 

application.837

Disclosing action taken and denial 

reasons in the public application-level 

1071 data in unmodified form would 

provide important data on credit 

outcomes for small businesses, 

including women-owned and minorityowned small businesses, that apply for 

credit. Data provided by these data 

fields would allow data users to 

examine the rates of originations, 

approvals, denials, and incomplete and 

withdrawn applications, and whether 

they differ among groups protected 

under ECOA. Of the stakeholders that 

provided feedback on this issue, several 

supported the collection of action taken 

and denial reason data in order to track 

demand for credit and identify potential 

discrimination. Information that credit 

was originated or was approved, but not 

accepted, would help data users 

determine whether there are potential 

disparities in the terms and conditions 

received by women-owned and 

minority-owned small businesses. 

Information that an application was 

incomplete or withdrawn would 

highlight potential issues of 

discouragement, level of assistance 

disparities, or other discriminatory 

treatment that could cause womenowned or minority-owned small 

businesses to walk away from the 

lending process or otherwise fail to 

complete the application. One 

commenter stated that capturing 

incomplete and withdrawn applications 

was important as it may reflect 

discouragement or discriminatory 

treatment, and that the approved but not 

accepted category could reflect less 

favorable pricing or loan terms. For 

example, when combined with amount 

approved or originated, data users could 

also identify issues of possible 

discouragement where lenders have 

potentially under-funded loan 

applications from women-owned and 

minority-owned businesses. 

Denial reasons would help data users 

examine reasons for credit denials 

particularly for women-owned and 

minority-owned businesses. For 

example, when combined with action 

taken date, denial reasons could help 

identify potential denial reasons 

disproportionately affecting protected 

classes, which may be useful to identify 

discrimination and enable data users to 

potentially develop strategies for 

narrowing or eliminating inequalities. 

These data would also be useful as a 

way to compare similarly situated 

applicants, which could be useful to 

both identify and explain potential 

disparities. Disclosing action taken and 

denial reasons would also be useful for 

business and community development 

purposes. The type of action taken 

would provide insights into the supply 

of credit. Data users would be able to 

monitor rates of credit denial, which 

can provide information on the 

willingness of creditors to lend, when 

combined with other data. Granular 

denial reason codes would also provide 

useful actionable information to small 

business applicants generally. For 

example, where small businesses are 

denied loans because of insufficient 

collateral, or time in business, data 

users could help direct programs and 

investment targeted specifically to these 

businesses in a particular community. 

When combined with census tract, 

analysis of denial reasons by 

geographical area could help identify 

whether small businesses in certain 

areas are experiencing higher rates of 


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838See SBREFA Panel Report at 34–35. 

839Whether or not the Bureau discloses the date 

of action taken, the application-level data will 

indicate the year in which action was taken, 

because the 1071 data would be disclosed annually 

based on the date of action taken. 

denial and the specific reasons for 

denial. 

During the SBREFA process, 

stakeholders commented that disclosure 

of denial reasons would be embarrassing 

for applicants and might discourage 

them from applying for credit.838

Several industry commenters believed 

that reporting reasons for denial would 

reveal information that would be very 

harmful or sensitive for businesses or 

natural persons. The Bureau agrees that 

this information could be harmful or 

sensitive for applicants or related 

natural persons. 

Commenters also described 

sensitivities associated with originated 

loans, such as concerns that some small 

business owners could be reluctant to be 

perceived as needing credit in the first 

place. One industry stakeholder 

believed that disclosure of action taken 

would allow competitors to reverse 

engineer a financial institution’s credit 

scoring model. The Bureau does not 

believe disclosing the fact that credit 

was sought, in and of itself, likely 

would be harmful or sensitive to small 

businesses because credit is widely used 

by small businesses. Furthermore, the 

harm or sensitivity of disclosing 

information that credit was originated is 

mitigated by the publication of 

originated loan details in UCC filings, 

for instance. Additionally, as discussed 

under Risk of Harm or Sensitivity in part 

VI.C.4.ii above, the Bureau does not 

believe that disclosure of action taken 

would permit the reverse-engineering of 

a financial institution’s proprietary 

lending models. 

The Bureau has not identified 

publicly available datasets that include 

data fields an adversary could directly 

match to data fields for denied 

applications (and reasons for denial) in 

unmodified form in the public 

application-level 1071 data with respect 

to an applicant or related natural 

person. However, at a category level, 

these data fields could tell adversaries 

which records it may be possible to 

match against other databases that 

include originated loans, as opposed to 

unoriginated loan records that cannot be 

matched in this way. Credit denials or 

credit offered but not originated are 

generally not disclosed to the public. 

Specifically, most of these data fields 

included in this data point are not 

found in publicly available sources of 

records that contain the identity of an 

applicant; the only data field that would 

be consistently available would be for 

originated loans. Without such an 

identified publicly available record to 

match with, there would likely be 

difficulty in attempting to re-identify an 

applicant by matching a 1071 record 

using these data fields. 

However, as discussed under ReIdentification Risk in part VI.C.4.i 

above, adversaries may be able to use 

other data fields, such as census tract, 

NAICS code, and identified public 

information, such as business 

directories, to determine the identity of 

an applicant or related natural person. 

Thus, if applicants and related natural 

persons could be re-identified, an 

adversary could learn information about 

application denials for these businesses 

and use this information for a variety of 

purposes. 

The Bureau seeks comment on this 

analysis. In light of the potential harm 

or sensitivity arising from the disclosure 

of application denials and the reasons 

for denial, the Bureau seeks comment 

on whether there are specific 

modifications it should consider, and 

whether modifying these data fields by 

grouping them, or deleting these data 

fields, would appropriately balance the 

privacy risks and benefits of disclosure, 

in light of the purposes of section 1071. 

ix. Action Taken Date 

Proposed § 1002.107(a)(10) would 

require financial institutions to collect 

and report the date of the action taken 

by the financial institution. 

Disclosing action taken date in the 

public application-level 1071 data in 

unmodified form would allow data 

users to monitor trends over time in 

small business lending more precisely 

than they could if only the year were 

disclosed.839 When combined with 

application date, information about the 

date of action taken would enable data 

users to determine the length of time, 

for different groups, between when 

businesses applied for credit and when 

they received the credit decision. This 

information would have benefits for fair 

lending analysis, allowing data users to 

determine whether certain groups 

experience different processing times 

(for example, longer processing for 

women-owned business, or faster 

denials for minority-owned businesses). 

The action taken date also would help 

ensure that users evaluating potential 

disparities in pricing or other terms and 

conditions can compare applicants that 

obtained loans on similar dates, thereby 

controlling for factors that might 

provide a legitimate explanation for 

some disparities, such as different 

market interest rates or different 

institutional practices over different 

time periods. 

Disclosing action taken date in the 

1071 data in unmodified form would 

likely disclose minimal, if any, 

information about an applicant or 

related natural person that may be 

harmful or sensitive if such person were 

re-identified, or that may be harmful or 

sensitive to an identified financial 

institution. 

The Bureau has identified publicly 

available datasets that include data 

fields an adversary could directly match 

to the action taken date data field in 

unmodified form in the public 

application-level 1071 data with respect 

to an applicant or related natural 

person. Public availability of the action 

taken date depends on the type of action 

taken. For example, the approval date of 

originated loans is widely publicly 

available in SBA 7(a), 504, and other 

program loan-level records that identify 

borrowers, and the date of executed 

agreements is often available for 

property records and UCC filings, which 

could be closely related to action taken 

date. For originated loans, action taken 

date would substantially facilitate 

matching with publicly available 

datasets that identify borrowers. 

Additionally, the 1071 data could 

identify the lender as well as the 

application date and action taken date. 

Where action taken date is on or near 

the UCC filing date, for example, an 

adversary might be able to use the date 

and lender on the UCC filings to 

identify the borrowers of originated 

loans in the eventual 1071 data. Action 

taken date may be less useful in reidentifying applicants of loans that were 

not originated because the action taken 

date for such loans is rarely publicly 

available. 

If the Bureau determined that action 

taken date should be modified, the 

Bureau may consider disclosing the date 

at a higher level; for example, disclosing 

the month in which action was taken, 

but not the specific date. This could 

reduce the re-identification risk from 

sources such as UCC filings that may 

include the specific date of action taken. 

In light of the potential re-identification 

risk arising from this data field, the 

Bureau seeks comment on whether there 

are other specific modifications it 

should consider and whether deletion 

would balance the risks and benefits of 

disclosure. 

The Bureau seeks comment on this 

analysis. 

x. Pricing Information 

Proposed § 1002.107(a)(12) would 

require financial institutions to collect 

and report to the Bureau the following 


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Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56531 

840 If the interest rate is fixed, the proposal would 

require the financial institution to report the 

interest rate that is or would be applicable to the 

covered credit transaction. If the interest rate is 

adjustable, the proposal would require the financial 

institution to report the margin, index value, and 

index name that is or would be applicable to the 

covered credit transaction at origination. The 

proposal would also require the financial 

institution to report the index used by selecting the 

index used from a specified list. If the index used 

does not appear on the list of indices provided, the 

financial institution would report ‘‘other’’ and 

provide the name of the index as free-form text. The 

Bureau analyzes free-form text under the proposed 

balancing test in part VI.C.6.xix below. 

841The proposal would require the financial 

institution to report whether the financial 

institution could have included a charge to be 

imposed for paying all or part of the transaction’s 

principal before the date on which the principal is 

due under the policies and procedures applicable 

to the covered credit transaction. The proposal also 

would require the financial institution to report 

whether the terms of the covered credit transaction 

include a charge imposed for paying all or part of 

the transaction’s principal before the date on which 

the principal is due. 

information regarding the pricing of a 

covered credit transaction that is 

originated or approved but not accepted, 

as applicable: (i) The interest rate; 840 (ii) 

total origination charges, defined as the 

total amount of all charges payable 

directly or indirectly by the applicant 

and imposed directly or indirectly by 

the financial institution at or before 

origination as an incident to or a 

condition of the extension of credit; (iii) 

broker fees, defined as the total amount 

of all origination charges that are fees 

paid by the applicant directly to a 

broker or to the financial institution for 

delivery to a broker; (iv) initial annual 

charges, defined as the total amount of 

all non-interest charges that are 

scheduled to be imposed over the first 

annual period of the covered credit 

transaction; (v) additional costs for 

merchant cash advances or other salesbased financing, defined as, for a 

merchant cash advance or other salesbased financing transaction, the 

difference between the amount 

advanced and the amount to be repaid; 

and (vi) prepayment penalties.841

The Bureau believes that these pricing 

data fields would serve to further both 

the fair lending purpose and the 

business and community development 

purpose of section 1071. The statutory 

data points alone offer limited insight 

into underwriting disparities and no 

insight into predatory prices or pricing 

disparities. For example, the statutory 

data points alone might show that a 

particular market segment is expanding 

and apparently filling an important 

need, but this could actually be an area 

with predatory conduct. Pricing 

information would allow the Bureau 

and others to understand the situation 

more accurately. Data collection without 

pricing information could have the 

unintended consequence of 

incentivizing irresponsible lending, as 

providers seeking to increase 

representation of underserved groups 

could be encouraged to adopt high-cost 

models of lending. 

Without information on pricing, data 

users would be unable to screen for fair 

lending pricing risks and prioritize fair 

lending enforcement resources. In 

addition, if potential discriminatory 

conduct is monitored effectively with 

regard to loan approvals, but not with 

regard to pricing, industry compliance 

systems may focus solely on approvals 

and denials and ignore potential pricing 

disparities. Having pricing data 

available in the public application-level 

1071 data would also increase 

transparency and demonstrate to 

responsible lenders where business 

opportunities exist to offer credit to 

underserved markets. Pricing data could 

also help small businesses identify 

where credit may be available on better 

terms. The Bureau provides additional 

analysis of the benefits of the pricing 

data fields in the section-by-section 

analysis of proposed § 1002.107(a)(12) 

above, including proposed 

§ 1002.107(a)(12)(i) through (vi). 

During the SBREFA process, several 

industry commenters expressed concern 

that pricing data could lead financial 

institutions to artificially flatten prices 

or create misperceptions about 

disparities among applicants, in light of 

the complexity of underwriting 

decisions. One industry commenter 

stated that pricing data could present 

‘‘privacy risk’’ to applicants in rural 

communities, without specifying the 

nature of the risk. Several SERs stated 

that pricing data may be sensitive to 

financial institutions. One of these SERs 

suggested that even aggregate pricing 

information would be commercially 

sensitive data for a financial institution. 

While acknowledging other SERs’ 

concerns, a few SERs stated that 

information on competitors’ pricing is 

relatively easy to obtain now. 

The Bureau believes that information 

about the interest rates and fees charged 

in connection with credit represents 

basic information about the features of 

a product generally would present low 

risk of harm or sensitivity. Disclosure of 

pricing data in unmodified form may 

reveal information that some applicants 

or related natural persons may regard as 

harmful or sensitive, such as a reflection 

of their perceived credit risk. However, 

the Bureau received feedback during the 

SBREFA process that multiple factors 

contribute to pricing for small business 

credit. Disclosure of pricing data in 

unmodified form may also reveal 

information that financial institutions 

regard as harmful or sensitive, such as 

the prices a financial institution charges 

for certain types of credit. However, as 

discussed under Risk of Harm or 

Sensitivity in part VI.C.4.ii above, the 

Bureau does not believe that disclosure 

of pricing information would permit the 

reverse-engineering of a financial 

institution’s proprietary lending models. 

The Bureau has identified publicly 

available datasets that include data 

fields an adversary could directly match 

to the pricing data fields in unmodified 

form in the public application-level 

1071 data with respect to an applicant 

or related natural person. Identified data 

about the interest rate and fees charged 

for a given loan are available from a 

limited number of publicly available 

datasets, such as data for the SBA 7(a) 

and 504 programs. Additionally, the 

PPP loan program has a uniform 1 

percent interest rate. 

During the SBREFA process, one 

industry stakeholder stated that, if 

pricing data are collected, the Bureau 

should publish them along with 

demographic information only in 

aggregate form, such as at an industry or 

multi-firm level, rather than the 

application level. The commenter stated 

that publication of pricing information 

along with demographic information 

risks creating the perception of potential 

fair lending violations that are not based 

on adequate analysis. The Bureau notes 

that 1071 data alone (including pricing 

data) generally could not be used to 

determine whether a lender is 

complying with fair lending laws. For 

example, HMDA data have a long 

history of utility for fair lending 

purposes even though they alone 

generally do not offer proof of 

compliance with fair lending laws. 

Additionally, in the section-by-section 

analysis of proposed § 1002.107(a)(12) 

above, the Bureau seeks comment on 

additional information that could help 

reduce misinterpretations of disparities 

in pricing, including modifications to 

the pricing information under proposed 

§ 1002.107(a)(12). 

If the Bureau determines that pricing 

data should be modified, the Bureau 

may consider recoding the pricing 

information data fields into bins. For 

example, the Bureau may consider 

recoding interest rates into bins of 0.25 

percentage points or origination fees 

into bins of $500. The Bureau may also 

consider top-coding pricing data fields, 

which would mask particularly high 

values. 

The Bureau seeks comment on this 

analysis. 


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842See SBREFA Panel Report at 34–35. 

843See U.S. Census Bureau, 2010 Census Tallies, 

https://www.census.gov/geographies/referencexi. Census Tract 

Proposed § 1002.107(a)(13) would 

require financial institutions to collect 

and report the census tract in which is 

located: (1) The address or location 

where the proceeds of the credit applied 

for or originated will be or would have 

been principally applied; or, (2) if this 

information is unknown, the address or 

location of the main office or 

headquarters of the applicant; or, (3) if 

this information is also unknown, 

another address or location associated 

with the applicant. In addition to 

reporting the census tract, the financial 

institution would be required to 

indicate which one of these three types 

of addresses or locations the census 

tract is based on. 

Disclosing census tract data in the 

public application-level 1071 data in 

unmodified form would aid in fulfilling 

both the fair lending and business and 

community development purposes of 

section 1071 by providing more useful 

information on the location of the credit 

activity for fair lending analysis and 

understanding where the business and 

community development is occurring. 

With respect to fair lending 

enforcement, a measure of geography at 

the neighborhood or community level is 

necessary to identify redlining—the 

illegal practice in which those in a 

certain area or neighborhood are denied 

access to credit, are charged higher 

prices, or are otherwise not given the 

same access to credit as those in other 

areas, on the basis of race or for some 

other prohibited reason. Additionally, 

because differences in the level of 

competition in the local credit market 

may contribute to differences in interest 

rates or approval rates for otherwise 

similarly situated small businesses, 

census tract data would help ensure that 

users can compare applicants with 

similar profiles, thereby controlling for 

factors that might provide nondiscriminatory explanations for some 

disparities in credit and pricing 

decisions. 

The inclusion of a geographic 

indicator, such as census tract, that 

identifies the appropriate community— 

not merely the appropriate county or 

State—would further the statute’s 

community and business development 

purposes. Census tract data would 

enable data users to monitor credit 

conditions in particular communities 

and identify communities that are 

underserved by the small business 

credit market. In addition, requiring 

data on the nature of the address 

reported would aid in fulfilling both the 

fair lending and business and 

community development purposes of 

section 1071 by facilitating accurate 

analyses of the data reported. 

Disclosing the census tract in the 1071 

data in unmodified form would likely 

disclose minimal, if any, information 

about an applicant or related natural 

person that may be harmful or sensitive 

if such person were re-identified, or that 

may be harmful or sensitive to an 

identified financial institution. The 

Bureau is aware that, for sole 

proprietors, the main office address of 

small business applicants is frequently 

a home address. However, the actual 

street address would not be reported or 

disclosed. In addition, small businesses 

commonly make their locations 

available in the normal course of their 

business by disclosing their addresses. 

If the address reflects where the 

proceeds of the credit will be or would 

have been principally applied, 

disclosing the census tract may reveal 

some information about an applicant’s 

business strategy, particularly if paired 

with the loan purpose data field. For 

example, the data could indicate that a 

small business is pursuing or was 

pursuing an expansion to a particular 

address. However, the value of this 

information to a small business’s 

competitors is likely to be mitigated by 

the delay between the date of action 

taken on a loan and the publication of 

the application-level 1071 data. 

Disclosure of the census tract in 

unmodified form may also reveal 

information that financial institutions 

regard as harmful or sensitive, such as 

a financial institution’s trade area. 

However, as discussed under Risk of 

Harm or Sensitivity in part VI.C.4.ii 

above, the Bureau does not believe that 

disclosure would permit the reverseengineering of a financial institution’s 

proprietary lending models. 

During the SBREFA process, several 

industry stakeholders stated that 

geographic identifiers such as census 

tract would have a high potential to 

contribute to the re-identification of 

businesses or natural persons, especially 

in small towns or rural areas, where 

only one or two businesses may be 

located in a census tract. Several 

industry commenters expressed concern 

about re-identification risks arising from 

the combination of the census tract data 

fields with other data fields, noting that 

it might be difficult to predict which 

data fields could contribute to reidentification. One commenter stated 

that tax assessor and UCC records could 

be used to re-identify businesses in rural 

areas, and that adversaries with 

personal knowledge of businesses in 

rural areas could learn about a 

business’s or natural person’s sensitive 

financial characteristics. Some SERs 

stated that the combination of 

geographic identifiers and information 

about a small business’s industry could 

make it easy to re-identify businesses in 

remote or rural areas.842 Two industry 

stakeholders stated that census tract and 

data about the type and purpose of 

financing would contribute to the reidentification of businesses or natural 

persons. One of these commenters also 

stated that combining geographic 

identifiers with data on the amount 

applied for or approved could 

contribute to re-identification. One 

industry commenter stated that census 

tract, combined with gross annual 

revenue and NAICS code, could 

facilitate re-identification of applicants 

in areas with low populations. A 

community group stakeholder stated 

that increasing the universe of financial 

institutions reporting 1071 data would 

mitigate privacy concerns about 

disclosing census tract. 

The Bureau has identified publicly 

available datasets that include data 

fields an adversary could directly match 

to the census tract data field in 

unmodified form in the public 

application-level 1071 data with respect 

to an applicant or related natural 

person. The Bureau expects that, in 

most cases, the census tract that 

financial institutions would report to 

the Bureau would be based on the 

address or location of the main office or 

headquarters of the applicant, either 

because that is where the proceeds of 

the credit will be applied or because the 

financial institution does not know the 

location or address where the proceeds 

of the credit will be applied, but does 

know the main office or headquarters 

address. The Bureau believes that, for 

many small businesses, this address or 

location is likely to be publicly available 

on the internet from sources such as the 

business’s website and review websites. 

Information about a business’s location 

is also likely available from loan-level 

data for public loan programs as well as 

from private datasets, such as from data 

brokers. Therefore, in many cases, the 

Bureau believes an adversary could use 

the census tract data fields, combined 

with other fields, to match a section 

1071 record to an identified publicly 

available record. 

Disclosing the census tract is likely to 

produce unique instances in the data— 

particularly when combined with the 6- 

digit NAICS code, if the 6-digit NAICS 

code is disclosed in unmodified form. 

There are currently 73,057 census tracts 

and 1,057 6-digit NAICS codes,843


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Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56533 

files/time-series/geo/tallies.html (last visited Aug. 

23, 2021) (2010 Census Tallies) (number of census 

tracts); Off. of Mgmt. & Budget, North American 

Industry Classification System (NAICS) Updates for 

2022, 86 FR 35350, 35352 (July 2, 2021) (number 

of 6-digit NAICS codes). 844See 2010 Census Tallies. 

which produce over 77 million 

combinations. With so many possible 

combinations, there would likely be 

many instances in the 1071 data where 

the census tract and 6-digit NAICS code 

form a unique combination. Regarding 

the comment that increasing the 

universe of financial institutions 

reporting 1071 data would mitigate 

privacy concerns about disclosing 

census tract, the Bureau’s proposals 

regarding the coverage of the 1071 rule 

are addressed elsewhere in this 

proposed rule. 

During the SBREFA process, several 

commenters suggested ways the Bureau 

might modify census tract data to 

reduce privacy risk. Several industry 

commenters recommended that the 

Bureau disclose geographical data on 

the county or State level to reduce reidentification risk. One SER 

recommended the reporting of 

geographic data only at the State level 

or higher. The SER stated that even 

county-level data in some areas could 

potentially lead to re-identification of 

applicants or borrowers. 

A joint comment from a number of 

community groups recommended that 

the Bureau consider modifying data 

with a low number of observations in a 

census tract to be reported at the zip 

code or county level. One SER 

recommended that the Bureau establish 

a minimum sample size before 

publishing application-level data for 

some rural markets to avoid privacy 

risks. A community group stakeholder 

recommended masking techniques such 

as moving data from a census tract with 

few observations to a contiguous or 

nearby census tract. This commenter 

also recommended that the Bureau 

consider switching records for similarly 

situated applicants between nearby 

census tracts to make it impossible to 

reconnect individual applicants while 

preserving the benefits of the data. 

If the Bureau were to modify census 

tract, it might consider disclosing a 

broader location category, such as 

county or State. Census tracts are 

defined by the U.S. Census Bureau, and 

the next-largest geographic identifier in 

the Census Bureau’s hierarchy of 

geographic identifiers is county. The 

next-largest geographic identifier after 

county is State. While likely reducing 

re-identification risk substantially, 

disclosing the county or State instead of 

the census tract would also reduce the 

utility of the 1071 data. There are 73,057 

census tracts, as noted above, but only 

3,143 counties,844 suggesting a 

significant loss of geographic detail in 

modifying census tract. The Bureau 

could potentially use a geographic 

designation larger than census tract but 

smaller than county. However, since the 

use of Census Bureau-defined 

geographies is widespread, using 

modifications that already reflect 

standard Census Bureau-defined 

geographies significantly improves the 

utility of the data to data users. 

The Bureau seeks comment on this 

analysis. The Bureau seeks comment on 

how disclosing the county, State, or 

some other geographic identifier—rather 

than the census tract—would affect the 

benefits of disclosure, the potential for 

harm or sensitivity, and the potential for 

re-identification of applicants or related 

natural persons. 

xii. Gross Annual Revenue 

Proposed § 1002.107(a)(14) would 

require financial institutions to collect 

and report to the Bureau the gross 

annual revenue of the applicant for its 

preceding full fiscal year prior to when 

the information is collected. 

Disclosing gross annual revenue in 

the public application-level 1071 data in 

unmodified form would facilitate 

enforcement of fair lending laws. Many 

creditors use gross annual revenue to 

help define whether a business is a 

small business and set revenue 

thresholds for assigning risk. 

Information about gross annual revenue 

would help ensure that users who are 

evaluating potential disparities in 

underwriting or pricing can compare 

small businesses with similar revenues, 

thereby controlling for a factor that 

might provide a legitimate explanation 

for some disparities. Disclosing gross 

annual revenue would also be useful for 

identifying business and community 

development needs and opportunities of 

small businesses. And because gross 

annual revenue is often used as a proxy 

for the size of a small business, these 

data could allow users to determine the 

availability of credit for small 

businesses of various sizes—including 

the very smallest businesses, which may 

face unique challenges accessing credit. 

Disclosing gross annual revenue in 

the 1071 data in unmodified form 

would likely disclose information about 

an applicant or related natural person 

that may be harmful or sensitive if such 

person were re-identified. One SER 

stated during the SBREFA process that, 

in the case of sole proprietorships, gross 

annual revenue can serve as a proxy for 

the small business owner’s personal 

income. The Bureau believes that 

disclosing gross annual revenue in 

unmodified form would likely disclose 

sensitive information because it could 

reflect the financial condition of a small 

business or, where a small business is 

a sole proprietorship, a natural person. 

With respect to the risk of harm or 

sensitivity to financial institutions, 

other creditors might use gross annual 

revenue data to learn more about the 

types of small businesses with which 

their competitors do business. However, 

as discussed under Risk of Harm or 

Sensitivity in part VI.C.4.ii above, the 

Bureau does not believe that disclosure 

would permit the reverse-engineering of 

a financial institution’s proprietary 

lending models. 

Gross annual revenue data are likely 

to be of interest to potential adversaries. 

As described below, gross annual 

revenue data are not available on a 

widespread basis from identified public 

databases. Competitors of the small 

business, other commercial entities, 

creditors, researchers, or persons with 

criminal intent all may have an interest 

in using these data to monitor the size 

or performance of an applicant that may 

be a rival, partner, or target of inquiry, 

investigation, or illegal activity. 

The Bureau has identified publicly 

available datasets that include data 

fields an adversary could directly match 

to the gross annual revenue data field in 

unmodified form in the public 

application-level 1071 data with respect 

to an applicant or related natural 

person. Gross annual revenue data are 

available from private databases. Gross 

annual revenue data are also available 

from data for New York State’s womenand minority-owned business 

certification program, in which it is 

recoded into bins. However, these data 

are not available from identified public 

databases on a widespread basis. 

During the SBREFA process, a 

community group stakeholder 

recommended that the Bureau consider 

reporting gross annual revenue in 

categories rather than specific amounts. 

An industry commenter recommended 

that the Bureau delete gross annual 

revenue from the public applicationlevel 1071 data to protect the privacy of 

an applicant or related natural person. 

If the Bureau determines that gross 

annual revenue should be modified, the 

Bureau may consider recoding gross 

annual revenue data into bins by, for 

example, disclosing the data in ranges of 

$25,000. The Bureau may also consider 

top-coding gross annual revenue, which 

would mask particularly high values, 

thereby reducing the identifiability of 

application data from businesses with 

especially high gross annual revenue. 


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56534 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

845As discussed above in the section-by-section 

analysis of proposed § 1002.107(a)(15), the SBA 

customizes its size standards on an industry-byindustry basis using 1,057 6-digit NAICS codes. The 

first two digits of a NAICS code broadly capture the 

industry sector of a business. The third digit 

captures the industry’s subsector, the fourth 

captures the industry group, and the fifth captures 

the industry code. The NAICS code thus becomes 

more specific as digits increase and the 6-digit long 

code is the most specific. For example, NAICS code 

453910 describes a pet supply store, for which the 

2-digit industry sector is the 44–45 ‘‘Retail Trade’’ 

sector. See Small Bus. Admin., Table of Small 

Business Size Standards Matched to North 

American Industry Classification System Codes, 

https://www.sba.gov/sites/default/files/2019-08/ 

SBA%20Table%20of%20Size%20Standards_

Effective%20Aug%2019%2C%202019_Rev.pdf. 

846For example, a wide variety of businesses, 

including those providing car washes, footwear and 

leather goods repair, and nail salons all fall under 

the 2-digit sector code 81: Other Services (except 

Public Administration). 

847See 2010 Census Tallies (number of census 

tracts); Off. of Mgmt. & Budget, North American 

Industry Classification System (NAICS) Updates for 

2022, 86 FR 35350, 35352 (July 2, 2021) (number 

of 6-digit NAICS codes). 

848Off. of Mgmt. & Budget, North American 

Industry Classification System (NAICS) Updates for 

2022, 86 FR 35350, 35352 (July 2, 2021). 

The Bureau seeks comment on this 

analysis. 

xiii. NAICS Code 

Proposed § 1002.107(a)(15) would 

require financial institutions to collect 

and report to the Bureau a 6-digit North 

American Industry Classification 

System (NAICS) code appropriate for 

the applicant.845

Disclosing 6-digit NAICS codes in the 

public application-level 1071 data in 

unmodified form would be useful for 

identifying business and community 

development needs and opportunities of 

small businesses. Such business and 

community development needs and 

opportunities may differ widely based 

on industry, even controlling for other 

factors. For example, 6-digit NAICS 

codes would help data users understand 

how small businesses in different 

industries use credit as well as identify 

industries in which small businesses 

face challenges accessing credit. 

Furthermore, disclosing NAICS codes 

would provide for consistency and 

compatibility with other public datasets 

related to small business lending 

activity, which generally use NAICS 

codes. This ability to synthesize 1071 

data with other datasets would help the 

public use the data in ways that would 

advance both the fair lending and 

business and community development 

purposes of section 1071. 

Disclosing 6-digit NAICS codes in the 

1071 data in unmodified form would 

also facilitate enforcement of fair 

lending laws in other ways. Financial 

institutions often designate certain 

industries as high-risk, such as 

industries that have high rates of 

businesses leaving the market or that 

deal primarily in cash transactions. The 

6-digit NAICS codes would help ensure 

that users can compare applicants with 

similar profiles, thereby controlling for 

factors that might provide nondiscriminatory explanations for some 

disparities in credit and pricing 

decisions. The Bureau also believes that 

using the SBA’s 6-digit NAICS codes (as 

opposed to the 2-digit code) would 

enable the public to identify whether 

disparities arise at a sector level and 

would provide more specific 

information on the types of businesses 

that are accessing or struggling to access 

credit.846

Including 6-digit NAICS codes in the 

public application-level 1071 data in 

unmodified form by itself would likely 

disclose minimal, if any, information 

about an applicant or related natural 

person that may be harmful or sensitive 

if such person were re-identified, or that 

may be harmful or sensitive to an 

identified financial institution. The 6- 

digit NAICS codes are unlikely to be 

harmful or sensitive to a small business 

because information about a small 

business’s industry is likely to be 

apparent to anyone interacting with it. 

Disclosure of the 6-digit NAICS codes in 

unmodified form may reveal 

information that financial institutions 

regard as harmful or sensitive, such as 

the industries with which the financial 

institution does business. However, as 

discussed under Risk of Harm or 

Sensitivity in part VI.C.4.ii above, the 

Bureau does not believe that disclosure 

would permit the reverse-engineering of 

a financial institution’s proprietary 

lending models. 

During the SBREFA process, several 

industry commenters stated that NAICS 

codes would increase re-identification 

risk for small businesses, particularly in 

combination with geographic 

identifiers, such as census tract. The 

Bureau has identified publicly available 

datasets that include data fields an 

adversary could directly match to the 

NAICS code data field in unmodified 

form in the public application-level 

1071 data with respect to an applicant 

or related natural person. A business’s 

NAICS code is likely to be publicly 

available in loan-level data for public 

loan programs such as the 7(a), 8(a), or 

PPP programs and in private datasets. In 

addition, even where the specific 

NAICS code may not be publicly 

available, it could be derived with 

reasonable accuracy from other public 

information that is available for most 

businesses, such as business directories, 

a business’s website, or from personal 

observation by members of the 

community where a business is located. 

Therefore, in many cases, an adversary 

could use 6-digit NAICS codes, 

combined with other fields, to match a 

section 1071 record to an identified 

publicly available record. 

The 6-digit NAICS code data field is 

likely to produce unique instances in 

the data, especially when combined 

with census tract, if census tract is 

disclosed in unmodified form. There are 

currently 73,057 census tracts and 1,057 

6-digit NAICS codes,847 which produce 

over 77 million combinations. With so 

many possible combinations, there 

would likely be many instances in the 

1071 data where the census tract and 6- 

digit NAICS code form a unique 

combination. 

If the Bureau determines that the 6- 

digit NAICS code should be modified, 

the Bureau may consider disclosing 

NAICS codes at a higher level by 

disclosing the 2-digit, 3-digit, or 4-digit 

NAICS code instead of the 6-digit code. 

Disclosing NAICS code at a higher level 

would reduce re-identification risk but 

would also reduce the utility of the data. 

There are 1,057 6-digit NAICS codes, as 

noted above, but there are only 99 3- 

digit subsectors and 20 broad 2-digit 

sectors.848 As a result, disclosing NAICS 

code at a higher level would reduce the 

specificity of the information in the 

1071 data about the small business’s 

industry. 

The Bureau seeks comment on this 

analysis. The Bureau specifically seeks 

comment on how disclosing the 2-, 3-, 

or 4-digit NAICS code—rather than the 

6-digit NAICS code—would affect the 

benefits of disclosure, the potential 

harm and sensitivity, and potential for 

re-identification for this data field. 

xiv. Number of Workers 

Proposed § 1002.107(a)(16) would 

require financial institutions to collect 

and report to the Bureau the number of 

non-owners working for the applicant. 

Disclosing number of workers in the 

public application-level 1071 data in 

unmodified form would be useful for 

identifying business and community 

development needs and opportunities of 

small businesses. This information 

would give the public a greater 

understanding of how the business and 

community development needs and 

opportunities of small businesses may 

differ based on the number of workers. 

The number of workers would help the 

public understand, for example, the 

extent to which ‘‘non-employer’’ 

businesses, which do not have 


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Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56535 

849The commenter did not make clear whether it 

was referring to competitors of a small business or 

competitors of a financial institution. 

employees besides the owner, and 

‘‘microbusinesses,’’ which are typically 

defined as having fewer than 10 

employees, may face unique challenges 

accessing credit or may use credit in 

different ways. Identifying the number 

of workers would also allow data users 

to understand the number of jobs 

supported by loans to a business. 

Disclosing the number of workers would 

also advance the fair lending purpose of 

section 1071. This information would 

help ensure that users of the 1071 data 

who are evaluating potential disparities 

in underwriting or pricing can compare 

small businesses with a similar number 

of workers, thereby controlling for a 

factor that might provide a legitimate 

explanation for some disparities. 

Disclosing number of workers in the 

application-level 1071 data in 

unmodified form would likely disclose 

minimal, if any, information about an 

applicant or related natural person that 

may be harmful or sensitive if such 

person were re-identified, or that may 

be harmful or sensitive to an identified 

financial institution. Financial 

institutions may use data about the 

number of workers to learn more about 

the types of small businesses with 

which their competitors do business. 

However, as discussed under Risk of 

Harm or Sensitivity in part VI.C.4.ii 

above, the Bureau does not believe that 

disclosure would permit the reverseengineering of a financial institution’s 

proprietary lending models. 

Furthermore, information about the 

number of workers is also likely to be 

publicly available for many businesses. 

State registries of businesses may 

include information about a business’s 

number of workers. Private databases 

also commonly include this 

information, which is often verified by 

the business. Further, loan-level records 

from SBA loan programs include a field 

for the number of jobs supported by a 

loan, which in some instances may 

reflect the business’s number of 

workers. In the Bureau’s view, the 

public availability of this information 

decreases any potential sensitivity or 

harm of disclosing number of workers in 

the application-level 1071 data. At the 

same time, the Bureau believes that the 

utility of number of workers data in the 

public application-level 1071 data to 

potential adversaries would be low due 

to the widespread public availability of 

this information. 

The Bureau has identified publicly 

available datasets that include data 

fields an adversary could directly match 

to the number of workers data field in 

unmodified form in the public 

application-level 1071 data with respect 

to an applicant or related natural 

person. As noted above, information 

about a business’s number of workers is 

found in many publicly available 

datasets in which the business’s name is 

identified, including State business 

registries, commercial databases, and 

loan-level records from SBA loan 

programs. Therefore, in many cases, an 

adversary could use number of workers, 

combined with other fields, to match a 

section 1071 record to an identified 

publicly available record. Data on a 

business’s number of workers may 

easily produce unique combinations, 

particularly when combined with other 

data fields in the public applicationlevel 1071 data and particularly for 

businesses with higher numbers of 

workers, which are more likely to be 

unique in the dataset. 

If the Bureau determines that the 

number of workers data field should be 

modified, the Bureau may consider 

recoding the data into bins. The Bureau 

could also top-code number of workers, 

given that larger values in the 1071 data 

are more likely to be unique. 

The Bureau seeks comment on this 

analysis. 

xv. Time in Business 

Proposed § 1002.107(a)(17) would 

require financial institutions to collect 

and report to the Bureau the time the 

applicant has been in business, 

described in whole years, as relied on or 

collected by the financial institution. 

Disclosing time in business in the 

public application-level 1071 data in 

unmodified form would advance both 

the fair lending and business and 

community development purposes of 

section 1071. As discussed in greater 

detail above in the section-by-section 

analysis of proposed § 1002.107(a)(17), 

start-ups and new businesses play an 

important role in the business 

ecosystem, particularly with respect to 

job creation. Time in business data 

would allow data users to better identify 

the proportion of small businesses 

seeking credit that are start-ups or 

relatively new businesses, the types of 

credit that are offered and provided to 

start-ups and newer businesses, the 

geographic makeup of those businesses, 

the types of financial institutions that 

are reaching such businesses, and where 

communities might focus business 

development efforts. The data may also 

aid policymakers in addressing issues 

impacting the growth of small start-ups. 

The data, particularly as to unmet 

demand, could help interested financial 

institutions identify lending 

opportunities to reach more start-ups 

and new businesses, promoting both 

business and community development. 

Disclosing time in business would 

also facilitate the enforcement of fair 

lending laws. Because lenders generally 

perceive younger businesses as having 

higher credit risk, time in business data 

would help ensure that users can 

compare applicants with similar 

profiles, thereby controlling for factors 

that might provide non-discriminatory 

explanations for some disparities in 

credit and pricing decisions. 

Disclosing time in business in the 

1071 data in unmodified form would 

likely disclose minimal, if any, 

information about an applicant or 

related natural person that may be 

harmful or sensitive if such person were 

re-identified, or that may be harmful or 

sensitive to an identified financial 

institution. During the SBREFA process, 

one industry commenter recommended 

that the Bureau delete time in business 

from the public application-level 1071 

data, citing general concerns that the 

data field could facilitate reidentification and disclose previously 

non-public information to 

competitors.849 However, while 

financial institutions may use time in 

business data to learn more about the 

types of small businesses with which 

their competitors do business, the 

Bureau does not believe that disclosure 

would permit the reverse-engineering of 

a financial institution’s proprietary 

lending models, as discussed under Risk 

of Harm or Sensitivity in part VI.C.4.ii 

above. Information about time in 

business is also likely to be publicly 

available for many businesses. 

Businesses typically disclose their date 

of establishment in public registration 

filings. Many commercial databases also 

include this information. In the 

Bureau’s view, the existing public 

availability of this information 

decreases any potential harm or 

sensitivity of disclosing time in business 

in the public application-level 1071 

data. 

The Bureau has identified publicly 

available datasets that include data 

fields an adversary could directly match 

to the time in business data field in 

unmodified form in the public 

application-level 1071 data with respect 

to an applicant or related natural 

person. As noted above, information 

about time in business is found in many 

publicly available datasets, including 

State business registries and commercial 

databases. Therefore, in many cases, an 

adversary could use time in business, 

combined with other fields, to match a 

section 1071 record to an identified 


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56536 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

850The collection and reporting of women-owned 

and minority-owned business status is proposed to 

be based on applicants’ self-reporting and would 

rely on the meanings of ‘‘ownership’’ and ‘‘control’’ 

defined in the CDD rule. 

851Financial institutions would report ethnicity 

and race using the aggregate categories and 

disaggregated subcategories listed in proposed 

comments 107(a)(20)–5 and –6, respectively. 

Financial institutions would report sex as described 

in proposed comment 107(a)(20)–7, which 

prescribes that financial institutions shall report sex 

using the following categories: ‘‘Male,’’ ‘‘Female,’’ 

‘‘I prefer to self-describe’’ (with accompanying freeform text), and ‘‘I do not wish to provide this 

information.’’ The Bureau analyzes free-form text 

under the proposed balancing test in part VI.C.6.xix 

below. 

852Unless a financial institution is permitted to 

report ethnicity, race, and sex information based on 

previously provided data pursuant to proposed 

§ 1002.107(c)(2), a financial institution would be 

required to ask an applicant to report its principal 

owners’ ethnicity, race, and sex for each 

application. In certain situations, discussed in 

proposed comments 107(a)(20)–7 and –8 and in 

proposed appendix G, a financial institution may 

also be required to report the ethnicity and race of 

one or more principal owner(s) based on visual 

observation and/or surname. 

publicly available record. Time in 

business data may easily produce 

unique combinations, particularly when 

combined with other data fields in the 

public application-level 1071 data, and 

particularly for larger time in business 

values, which are more likely to be 

unique in the dataset. 

If the Bureau determines that the time 

in business data field should be 

modified, it may consider recoding time 

in business into bins—for example, 

using two- or five-year intervals—to 

reduce the identifiability of a specific 

length of time in business. The Bureau 

could also top-code time in business at 

a value such as 25 years, given that 

larger values are more likely to be 

unique. With regard to the industry 

commenter’s recommendation that the 

Bureau delete time in business from the 

public application-level 1071 data based 

on re-identification concerns, the 

Bureau’s determination about whether 

this field should be modified or deleted 

will be based on the re-identification 

analysis that it will conduct once it 

receives at least a full year of actual data 

reported by financial institutions. 

The Bureau seeks comment on this 

analysis. The Bureau specifically seeks 

comment on what intervals the Bureau 

should use if it were to recode time in 

business into bins and what value the 

Bureau should use if it were to top-code 

this data field. 

xvi. Minority-Owned Business Status 

and Women-Owned Business Status 

Proposed § 1002.107(a)(18) and (19) 

would require financial institutions to 

collect and report to the Bureau whether 

the applicant is a minority-owned 

business or a women-owned business 

and whether minority-owned business 

status or women-owned business status 

is being reported based on previously 

collected data pursuant to proposed 

§ 1002.107(c)(2).850

Disclosing women-owned and 

minority-owned business status in the 

public application-level 1071 data in 

unmodified form is central to furthering 

the fair lending purpose of section 1071 

and would promote the business and 

community development purpose of the 

statute by identifying opportunities for 

further development of women-owned 

and minority-owned small businesses. 

In fair lending analyses, knowing 

whether a business is women-owned or 

minority-owned would help data users 

identify potential discriminatory 

lending patterns. Publishing 

information on women-owned or 

minority-owned business status in the 

public application-level 1071 data 

would help data users examine and 

identify potential disparities in small 

business lending. For example, when 

combined with action taken, data users 

would be able to identify if womenowned and minority-owned small 

businesses are denied for credit at 

disproportionate rates. In addition, 

when combined with pricing 

information, data users would be able to 

identify if women-owned and minorityowned businesses are receiving credit at 

higher prices. Additionally, these data 

would allow communities, 

governmental entities, and creditors to 

determine areas where women-owned 

and minority-owned small businesses 

are underserved relative to other small 

businesses and to focus resources to 

identify business and community 

development opportunities for womenowned and minority-owned small 

businesses. Disclosing women-owned 

and minority-owned business status 

could also help communities, 

governmental entities, and creditors 

determine whether or not initiatives to 

increase access to credit for womenowned and minority-owned businesses 

are succeeding. 

Disclosing women-owned and 

minority-owned business status in the 

1071 data in unmodified form would 

likely disclose minimal, if any, 

information about an applicant or 

related natural person that may be 

harmful or sensitive if such person were 

re-identified, or that may be harmful or 

sensitive to an identified financial 

institution. While some applicants or 

related natural persons may regard this 

information as harmful or sensitive, the 

Bureau believes this information 

generally would present low risk of 

harm or sensitivity. The Bureau also 

believes that this information already 

may be available to the general public, 

as discussed in the paragraph below, 

and that this information would have 

relatively limited utility for adversaries 

if an applicant or related natural person 

were re-identified. 

However, in many cases, an adversary 

could use women-owned or minorityowned business status, in combination 

with other 1071 data, to match a section 

1071 record to an identified publicly 

available record. The Bureau has 

identified publicly available datasets 

that include data fields an adversary 

could directly match to the minority- or 

women-owned status data fields in 

unmodified form in the public 

application-level 1071 data with respect 

to an applicant or related natural 

person. Women-owned business status 

and minority-owned business status is 

likely to be publicly available for many 

businesses. Many businesses also 

publicly register or certify with the SBA 

or State or local authorities as a womenowned or minority-owned business to 

access government programs. For 

example, businesses are identified as 

woman or minority-owned in the public 

loan-level SBA 7(a) and PPP data, and 

demographic status indicators are 

available in loan-level 8(a) records. 

Additionally, businesses’ websites may 

have information about their owners 

that could be used to derive womenowned and minority-owned business 

status information. Private commercial 

databases also often contain this 

information, either imported from 

public records or estimated using 

software based on owner names (or 

both). 

The Bureau invites comment on this 

analysis. 

xvii. Ethnicity, Race, and Sex of 

Principal Owners and Number of 

Principal Owners 

Proposed § 1002.107(a)(20) would 

require financial institutions to collect 

and report to the Bureau the ethnicity, 

race, and sex of the applicant’s principal 

owner(s); 851 whether ethnicity and race 

are being collected by the financial 

institution on the basis of visual 

observation or surname; 852 and whether 

ethnicity, race, or sex are being reported 

based on previously collected data 

pursuant to proposed § 1002.107(c)(2). 

Unless a financial institution is 

permitted to report ethnicity, race, and 

sex information based on previously 

collected data pursuant to proposed 

§ 1002.107(c)(2), a financial institution 

must ask an applicant about its 

principal owners’ ethnicity, race, and 

sex for each application. A financial 

institution must permit an applicant to 


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853Regulation B generally prohibits a creditor 

from inquiring about such protected demographic 

information in connection with a credit transaction 

unless otherwise required by Regulation B, ECOA, 

or other State or Federal law, regulation, order, or 

agreement. See § 1002.5(a)(2). Relatedly, ECOA 

states that it is not discrimination for a financial 

institution to inquire about women-owned or 

minority-owned business status, or the race, sex, 

and ethnicity of principal owners pursuant to 

section 1071. 15 U.S.C. 1691(b). 

refuse to answer the financial 

institution’s inquiry and report its 

refusal to answer the inquiry, or its 

failure to respond to the inquiry. 

Disclosing the ethnicity, race, and sex 

of the applicant’s principal owner(s) in 

the public application-level 1071 data in 

unmodified form would be central to 

furthering the fair lending purpose of 

section 1071 and would promote the 

business and community development 

purpose of the statute by identifying 

opportunities for further development of 

women-owned and minority-owned 

small businesses. In fair lending 

analyses, data on the ethnicity, race, and 

sex of an applicant’s principal owner(s) 

would be used to identify potential risk 

of discrimination under fair lending 

laws. These data would be essential for 

this purpose when analyzed in 

conjunction with data fields such as 

action taken, credit amount approved or 

originated, and pricing. For example, 

when combined with the type of action 

taken, ethnicity, race, and sex data of an 

applicant’s principal owner(s) would 

help data users identify whether 

women-owned and minority-owned 

applicants are denied at higher rates on 

a prohibited basis. In addition, as 

discussed above with women-owned 

and minority-owned business status, 

when combined with pricing 

information, data on ethnicity, race, and 

sex of an applicant’s principal owner(s) 

would help data users identify if 

women-owned and minority-owned 

businesses are receiving credit at higher 

prices. In addition, because the Bureau 

is proposing to require that financial 

institutions report ethnicity and race 

using the aggregate categories and 

disaggregated subcategories listed in 

proposed comments 107(a)(20)–5 and 

–6, respectively, such data would enable 

data users to identify potential 

discrimination or challenges accessing 

credit by particular ethnic and racial 

minorities. 

Data on ethnicity, race, and sex of the 

applicant’s principal owner(s) would 

also be essential for the business and 

community development purpose of 

section 1071. These data would allow 

communities, governmental entities, 

and creditors to determine areas where 

women-owned and minority-owned 

small businesses are underserved 

relative to other small businesses. In 

addition, such demographic information 

about small business applicants would 

allow communities, governmental 

entities, and creditors to focus resources 

to identify business and community 

development opportunities for womenowned and minority-owned small 

businesses. For example, in conjunction 

with NAICS codes, these data would 

help data users identify challenges 

facing women-owned businesses and 

businesses owned by individuals from 

different ethnic and racial groups in 

particular industries. This information 

could also help communities and 

lenders focus investment and resources 

in traditionally underserved 

demographic groups. 

In general, disclosing the ethnicity, 

race, and sex of the applicant’s principal 

owner(s) in the 1071 data in unmodified 

form would likely disclose minimal, if 

any information about an applicant or 

related natural person that may be 

harmful or sensitive if such person were 

re-identified, or that may be harmful or 

sensitive to an identified financial 

institution. As noted similarly above for 

the data fields on women-owned and 

minority-owned business status, while 

some applicants or related natural 

persons may regard this information as 

harmful or sensitive, the Bureau 

believes this information generally 

would present low risk of harm or 

sensitivity. The Bureau also notes that 

this information may be already 

available to the general public, and that 

this information would have relatively 

limited utility for adversaries if an 

applicant or related natural person were 

re-identified. 

The Bureau has identified publicly 

available datasets that include data 

fields an adversary could directly match 

to the ethnicity, race, and sex of the 

applicant’s principal owner(s) data 

fields in unmodified form in the public 

application-level 1071 data with respect 

to an applicant or related natural 

person. Information about the ethnicity, 

race, and sex of the applicant’s principal 

owner(s) is available to the general 

public in some datasets.853 For example, 

certain State business registries, 

including those required to access 

women-owned and minority-owned 

business programs, provide this 

information. Other public record 

databases such as for SBA 8(a) and PPP 

loan programs also include ethnicity, 

race, and sex data alongside the 

borrower’s name. Private databases 

often include information about the 

owners of businesses, which can be 

used to estimate ethnicity, race, and sex 

based on owner name. Therefore, in 

many cases, an adversary could use the 

ethnicity, race, and sex of the 

applicant’s principal owner(s), 

combined with other fields, to directly 

or indirectly match a section 1071 

record to an identified publicly 

available record. 

As discussed in the section-by-section 

analysis of proposed § 1002.107(a)(20) 

in part V above, the Bureau is proposing 

that financial institutions would report 

sex as described in proposed comment 

107(a)(20)–7, which prescribes that 

financial institutions shall report sex 

using the following categories: ‘‘Male,’’ 

‘‘Female,’’ ‘‘I prefer to self-describe’’ 

(with accompanying free-form text), and 

‘‘I do not wish to provide this 

information.’’ As such, if finalized, the 

Bureau would permit an applicant to 

self-describe their sex by selecting ‘‘I 

prefer to self-describe’’ with using freefrom text. As discussed in part 

VI.C.6.xix below, the Bureau is 

proposing to delete free-form text from 

the public application-level 1071 data. 

However, the Bureau seeks comment on 

whether there are additional specific 

modifications it should consider with 

regard to applicants who choose to selfdescribe their sex. 

As discussed in the section-by-section 

analysis of proposed § 1002.107(a)(20) 

in part V above, the Bureau is seeking 

comment in this proposal about the 

reporting of sexual orientation and 

gender identity of principal owners— 

specifically, whether separate questions 

regarding sex, sexual orientation, and 

gender identity should be asked and, if 

so, what categories should be offered on 

the sample data collection form for use 

by applicants in responding to each 

question. The Bureau seeks comment on 

whether disclosing that one or more 

principal owners of an applicant has 

answered any of these questions, and 

how, could cause heightened sensitivity 

or risk of harm and whether there are 

specific modifications the Bureau 

should consider if such data points are 

included in the final rule. 

The Bureau seeks comment on this 

analysis. 

xviii. Financial Institution Identifying 

Information 

Proposed § 1002.109(b) would require 

a financial institution to provide the 

Bureau with certain information with its 

submission of its small business lending 

application register: (1) Its name; (2) its 

headquarters address; (3) the name and 

business contact information of a person 

who may be contacted with questions 

about the financial institution’s 

submission; (4) its Federal prudential 

regulator, if applicable; (5) its Federal 

Taxpayer Identification Number; (6) its 

LEI; (7) its RSSD ID, if applicable; (8) 


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56538 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

854Parent entity information would include the 

name of the immediate parent entity, the LEI of the 

immediate parent entity, if available, the RSSD ID 

number of the immediate parent entity, if available, 

the name of the top-holding parent entity, the LEI 

of the top-holding parent entity, if available, and 

the RSSD ID number of the top-holding parent 

entity, if available. 

855The list would include the following types: 

Bank or savings association, minority depository 

institution, credit union, nondepository institution, 

community development financial institution 

(CDFI), other nonprofit financial institution, Farm 

Credit System institution, government lender, 

commercial finance company, equipment finance 

company, industrial loan company, fintech, and 

‘‘other’’ (reported as free-form text). The Bureau 

analyzes free-form text under the proposed 

balancing test in part VI.C.6.xix below. 

856One industry commenter stated that financial 

institutions might respond to perceived 

reputational risks by eliminating certain product 

offerings or modifying underwriting practices in a 

way that reduces the overall diversity of small 

business products. 

857The FFIEC publishes transmittal sheet 

information, including LEI and Federal Taxpayer 

Identification number, on its website. Fed. Fin. 

Insts. Examination Council, Public Transmittal 

Sheet—Schema, https://ffiec.cfpb.gov/ 

documentation/2020/public-ts-schema/ (last visited 

July 23, 2021). 

858See SBREFA Panel Report at 34. 

parent entity information,854 if 

applicable; (9) the type of financial 

institution that it is, indicated by 

selecting the appropriate type or types 

of institution from the list provided or 

entering free-form text; 855 and (10) 

whether the financial institution is 

voluntarily reporting covered 

applications for covered credit 

transactions. 

Regulation C requires financial 

institutions to report similar 

information when submitting their loanlevel HMDA data. Regulation C also 

requires financial institutions to report 

the calendar year of submission and the 

total number of entries in their loanlevel HMDA data. Regulation C does not 

require financial institutions to submit 

their headquarters address, RSSD ID, or 

financial institution type or indicate 

whether they are reporting data 

voluntarily. With the exception of 

contact information for a person who 

can be reached about the financial 

institution’s submission, the 

information financial institutions are 

required to submit with their HMDA 

submissions under § 1003.5(a)(3) is 

publicly available through the FFIEC 

website. 

Financial institution identifying 

information other than individual 

contact information. For the reasons 

described below, the Bureau 

preliminarily determines that the 

privacy risks of disclosing the financial 

institution identifying information data 

fields in unmodified form, other than 

data fields containing the information 

for the financial institution’s point of 

contact for its 1071 data submission 

(i.e., the name and business contact 

information of a person who may be 

contacted with questions about the 

submission), would be justified by the 

benefits of disclosure for section 1071’s 

purposes. As such, the Bureau proposes 

to disclose such information to the 

public as reported, without 

modification. The Bureau seeks 

comment on this determination. 

Disclosing the financial institution 

identifying information, other than 

individual contact information, in the 

public application-level 1071 data in 

unmodified form would facilitate the 

enforcement of fair lending laws. The 

purposes of section 1071 in large part 

concern evaluating the practices of 

individual financial institutions and 

disclosing their identifying information 

allows the public to evaluate their 

lending practices. Identifying their 

Federal regulator would also facilitate 

fair lending enforcement by enabling the 

public to communicate with the 

regulator in connection with 

administrative enforcement of fair 

lending laws. Disclosing RSSD ID and 

parent institution information would 

enable the public to map corporate 

relationships for financial institutions, 

which is also important for fair lending 

enforcement. 

Disclosing financial institution 

identifying information, including 

financial institution type, would enable 

the public to evaluate which financial 

institutions are reaching underserved 

areas of the market and the extent to 

which different types of financing is 

available from different types of 

institutions. And as described more 

fully in the section-by-section analysis 

of proposed § 1002.109(b) above, 

financial institution identifying 

information would promote the fair 

lending and community and business 

development purposes of the statute by 

allowing users to identify financial 

institutions precisely and draw 

appropriate conclusions from the data. 

Several SERs and industry 

commenters expressed concern that 

disclosing financial institution 

identifying information would lead to 

frivolous litigation and unfounded 

reputational risks, and would increase 

the cost of credit or limit credit 

availability for small businesses.856

Disclosing financial institution 

identifying information in the 1071 data 

in unmodified form would likely 

disclose minimal, if any, information 

about an applicant or related natural 

person that may be harmful or sensitive 

if such person were re-identified. While 

some businesses might view their 

identification as an applicant as harmful 

or sensitive, the Bureau does not believe 

revealing the name of the financial 

institution would significantly increase 

such risks. In addition, this information 

is already largely available from other 

identified public records, such as UCC 

filings. For the same reason, the Bureau 

does not believe revealing the name of 

the financial institution would 

significantly increase risk of fraud or 

identity theft to businesses or related 

natural persons caused by adversaries 

impersonating the financial institution. 

Disclosing financial institution 

identifying information in the 1071 data 

in unmodified form would not, by itself, 

reveal information that is harmful or 

sensitive, given financial institutions’ 

commercial interests. Additionally, 

other public records, such as public 

HMDA data, tax records, and 

commercial databases disclose Federal 

Taxpayer Identification number, RSSD 

ID, and LEI.857 Disclosing financial 

institution identifying information in 

unmodified form may reveal 

information that financial institutions 

regard as harmful or sensitive, but, as 

discussed under Risk of Harm or 

Sensitivity in part VI.C.4.ii above, the 

Bureau does not believe that disclosure 

of the information in the public 

application-level 1071 data would 

permit the reverse-engineering of a 

financial institution’s proprietary 

lending models. The Bureau 

acknowledges, however, that this 

information could, in some 

circumstances, lead to reputational risks 

and increased costs for financial 

institutions, which might be passed on 

to their customers in the form of 

increased costs or decreased access to 

credit. 

Several SERs were concerned that 

publishing financial institution 

identifying information could increase 

re-identification risk of applicants and 

related natural persons.858 One industry 

stakeholder provided feedback that 

customers of captive wholesale finance 

companies with applicant bases limited 

to franchises or licensees of a particular 

distributor or manufacturer would face 

unique re-identification risks. The 

commenter explained that, in many 

instances, these applicants may be the 

financial institution’s only customer in 

a particular State, or one of only a very 

small number of customers in the State, 

heightening the privacy concerns for 

publication of data tied to these 

financial institutions. 

The Bureau has identified publicly 

available datasets that include data 

fields an adversary could directly match 


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859As discussed under Balancing Test Design in 

part VI.C.1 above, while the proposed balancing test 

would consider the risk of harm or sensitivity to 

financial institutions, it would not consider reidentification risk with respect to financial 

institutions because the statute contemplates the 

disclosure of their identity. 860See SBREFA Panel Report at 36. 

to financial institution identifying 

information data fields in unmodified 

form in the public application-level 

1071 data with respect to an applicant 

or related natural person. Other 

identified public records, such as UCC 

filings, disclose financial institution 

name. Therefore, in many cases, an 

adversary could use identifying 

financial institution data fields, 

combined with other 1071 data fields, to 

match a section 1071 record to an 

identified public record. Because the 

Bureau does not intend to perform a reidentification analysis of the 1071 data 

fields until 1071 data are reported, it has 

not determined the extent to which 

financial institution identifying 

information or other data fields could 

contribute to record uniqueness.859

With respect to concerns raised 

regarding captive wholesale finance 

companies, the Bureau acknowledges 

that financial institution identifying 

information in unmodified form in the 

public application-level 1071 data 

could, in combination with other data 

fields like census tract, NAICS codes, 

and credit type or purpose, facilitate reidentification of applicants that have a 

common name, without requiring that 

adversaries match 1071 records to other 

identified datasets. As discussed in the 

section-by-section analysis of proposed 

§ 1002.104(b) above, the Bureau 

proposes to exclude trade credit and 

other transactions from the scope of 

covered credit transactions. This might 

eliminate some transactions involving 

such lenders. The Bureau seeks 

comment on the circumstances under 

which a transaction involving a captive 

wholesale finance company would be 

covered by the proposal 

notwithstanding the exemption. 

To the extent there are such 

transactions, the Bureau seeks comment 

on the instances in which captive 

wholesale finance companies lend 

exclusively to businesses that are 

publicly branded in a way that can be 

easily matched to the identity of the 

financial institution. As discussed in the 

section-by-section analysis of proposed 

§ 1002.109(b) above, the Bureau also 

seeks comment on whether a final rule 

could include certain categories of 

financial institution types that would 

allow the Bureau to easily identify such 

financial institutions in the unmodified 

1071 dataset without an applicationlevel analysis. Finally, the Bureau seeks 

comment on whether there are 

particular modification techniques that 

would reduce re-identification risks and 

risks of harm or sensitivity for 

applicants and related natural persons 

who might be re-identified in the public 

application-level 1071 data. 

The Bureau has considered whether a 

modification of the 1071 data available 

to the public short of deleting financial 

institution identifying information 

(other than individual contact 

information) would appropriately 

balance identified privacy risks and 

disclosure benefits of this data field. 

Several SERs stated that a solution to 

their concerns about financial 

institution privacy would be for the 

Bureau not to release the names of 

financial institutions when publishing 

1071 data.860

The Bureau proposes to disclose 

financial institution identifying 

information, other than individual 

contact information, to the public as 

reported, without modification. The 

Bureau preliminarily determines that 

risks to privacy interests from the 

disclosure of this data field in 

unmodified form would be justified by 

the benefits of disclosure for section 

1071’s purposes. As described above, 

while the Bureau has not conducted a 

uniqueness analysis, it is very likely 

that disclosure of financial institution 

identifying information would 

substantially facilitate the reidentification of applicants or related 

natural persons. If such persons were reidentified, disclosure of other 1071 data 

fields would likely create a risk of harm 

or sensitivity. In addition, the disclosure 

of other proposed 1071 data fields in 

combination with identifying financial 

institution name likely would reveal 

information that may be harmful or 

sensitive to financial institutions. The 

Bureau nonetheless determines that 

these risks to privacy would be justified 

by the benefits of disclosure in light of 

section 1071’s purposes. 

The Bureau also seeks comment on 

this analysis and its proposal to disclose 

these fields without modification in the 

public application-level 1071 data. 

Individual contact information. 

Proposed § 1002.109(b)(1)(iii) would 

require financial institutions to report 

the name and business contact 

information of a person who may be 

contacted with questions about the 

financial institution’s submission. In 

contrast to the other financial institution 

identifying information described 

above, the Bureau preliminarily 

determines that the privacy risks of 

disclosure in unmodified form of this 

data field would not be justified by the 

benefits of disclosure for section 1071’s 

purposes. As such, the Bureau proposes 

to delete such information from the 

publicly available data. The Bureau 

seeks comment on this determination. 

Disclosing individual contact 

information in the public applicationlevel 1071 data in unmodified form 

would enable the public to contact 

natural persons at financial institutions 

about the technical aspects of a financial 

institution’s submission of applicationlevel data. However, the Bureau does 

not believe this would promote the fair 

lending or community or business 

development purposes of section 1071 

because the Bureau, not the general 

public, will coordinate with this person 

to ensure proper submission of data. 

Moreover, the person designated by the 

financial institution to respond to 

questions about the submission might 

not necessarily be designated by the 

financial institution for engaging with 

the general public. 

Disclosing individual contact 

information in the 1071 data in 

unmodified form would likely not 

disclose any information about an 

applicant or related natural person if 

such person were re-identified. 

However, disclosing the name and 

contact information of natural persons 

designated by the financial institution 

would disclose information that may be 

harmful or sensitive to identified 

financial institutions and its employees. 

Financial institutions have a legitimate 

interest in protecting the identities of 

their employees from the public, 

consistent with their job functions, and 

persons identified for purposes of 

questions about the financial 

institution’s submission to the Bureau 

might not necessarily be responsible for 

engaging with the general public. 

The Bureau has considered whether a 

modification of the 1071 data available 

to the public other than exclusion of 

individual contact information would 

appropriately balance identified privacy 

risks and disclosure benefits of this data 

field. Because disclosure of this data 

field in unmodified form would not 

promote the purposes of section 1071 

and would likely reveal information that 

would be harmful or sensitive to a 

financial institution and its employees, 

the Bureau does not believe there is a 

modification that would appropriately 

balance the privacy risks and disclosure 

benefits for this data field. Accordingly, 

the Bureau preliminarily determines 

that deleting individual contact 

information would appropriately 

balance the privacy risks and disclosure 

benefits of this data field. 


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861For example, the proposal would require 

financial institutions to report credit purpose by 

choosing one or more purposes from a specified list. 

Financial institutions selecting ‘‘other’’ would be 

required to report that other purpose as free-form 

text. 

862 12 U.S.C. 2801 et seq. 

863See generally White Paper. 

The Bureau seeks comment on this 

analysis as well as its proposed 

deletion. 

xix. Free-Form Text 

Proposed § 1002.107(a) would require 

financial institutions to use free-form 

text to report certain data fields where 

a financial institution reports 

information that is not included in a list 

of data fields provided. Under proposed 

§ 1002.107(a)(5), (6), (11), (12), and (20), 

free-form text could be used to report 

credit type (product and guarantee 

information); credit purpose; denial 

reasons; pricing (the interest rate index 

used); and ethnicity, race, and sex.861

Financial institutions also would have 

flexibility in describing identifying 

information that would be provided 

under proposed § 1002.109(b). Freeform text used to report ethnicity, race, 

and sex would be completed based on 

information provided by applicants; all 

other free-form text would be completed 

based on information provided by the 

financial institution. 

Free-form text would allow the 

reporting of any information, including 

information that may be harmful or 

sensitive to applicants, related natural 

persons, and possibly the interests of 

financial institutions. Such information 

might also create a significant risk of reidentification for applicants or related 

natural persons. Given the expected 

amount of 1071 data reported each year, 

it will not be feasible for the Bureau to 

review the free-form text submitted 

before publishing the application-level 

1071 data. The Bureau believes at this 

time that, under the balancing test, 

deleting free-form text from the public 

application-level 1071 data, other than 

with respect to the financial institution 

identifying information described in 

part VI.C.6.xviii above, would 

appropriately balance the benefits of 

disclosure with the risks to the privacy 

interests of applicants, related natural 

persons, and financial institutions. 

The Bureau seeks comment on this 

analysis as well as its proposed 

deletion. 

VII. Dodd-Frank Act Section 1022(b)(2) 

Analysis 

The Bureau is considering the 

potential benefits, costs, and impacts of 

the proposed rule. The Bureau requests 

comment on the preliminary discussion 

presented below, as well as submissions 

of additional data that could inform the 

Bureau’s consideration of the benefits, 

costs, and impacts of the proposed rule. 

In developing the proposed rule, the 

Bureau has consulted with or offered to 

consult with the prudential regulators 

(the Board of Governors of the Federal 

Reserve System, the Federal Deposit 

Insurance Corporation, the National 

Credit Union Administration, and the 

Office of the Comptroller of the 

Currency), the Department of 

Agriculture, the Department of Housing 

and Urban Development, the 

Department of Justice, the Department 

of the Treasury, the Economic 

Development Administration, the Farm 

Credit Administration, the Federal 

Trade Commission, the Financial 

Crimes Enforcement Network, the 

Minority Business Development 

Agency, and the Small Business 

Administration regarding, among other 

things, consistency with any prudential, 

market, or systemic objectives 

administered by such agencies. 

In the Dodd-Frank Act, which was 

enacted ‘‘[t]o promote the financial 

stability of the United States by 

improving accountability and 

transparency in the financial system,’’ 

Congress directed the Bureau to adopt 

regulations governing the collection of 

small business lending data. Under 

section 1071, covered financial 

institutions must compile, maintain, 

and submit certain specified data points 

regarding applications for credit for 

women-owned, minority-owned, and 

small businesses, along with ‘‘any 

additional data that the Bureau 

determines would aid in fulfilling the 

purposes of [section 1071].’’ Under the 

proposed rule, covered financial 

institutions would be required to collect 

and report the following data points: (1) 

A 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) NAICS code, (16) number 

of workers, (17) time in business, (18) 

minority-owned business status, (19) 

women-owned business status, (20) 

ethnicity, race, and sex of principal 

owners, and (21) the number of 

principal owners. 

Under the proposed rule, financial 

institutions would be required to report 

data on small business credit 

applications under section 1071 if they 

originated at least 25 covered credit 

transactions in each of the two 

preceding calendar years. The Bureau is 

proposing to define an application as an 

oral or written request for a covered 

credit transaction that is made in 

accordance with the procedures used by 

a financial institution for the type of 

credit requested, with some exceptions. 

The Bureau is proposing to define the 

term covered credit transaction as an 

extension of business credit that is not 

an excluded transaction. Loans, lines of 

credit, credit cards, and merchant cash 

advances (including such credit 

transactions for agricultural purposes 

and those that are also covered by 

HMDA 862 (that is, HMDA-reportable 

transactions)) would all fall within the 

transactional scope of this proposed 

rule. The Bureau is broadly proposing to 

not cover the following types of 

transactions: Factoring, leases, 

consumer-designated credit used for 

business purposes, credit secured by 

certain investment properties, trade 

credit, public utilities credit, securities 

credit, and incidental credit. 

Additionally, the Bureau is proposing 

that a business is a small business if and 

only if its gross annual revenue for its 

preceding fiscal year is $5 million or 

less. 

A. Statement of Need 

Congress directed the Bureau to adopt 

regulations governing the collection of 

small business lending data. 

Specifically, section 1071 of the DoddFrank Act amended ECOA to require 

financial institutions to compile, 

maintain, and submit to the Bureau 

certain data on applications for credit 

for women-owned, minority-owned, and 

small businesses. Congress enacted 

section 1071 for the purpose of 

facilitating enforcement of fair lending 

laws and enabling communities, 

governmental entities, and creditors to 

identify business and community 

development needs and opportunities of 

women-owned, minority-owned, and 

small businesses. The Bureau is issuing 

this proposed rule to implement the 

section 1071 mandate. 

Small businesses play a key role in 

fostering community development and 

fueling economic growth both 

nationally and in their local 

communities.863 However, 

comprehensive data on loans to small 

businesses currently are limited. The 

largest sources of information on 

lending by depository institutions are 

the FFIEC and NCUA Call Reports and 

reporting under the CRA. Under the 

FFIEC Call Report and CRA reporting 

regimes, small loans to businesses of 

any size are used in whole or in part as 

a proxy for loans to small businesses. 

The FFIEC Call Report captures banks’ 


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864See FFIEC Call Report at Schedule RC–C Part 

II. 

865See 2015 FFIEC CRA Guide at 11, 13. Small 

business loans are defined for CRA purposes as 

loans whose original amounts are $1 million or less 

and that were reported on the institution’s Call 

Report or Thrift Financial Report (TFR) as either 

‘‘Loans secured by nonfarm or nonresidential real 

estate’’ or ‘‘Commercial and industrial loans.’’ 

Small farm loans are defined for CRA purposes as 

loans whose origination amounts are $500,000 or 

less and were reported as either ‘‘Loans to finance 

agricultural production and other loans to farmers’’ 

or ‘‘Loans secured by farmland.’’ 

866See Nat’l Credit Union Admin., Call Report 

Form 5300 (June 2020), https://www.ncua.gov/files/ 

publications/regulations/form-5300-june-2020.pdf. 

and savings associations’ total 

outstanding number and amount of 

small loans to businesses (that is, loans 

originated under $1 million to 

businesses of any size; small loans to 

farms are those originated under 

$500,000) by institution.864 The CRA 

requires banks and savings associations 

with assets over a specified threshold 

(currently $1.305 billion) to report data 

on loans to businesses with origination 

amounts of $1 million or less; reporters 

are asked to indicate whether the 

borrower’s gross annual revenue is $1 

million or less, if they have that 

information.865 Under the CRA, banks 

and savings associations report 

aggregate numbers and values of 

originations at an institution level and 

at various geographic levels. The NCUA 

Call Report captures credit unions’ total 

originations, but not applications, on all 

loans over $50,000 to members for 

commercial purposes, regardless of any 

indicator about the business’s size.866

Some federally funded loan programs, 

such as the SBA’s 7(a) or 504 programs 

and the CDFI Fund require reporting of 

loan-level data, but only for loans that 

received support under those programs. 

Nondepository institutions do not report 

small business lending applications 

under any of these reporting regimes. 

There are no similar sources of 

information about lending to small 

businesses by nondepository 

institutions. 

There are also a variety of nongovernmental data sources, issued by 

both private and nonprofit entities, that 

cover small businesses and/or the small 

business financing market. These 

include datasets and surveys published 

by commercial data and analytics firms, 

credit reporting agencies, trade 

associations, community groups, and 

academic institutions. See part II.B for 

additional information on these sources. 

While these non-public sources of data 

on small businesses may provide a 

useful supplement to existing Federal 

sources of small business lending data, 

these private and nonprofit sources 

often do not have lending information, 

may rely on unverified research based 

on public internet sources, and/or 

narrowly limit use cases for parties 

accessing data. Further, commercial 

datasets are generally not free to public 

users and can be costly, raising equity 

issues for stakeholders who cannot 

afford access. 

Under the proposed rule, covered 

financial institutions would be required 

to compile, maintain, and submit data 

regarding the race, sex, and ethnicity of 

the principal owners of the business and 

whether a small business is womenowned or minority-owned. No other 

source of data comprehensively collects 

this type of demographic information on 

small business loan applications. 

Section 1071 requires financial 

institutions to report detailed 

application-level data to the Bureau, 

and to make it available to the public 

upon request. Such information will 

constitute a public good that illuminates 

the lending activities of financial 

institutions and the small business 

lending market in general. In particular, 

the public provision of application-level 

data will: (1) Provide small businesses 

and financial institutions with 

additional information to improve credit 

market outcomes and (2) allow members 

of the public, public officials, and other 

stakeholders to better assess compliance 

with antidiscrimination statutes. 

First, the data made public pursuant 

to the proposed rule will provide 

information that could help to improve 

credit outcomes in the small business 

lending market. As discussed above, 

market-wide data on small business 

credit transactions is currently limited. 

Neither the public nor private sectors 

provide extensive data on credit 

products or terms. Small business 

owners have access to very little 

information on typical rates or products 

offered by different lenders. As a result, 

small business owners are limited in 

their ability to shop for the credit 

product that best suits their needs at the 

best price. The information made public 

pursuant to the proposed rule will 

provide extensive data on product types 

and credit terms that community 

development groups or commercial 

services could use to provide better 

information to small businesses. For 

example, a commercial provider could 

provide small businesses with 

information on what products lenders 

typically offer and at what rates. These 

data will allow small business owners to 

more easily compare credit terms and 

evaluate credit alternatives. By engaging 

in more informed shopping, small 

business owners may achieve better 

credit outcomes. 

Furthermore, financial institutions 

can analyze data to understand small 

business lending market conditions and 

determine how best to provide credit to 

borrowers. However, financial 

institutions are not able to conduct very 

granular or comprehensive analyses 

because the data on small business 

lending are limited. The data made 

public pursuant to the proposed rule 

will allow financial institutions to better 

understand the demand for small 

business credit products and the 

conditions under which they are being 

supplied by other covered financial 

institutions. The data will help enable 

institutions to identify potentially 

profitable opportunities to extend 

credit. Small business owners, as a 

result, could benefit from increased 

credit availability. 

Second, while data made public 

pursuant to the proposed rule may not 

constitute conclusive evidence of credit 

discrimination on its own, the data will 

enable members of the public, 

regulators, and other stakeholders to 

better assess compliance with 

antidiscrimination statutes. 

Application-level data that include 

information on business owners’ race, 

sex, and ethnicity, as well as whether 

the business is women- or minorityowned, are necessary for the public to 

evaluate a lender’s practices for 

potential risks of violating 

antidiscrimination statutes. However, as 

described above, there are currently no 

application-level data comprehensive 

enough or that contain the required 

demographic information to enable the 

public to conduct these kinds of 

analyses. The data made public 

pursuant to the proposed rule will be 

comprehensive and contain the 

necessary data fields for such analysis. 

Users will be able to examine whether, 

for example, a lender denies 

applications from women- or minorityowned businesses at higher rates than 

those that are not or whether these 

businesses are charged higher prices. 

This kind of transparency can place 

appropriate pressure on lenders to 

ensure that there is equity in their credit 

provision. Additionally, data collected 

under the proposed rule will contain the 

data fields that allow users to conduct 

more accurate fair lending analyses by 

comparing applications for credit 

products with similar characteristics. 

B. Baseline for the Consideration of 

Costs and Benefits 

The Bureau has discretion in any 

rulemaking to choose an appropriate 

scope of consideration with respect to 

potential benefits and costs and an 

appropriate baseline. The Bureau 


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867See Letter from Leonard Kennedy, General 

Counsel, CFPB, to Chief Executive Officers of 

Financial Institutions under Section 1071 of the 

Dodd-Frank Act (Apr. 11, 2011), https://

files.consumerfinance.gov/f/2011/04/GC-letter-re1071.pdf. 

868 12 U.S.C. 5512(b)(2)(A). 

869 12 U.S.C. 5516. 

870 12 U.S.C. 5481(4) through (6). 

interpreted section 1071 to mean that 

obligations for financial institutions to 

collect, maintain, and submit data ‘‘do 

not arise until the Bureau issues 

implementing regulations and those 

regulations take effect.’’ 867 Accordingly, 

this analysis considers the benefits, 

costs, and impacts of the major 

provisions of the proposed rule against 

a pre-section 1071 rule baseline, i.e., the 

current state of the world before the 

Bureau’s section 1071 rule is 

implemented. Under this baseline, the 

Bureau assumes that institutions are 

complying with regulations that they are 

currently subject to, including reporting 

data under HMDA and CRA. The 

Bureau believes that such a baseline 

will also provide the public with better 

information about the benefits and costs 

of this rule. 

C. Basic Approach of the Bureau’s 

Consideration of Benefits and Costs and 

Data Limitations 

Pursuant to section 1022(b)(2)(A) of 

the Dodd-Frank Act,868 in prescribing a 

rule under the Federal consumer 

financial laws (which include ECOA 

and title X of the Dodd-Frank Act), the 

Bureau is required to consider the 

potential benefits and costs to 

‘‘consumers’’ and ‘‘covered persons,’’ 

including the potential reduction of 

access by consumers to consumer 

financial products or services resulting 

from such rule, and the impact of 

proposed rules on covered persons as 

described under section 1026 of the 

Dodd-Frank Act 869 (i.e., depository 

institutions and credit unions with $10 

billion or less in total assets), and the 

impact on consumers in rural areas. 

As mentioned above, section 

1022(b)(2)(A) refers to ‘‘consumers’’ and 

‘‘covered persons’’; the Dodd-Frank Act 

defines the term ‘‘consumer’’ as an 

individual or someone acting on behalf 

of an individual, while a ‘‘covered 

person’’ is one who engages in offering 

or providing a ‘‘consumer financial 

product or service,’’ which means a 

financial product or service that is 

provided to consumers primarily for 

‘‘personal, family, or household 

purposes.’’ 870 In the 1071 rulemaking, 

however, the only parties directly 

affected by the rule are small businesses 

(rather than individual consumers) and 

the financial institutions from whom 

they seek credit (rather than covered 

persons). Accordingly, a section 

1022(b)(2)(A) analysis that considers 

only the costs and benefits to individual 

consumers and to covered persons 

would not meaningfully capture the 

costs and benefits of the rule. 

Below, the Bureau conducts the 

statutorily required analysis with 

respect to the rule’s effects on 

consumers and covered persons. 

Additionally, the Bureau is electing to 

conduct this same analysis with respect 

to small businesses and the financial 

institutions required to compile, 

maintain, and submit data fields under 

the proposed rule. This discussion relies 

on data that the Bureau has obtained 

from industry, other regulatory agencies, 

and publicly available sources. 

However, as discussed further below, 

the data limit the Bureau’s ability to 

quantify the potential costs, benefits, 

and impacts of the proposed rule. 

1. Analysis With Respect to Consumers 

and Covered Persons 

The proposed rule implements a data 

collection regime in which certain 

covered financial institutions must 

compile, maintain, and submit data 

with respect to applicants for credit for 

small businesses. The rule does not 

directly impact consumers or consumers 

in rural areas, as those terms are defined 

by the Dodd-Frank Act. Some covered 

persons, including some that are 

depository institutions or credit unions 

with $10 billion or less in total assets, 

will be directly affected by the rule not 

in their capacity as covered persons (i.e., 

as offerors or providers of consumer 

financial products or services) but in 

their separate capacity as covered 

financial institutions that offer 

commercial credit. The costs, benefits, 

and impact of the rule on those entities 

are discussed below. 

2. Costs to Covered Financial 

Institutions 

Regarding the costs to covered 

financial institutions, the proposed rule 

generally establishes which financial 

institutions, transactions, and data 

points would be covered under section 

1071. In order to precisely quantify the 

costs to covered financial institutions, 

the Bureau would need representative 

data on the operational costs that 

financial institutions would incur to 

gather and report 1071 data, one-time 

costs for financial institutions to update 

or create reporting infrastructure in 

response to the proposed rule, and 

information on the level of complexity 

of financial institutions’ business 

models and compliance systems. 

Currently, the Bureau does not believe 

that data on section 1071 reporting costs 

with this level of granularity are 

systematically available from any 

source. The Bureau has made reasonable 

efforts to gather data on section 1071 

reporting costs. Through outreach 

efforts with industry, community 

groups, and other regulatory agencies, 

the Bureau has obtained some 

information about potential ongoing 

operational and one-time compliance 

costs, and the discussion below uses 

this information to quantify certain 

costs of the proposed rule. The Bureau 

believes that the discussion constitutes 

the most comprehensive assessment to 

date of the potential costs of section 

1071 reporting by financial institutions. 

However, the Bureau recognizes that 

these estimations may not fully quantify 

the costs to covered financial 

institutions, especially given the wide 

variation of section 1071 reporting costs 

among financial institutions. The 

Bureau continues to seek data from 

available sources in order to better 

quantify the costs to covered financial 

institutions. 

The Bureau categorizes costs required 

to comply with the proposed rule into 

‘‘one-time’’ and ‘‘ongoing’’ costs. ‘‘Onetime’’ costs refer to expenses that the 

financial institution would incur 

initially and only once to implement 

changes required in order to comply 

with the requirements of the new rule. 

‘‘Ongoing’’ costs are expenses incurred 

as a result of the ongoing reporting 

requirements of the rule, accrued on an 

annual basis. In considering the costs 

and impacts of the proposed rule, the 

Bureau has engaged in a series of efforts 

to estimate the cost of compliance by 

covered entities. The Bureau conducted 

a One-Time Cost Survey, discussed in 

more detail in part VII.E.1 below, to 

learn about the one-time 

implementation costs associated with 

implementing section 1071 and adapted 

ongoing cost calculations from previous 

rulemaking efforts. The Bureau 

evaluated the potential one-time costs of 

implementing the procedures necessary 

and the potential ongoing costs of 

annually reporting under the proposed 

rule in part VII.F.3 below. The 

discussion below provides details on 

the Bureau’s approach in performing 

these institution-level analyses. The 

Bureau realizes that costs vary by 

institution due to many factors, such as 

size, operational structure, and product 

complexity, and that this variance exists 

on a continuum that is impossible to 

fully represent. In order to conduct a 

cost consideration that is both practical 

and meaningful, the Bureau has chosen 

an approach that focuses on three 


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871The Bureau uses 2019 instead of 2020 to 

estimate coverage during a year unaffected by 

pandemic conditions. 

representative types of financial 

institutions. For each type, the Bureau 

has produced reasonable estimates of 

the costs of compliance given the 

limitations of the available data. Part 

VII.F.3 below provides additional 

details on this approach. More 

elaboration is available in the SBREFA 

Outline and the SBREFA Panel Report. 

3. Costs to Small Businesses 

The Bureau has estimated the costs to 

small businesses in addition to those for 

covered financial institutions. The 

Bureau expects the direct costs of the 

proposed rule to small businesses will 

be negligible, especially compared to 

the overall cost of credit. Therefore, the 

Bureau focuses its analysis on whether 

and how the Bureau expects financial 

institutions to pass on the costs of 

compliance with the proposed rule to 

small businesses and any possible 

effects on the availability of small 

business credit. According to economic 

theory, in a competitive framework 

where financial institutions are profit 

maximizers, the affected financial 

institutions would pass on to small 

business applicants the marginal (i.e., 

variable) cost per application or 

origination, and either absorb the onetime and increased fixed costs of 

complying with the rule or exit the 

market if the one-time and fixed costs 

are sufficiently high. As discussed 

below, the Bureau estimates that these 

costs would be relatively low. Further, 

the Bureau received feedback through 

the One-Time Cost Survey process on 

how creditors might react to increased 

compliance costs due to the proposed 

rule. The results generally suggest that 

covered financial institutions will 

generally pass the increased cost of 

compliance on to small businesses and 

would not exit the market. The Bureau 

received similar feedback during the 

SBREFA process. 

4. Benefits to Small Businesses and 

Covered Financial Institutions 

Quantifying benefits to small 

businesses presents substantial 

challenges. As discussed above, 

Congress enacted section 1071 for the 

purpose of facilitating enforcement of 

fair lending laws and enabling 

communities, governmental entities, 

and creditors to identify business and 

community development needs and 

opportunities of women-owned, 

minority-owned, and small businesses. 

The Bureau is unable to readily quantify 

any of these benefits with precision, 

both because the Bureau does not have 

the data to quantify all benefits and 

because the Bureau is not able to assess 

completely how effective the 

implementation of section 1071 will be 

in achieving those benefits. The Bureau 

believes that its proposals appropriately 

implement the statutory mandate of 

section 1071 to effectuate the section’s 

stated purposes. As discussed further 

below, as a data reporting rule, most 

provisions of the proposal would benefit 

small businesses in indirect ways. 

Nevertheless, the Bureau believes that 

the impact of enhanced transparency 

would substantially benefit small 

businesses. For example, the proposed 

rule would facilitate the detection (and 

thus remediation) of discrimination; 

promote public and private investment 

in certain under-served markets; and 

promote competitive markets. 

Quantifying and monetizing these 

benefits would require identifying all 

possible uses of section 1071 data, 

establishing causal links to the resulting 

public benefits, and then quantifying 

the magnitude of these benefits. The 

Bureau seeks comment on whether there 

are additional data sources available 

regarding the benefits to small 

businesses of the proposed rule. The 

Bureau is particularly interested in the 

quantifiable impact of increased 

transparency on financial institution 

behavior, and the need for public and 

private investment. The Bureau is 

unaware of data that would enable 

reliable quantitative estimates of all of 

these effects. 

Similar issues arise in attempting to 

quantify the benefits to covered 

financial institutions. Certain benefits to 

covered financial institutions are 

difficult to quantify. For example, the 

Bureau believes that the section 1071 

data will reduce the compliance burden 

of fair lending reviews for lower risk 

financial institutions by reducing the 

‘‘false positive’’ rates during fair lending 

prioritization by regulators. The Bureau 

also believes that data made public 

pursuant to the proposed rule will allow 

financial institutions to better 

understand the demand for small 

business credit products and the 

conditions under which they are being 

supplied by other covered financial 

institutions. The Bureau believes that 

such benefits to financial institutions 

could be substantial. Nevertheless, 

quantifying them would require data 

that are currently unavailable. 

In light of these data limitations, the 

discussion below generally provides a 

qualitative consideration of the benefits 

and impacts of the proposed rule. 

General economic principles, together 

with the limited data available, provide 

insight into these benefits and impacts. 

Where possible, the Bureau makes 

quantitative estimates based on these 

principles and the data that are 

available. The Bureau seeks comment 

on the appropriateness of the approach 

described above, including additional 

data relevant to the benefits to small 

businesses and covered financial 

institutions. 

D. Coverage of the Proposed Rule 

The proposed rule provides that 

financial institutions (both depository 

and nondepository) that meet all the 

other criteria for a ‘‘financial 

institution’’ in proposed § 1002.105(a) 

would only be required to collect and 

report section 1071 data if they 

originated at least 25 covered credit 

transactions in each of the two 

preceding calendar years. See proposed 

§ 1002.105(b). 

As discussed above, market-wide data 

on small business lending are currently 

limited. The Bureau is unaware of any 

comprehensive data available on 

originations for all financial institutions, 

which would be needed in order to 

precisely identify all institutions 

covered by the rule. To estimate 

coverage of the proposed rule, the 

Bureau uses publicly available data for 

two groups of financial institutions: 

Depository and nondepository 

institutions. 

To estimate coverage of depository 

institutions, the Bureau relies on NCUA 

Call Reports to estimate coverage for 

credit unions, including for those that 

are not federally insured, and FFIEC 

Call Reports and the CRA data to 

estimate coverage for banks and savings 

associations. For the purposes of the 

analysis in this part VII, the Bureau 

estimates the number of depository 

institutions that would have been 

required to report in 2019, based on the 

estimated number of originations of 

covered products for each institution in 

2017 and 2018.871 The Bureau accounts 

for mergers and acquisitions between 

2017 and 2019 by assuming that any 

depository institutions that merged in 

those years report as one institution. 

As discussed above, the NCUA Call 

Report captures data on all loans over 

$50,000 to members for commercial 

purposes, regardless of any indicator 

about the business’s size and including 

number and dollar value of originations. 

For the purposes of estimating the 

impacts of the proposed rule, the 

Bureau uses the annual number of 

originated commercial loans to members 

reported by credit unions as a proxy for 

the annual number of originated 

covered credit transactions under the 


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872For this analysis, the Bureau includes all types 

of commercial loans to members except 

construction and development loans. This includes 

loans secured by multifamily residential property; 

loans secured by farmland; loans secured by owneroccupied, non-farm, non-residential property; loans 

secured by non-owner occupied, non-farm, nonresidential property; loans to finance agricultural 

production and other loans to farmers; commercial 

and industrial loans; unsecured commercial loans; 

and unsecured revolving lines of credit for 

commercial purposes. 

873See Fed. Fin. Insts. Examination Council, 

Community Reinvestment Act, 2021 Reporting 

Criteria (Dec. 16, 2020), https://www.ffiec.gov/cra/ 

reporter21.htm. 

874The FFIEC Call Reports do not collect 

information on small loans to businesses made for 

the purposes of funding multifamily property. In 

order to account for these loans in the coverage 

estimates, for each bank or savings association, the 

Bureau adds the number of multifamily loans 

originated for business purposes with origination 

amounts under $1 million reported in the HMDA 

data to the estimated number of small business 

lending originations. While multifamily loans for 

business purposes have been reportable in HMDA 

data for some time, these loans have only been 

identifiable with data fields available since 2018. 

For simplicity, the Bureau assumes that a bank or 

savings association made the same number of 

multifamily loans for business purposes with 

origination amounts under $1 million in 2017 as it 

did in 2018. 

875Based on FFIEC Call Report data as of 

December 2019, of the 5,177 banks and savings 

associations that existed in 2019, only about 11 

percent were required to report under CRA. That is, 

only about 11 percent of banks and savings 

associations had assets below $1.284 billion, the 

CRA reporting threshold in 2019. See Fed. Fin. 

Insts. Examination Council, 2019 Reporting Criteria, 

https://www.ffiec.gov/cra/reporter19.htm (last 

visited Aug. 5, 2021). 

876This document is available at https://

www.consumerfinance.gov/data-research/researchreports/supplemental-estimation-methodologiessmall-business-lending-data-collection-nprm/. 

877The Bureau provides estimates for the majority 

of nondepository institutions but knows an exact 

number of members of the Farm Credit System. 

proposed rule.872 These are the best data 

available for estimating the number of 

credit unions that may be covered by 

the proposed rule. However, the Bureau 

acknowledges that the true number of 

covered credit unions may be different 

than what is presented here. For 

example, this proxy may overestimate 

the number of credit unions that would 

be covered if some commercial loans to 

members are not covered because the 

member is taking out a loan for a large 

business. Alternatively, this proxy may 

underestimate the number of credit 

unions that would be covered by the 

proposed rule if credit unions originate 

a substantial number of covered credit 

transactions with origination values 

under $50,000. 

As discussed above, the FFIEC Call 

Report captures banks’ and savings 

associations’ outstanding number and 

amount of small loans to businesses 

(i.e., loans originated under $1 million 

to businesses of any size; small loans to 

farms are those originated under 

$500,000). The CRA requires banks and 

savings associations with assets over a 

specified threshold ($1.322 billion as of 

2021) 873 to report loans to businesses in 

original amounts of $1 million or less. 

For the purposes of estimating the 

impacts of the proposed rule, the 

Bureau follows the convention of using 

small loans to businesses as a proxy for 

loans to small businesses and small 

loans to farms as a proxy for loans to 

small farms.874 These are the best data 

available for estimating the number of 

banks and savings associations that may 

be covered by the proposed rule. 

However, the Bureau acknowledges that 

the true number of covered banks and 

savings associations may be different 

than what is presented here. For 

example, this proxy would overestimate 

the number of banks and savings 

associations covered by the rule if a 

significant number of small loans to 

businesses and farms are to businesses 

or farms that are considered large under 

the definition of a small business in the 

proposed rule. Alternatively, this proxy 

would underestimate the number of 

banks and savings associations covered 

by the rule if a significant number of 

businesses and farms that are small 

under the proposed rule take out loans 

that are larger than $1 million or 

$500,000, for businesses and farms, 

respectively. 

Although banks and savings 

associations reporting under the CRA 

are required to report the number of 

originations of small loans to businesses 

and farms, the Bureau is not aware of 

any comprehensive dataset that contains 

originations made by banks and savings 

associations below the CRA reporting 

threshold. To fill this gap, the Bureau 

simulated plausible values for the 

annual number and dollar value of 

originations for each bank and savings 

association that falls below the CRA 

reporting threshold for 2017, 2018, and 

2019.875 The Bureau generated 

simulated originations in order to 

account for the uncertainty around the 

exact number and value of originations 

for these banks and saving associations. 

To simulate these values, the Bureau 

assumes that these banks have the same 

relationship between outstanding and 

originated small loans to businesses and 

farms as banks and savings associations 

above the CRA reporting threshold. 

First, the Bureau estimated the 

relationship between originated and 

outstanding numbers and balances of 

small loans to businesses and farms for 

CRA reporters. Then the Bureau used 

this estimate, together with the 

outstanding numbers and balances of 

small loans to businesses and farms of 

non-CRA reporters, to simulate these 

plausible values of originations. The 

Bureau has documented this 

methodology in more detail in its 

Supplemental estimation methodology 

for institutional coverage and marketlevel cost estimates in the small 

business lending data collection notice 

of proposed rulemaking released 

concurrently with this proposal.876

Below, the Bureau reports a range of 

values for the estimated number of 

depository institutions covered under 

the proposed rule. The range represents 

a 95 percent confidence interval over 

the number of credit unions, banks and 

savings associations that would be 

covered under the proposed rule. The 

Bureau presents this range to reflect the 

uncertainty associated with the estimate 

and notes that the uncertainty is driven 

by the lack of data on originations by 

banks and savings associations below 

the CRA reporting threshold. 

The Bureau estimates that about 992 

nondepository institutions will be 

covered by the proposed rule: About 

340 nondepository CDFIs; about 100 

MCA providers; about 30 fintech 

companies; about 300 commercial 

finance companies; about 100 

governmental lending entities; about 50 

nondepository mortgage providers; and 

72 Farm Credit System members.877 See 

part II.D above for more detail on how 

the Bureau arrived at these estimates. 

Based on 2019 data from FFIEC and 

NCUA Call Reports and the CRA data, 

using the methodology described above, 

the Bureau estimates that the number of 

depository institutions that would be 

required to report under the proposed 

rule would be between approximately 

4,000 and 4,200. The Bureau estimates 

that between 3,600 and 3,800 banks and 

savings associations and about 400 

credit unions would be required to 

report under the proposed rule. 

The Bureau has attempted to use the 

best available data and methods to 

estimate the number of financial 

institutions that would be covered by 

the proposed rule. The Bureau seeks 

comment on whether there are 

additional data sources that could 

provide better estimates of coverage. 

The Bureau also seeks comment on its 

Supplemental estimation methodology 

for institutional coverage and marketlevel cost estimates in the small 

business lending data collection notice 

of proposed rulemaking describing the 

methods used to estimate coverage. 


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878Home Mortgage Disclosure (Regulation C), 80 

FR 66128, 66269 (Oct. 28, 2015). 

879For example, the Bureau assumes that 

financial institutions will integrate their small 

business data management system with their other 

data systems the same way that similar institutions 

integrated their HMDA management system. 880 80 FR 66128, 66269 (Oct. 28, 2015). 

E. Methodology for Generating Cost 

Estimates 

The Bureau used previous HMDA 

rulemaking estimates as the basis for its 

review of 1071 data collection and 

reporting tasks that would impose onetime and ongoing costs. In developing 

its ongoing cost methodology to 

estimate the impacts of its 2015 HMDA 

final rule, the Bureau used interviews 

with financial institutions to understand 

the processes of complying with a 

regulation that requires collecting and 

reporting credit application data and to 

generate estimates of how changes to the 

reporting requirements would impact 

the ongoing costs of collecting and 

reporting mortgage application data.878

To analyze the potential impacts of this 

proposed rule, the Bureau adapted its 

methodology from its HMDA 

rulemaking activities to the small 

business lending market. 

The Bureau expects that the tasks 

required for data collection, checking 

for accuracy, and reporting under the 

proposed rule would be similar to those 

under HMDA. The similarities in data 

collection and reporting tasks allowed 

the Bureau to leverage its previous 

rulemaking experience in its analysis of 

the potential impacts of this proposed 

rule. 

However, there are significant 

differences between the home mortgage 

and small business lending market. For 

example, small business lending is 

generally less automated, and has a 

wider variety of products, smaller 

volumes, and smaller credit amounts. 

The Bureau used the SBREFA process, 

research using publicly available 

information, and the Bureau’s general 

expertise regarding the small business 

lending market to determine how these 

differences would change the tasks 

required for data collection, checking 

for accuracy, and reporting. 

During the HMDA rulemaking 

process, the Bureau identified seven key 

aspects or dimensions of compliance 

costs with a data collection and 

reporting rule: (1) The reporting system 

used; (2) the degree of system 

integration; (3) the degree of system 

automation; (4) the tools for geocoding; 

(5) the tools for performing 

completeness checks; (6) the tools for 

performing edits; and (7) the 

compliance program. The Bureau 

assumes that financial institutions will 

set up their 1071 reporting in a manner 

similar to how HMDA reporting was 

implemented.879 The Bureau presented 

this list of key aspects or dimensions of 

compliance costs in its SBREFA 

Outline, but did not receive specific 

feedback or suggestions about these 

areas of compliance costs. 

The Bureau found during the HMDA 

rulemaking process that, generally, the 

complexity of a financial institution’s 

approach across dimensions was 

consistent—that is, a financial 

institution generally would not use less 

complex approaches on some 

dimensions and more complex 

approaches on others.880 This allowed 

the Bureau to classify financial 

institutions, including depository 

institutions and nondepository 

institutions, into three broad tiers 

according to the overall level of 

complexity of their compliance 

operations. Using very similar 

assumptions to HMDA, the Bureau’s 

estimation of the costs of this proposed 

rule also assumed that complexity 

across dimensions of a financial 

institution’s small business lending data 

collection and reporting system is 

consistent. 

Table 3 below summarizes the typical 

approach to those seven key aspects or 

dimensions of compliance costs across 

three representative types of financial 

institutions based on level of 

complexity in compliance operations. 

Financial institutions that are Type A 

have the lowest level of complexity in 

compliance operations, while Type B 

and Type C have the middle and highest 

levels of complexity, respectively. 


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881The Bureau expects the development of a 

market for small business data management systems 

similar to HMDA management systems that 

financial institutions will license or purchase from 

third parties. 

882 80 FR 66128, 66270 (Oct. 28, 2015). 

883The Bureau chose the 1:2 and 1:3 application 

to origination ratios based on two sources of 

information. First see Biz2Credit, Small Business 

Loan Approval Rates Rebounded in May 2020: 

Biz2Credit Small Business Lending Index (May 

2020), https://cdn.biz2credit.com/appfiles/ 

biz2credit/pdf/report-may-2020.pdf, which shows 

that, in December of 2019, large banks approved 

small business loans at a rate of 27.5 percent, while 

small banks and credit unions had approval rates 

of 49.9 percent and 40.1 percent. Additionally, and 

supported by the Bureau’s data from supervisory 

exams, the Bureau chose a 33 percent approval rate 

as a conservative measure among these estimates for 

complex financial institutions (Type C FIs). 

In previous HMDA rulemakings, the 

Bureau found that the number of loan 

applications received was largely 

correlated with overall complexity of 

financial institutions’ compliance 

operations.882 The Bureau used this 

observation from HMDA, in addition to 

early outreach to financial institutions 

and data from Call Reports and publicly 

available data from the CDFI Fund, to 

generate assumptions about the number 

of annual small business lending 

applications processed by each FI type. 

The Bureau assumes that Type A FIs 

receive fewer than 300 applications per 

year, Type B FIs receive between 300 

and 2,000 applications per year, and 

Type C FIs receive more than 2,000 

applications per year. The Bureau 

assumes that, for types A and B, one out 

of two small business applications will 

result in an origination. Thus, the 

Bureau assumes that Type A FIs 

originate fewer than 150 products per 

year and Type B FIs originate between 

150 and 1,000 products per year. The 

Bureau assumes that Type C FIs 

originate one out of three applications 

and more than 1,000 per year.883

The Bureau understands that costs 

vary by financial institution due to 

many factors, such as size, operational 

structure, and product complexity. Due 

to data limitations, the Bureau is unable 

to capture many of the ways in which 

costs vary by institution, and therefore 

uses these representative financial 

institutions with the above assumptions 

for its analysis. In order to aggregate 

costs to a market level, the Bureau must 

map financial institutions onto its types 

using discrete volume categories. 

For the ongoing costs discussion in 

part VII.F.3.ii below, the Bureau 

discusses costs in the context of 

representative institutions for ease of 


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884SBREFA Outline at 52–56. 

885The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 37–38. 886SBREFA Outline at 49–52. 

887The One-Time Cost Survey was released on 

July 22, 2020; the response period closed on 

October 16, 2020. The OMB control number for this 

collection is 3170–0032. 

exposition. The Bureau assumes that a 

representative Type A FI receives 100 

small business credit applications per 

year, a representative Type B FI receives 

400 applications per year, and a 

representative Type C FI receives 6,000 

applications per year. The Bureau 

further assumes that a representative 

Type A FI originates 50 covered credit 

transactions per year, a representative 

Type B FI originates 200 covered credit 

transactions per year, and a 

representative Type C FI originates 

3,000 covered credit transactions per 

year. 

The Bureau presented an earlier 

version of this cost calculation 

methodology in the SBREFA Outline 

and during the SBREFA process.884 In 

general, SERs provided minimal 

feedback on the overall structure of the 

categorization of financial institutions 

and activities required to collect, check, 

and report data under the proposed 

rule.885 The Bureau has made two 

changes to its methodology in response 

to SER feedback. One SER stated that 

the methodology would benefit from an 

additional category of complexity 

between Types B and C. To address this 

issue, while the Bureau did not add an 

additional category of complexity, it has 

increased the number of applications 

assumed for Type A FIs and Type B FIs 

so that these institutions cover more of 

the small business credit market. The 

Bureau has adjusted the categories of 

applications for Type A FIs and Type B 

FIs to 100 and 400 (from 75 and 300, 

respectively). Several SERs also 

suggested that the ratio of applications 

per originated loans used in the 

SBREFA Outline was too high. The 

Bureau has accordingly updated its 

assumptions to assume two applications 

per origination (instead of its original 

three-to-one ratio) for Type A FIs and 

Type B FIs. 

The Bureau seeks comment on its 

methodologies, as described in this part 

VII.E (including parts VII.E.1, VII.E.2, 

and VII.E.3 below), for estimating onetime costs of implementation, 

estimating ongoing costs of 

implementation, and generating marketlevel estimates of one-time and ongoing 

costs. 

1. Methodology for Estimating OneTime Costs of Implementation of the 

Proposed Rule 

The Bureau has identified the 

following eight categories of one-time 

costs that would likely be incurred by 

financial institutions to develop the 

infrastructure to collect and report data 

under the proposed rule: 

1. Preparation/planning 

2. Updating computer systems 

3. Testing/validating systems 

4. Developing forms/applications 

5. Training staff and third parties (such as 

dealers and brokers) 

6. Developing policies/procedures 

7. Legal/compliance review 

8. Post-implementation review of compliance 

policies and procedures 

Conversations with financial 

institutions have informed the Bureau’s 

understanding of one-time costs. 

Financial institutions will likely have to 

spend time and resources understanding 

the regulation, developing the required 

policies and procedures for their 

employees to follow, and engaging a 

legal team to review their draft policies 

and procedures. Additionally, financial 

institutions may require new 

equipment, such as new computer 

systems that can store and check the 

required data points; new or revised 

application forms or related materials to 

collect any data that would be required 

under the proposed rule that they do not 

currently collect, including minorityowned and women-owned business 

status and the ethnicity, race, and sex of 

applicants’ principal owners, and to 

provide any related disclosures required 

by the rule. Some financial institutions 

mentioned that they may store, check, 

and report data using third-party 

providers such as Fiserv, Jack Henry, 

LaserPro, or Fidelity Information 

Systems (FIS), while others may use 

more manual methods of data storage, 

checking, and reporting using software 

applications such as Microsoft Excel. 

Financial institutions would also engage 

in a one-time training of all small 

business lending staff to ensure that 

employees understand the new policies 

and procedures. After all new policies 

and procedures have been implemented 

and systems/equipment deployed, 

financial institutions will likely 

undertake a final internal review to 

ensure that all the requirements of the 

section 1071 regulation have been 

satisfied. 

The Bureau presented the one-time 

cost categories in the SBREFA Outline 

and during the SBREFA process.886 The 

SERs generally confirmed that the eight 

categories listed above accurately 

capture the components of one-time 

costs. 

The Bureau conducted a survey 

regarding one-time implementation 

costs for section 1071 compliance 

targeted at FIs who extend small 

business credit.887 The Bureau 

developed the survey instrument based 

on guidance from industry on the 

potential types of one-time costs 

institutions might incur if required to 

report under a 1071 rule and tested the 

survey instrument on a small set of FIs, 

incorporating their feedback prior to 

implementation. Estimates from survey 

respondents form the basis of the 

Bureau’s estimates for one-time costs in 

assessing the potential impact of this 

proposed rule. The survey was broadly 

designed to ask about the one-time costs 

of reporting data under a regime that 

only includes mandatory data points, 

uses a reporting structure similar to 

HMDA, uses the Regulation B definition 

of an ‘‘application,’’ and uses the 

respondent’s own internal small 

business definition. The survey was 

divided into three sections: Respondent 

Information, One-Time Costs, and the 

Cost of Credit to Small Entities. 

In the Respondent Information 

section, the Bureau obtained basic 

information about the respondent, 

including information on the type of 

institution, its size, and its volume of 

small business lending. (The Bureau did 

not, however, obtain the actual name or 

other directly identifying information 

about respondents.) The One-Time 

Costs section of the survey measured the 

total hours, staff costs, and non-salary 

expenses associated with the different 

tasks comprising one-time costs. Using 

the reported costs of each task, the 

Bureau estimated the total one-time cost 

for each respondent. The Cost of Credit 

to Small Entities section dealt with the 

respondent’s anticipated response to the 

increased compliance costs of being 

covered by the rule in order to 

understand the impacts of the regulation 

on its small business lending activity, 

including any anticipated potential 

changes to underwriting standards, 

volume, prices, product mix, or market 

participation. 

The Bureau worked with several 

major industry trade associations to 

recruit their members to respond to the 

survey. A total of 105 financial 

institutions responded to the survey. 

To estimate one-time costs, the 

Bureau needed information on a 

financial institution’s one-time costs by 

category and number of originations. Of 

the 105 total respondents, 49 answered 

these questions. The Bureau will 

henceforth refer to these respondents as 

the ‘‘cost estimation sample.’’ Of these 

respondents, 42 (86 percent) selfVerDate Sep<11>2014 19:49 Oct 07, 2021 Jkt 256001 PO 00000 Frm 00193 Fmt 4701 Sfmt 4702 E:\FR\FM\08OCP2.SGM 08OCP2

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888Nondepository institutions also reported 

assets. The Bureau separately reports asset category 

for depository institutions because asset sizes are 

not as comparable between depositories and 

nondepositories. The Bureau does not report asset 

sizes for nondepository respondents because there 

were too few respondents to report separately 

without risking re-identification of respondents. 

889See Bureau of Labor Statistics, U.S. Dep’t of 

Labor, Occupational Employment and Wage 

Statistics (May 2020), https://www.bls.gov/oes/ 

current/oes132072.htm. 890The March 2020 Employer Costs for Employee 

Compensation from the Bureau of Labor Statistics 

documents that wages and salaries are, on average, 

70 percent of employee compensation for private 

industry workers. The Bureau inflates the hourly 

wage to account for 100 percent of employee 

compensation ((100/70) ¥ 1) * 100 = 43 percent). 

See Bureau of Labor Statistics, U.S. Dep’t of Labor, 

Employer Costs for Employee Compensation (Mar. 

2020), https://www.bls.gov/news.release/archives/ 

ecec_06182020.pdf. 

reported that they were a depository 

institution (bank or credit union). The 

remaining seven (14 percent) were 

nondepository institutions. Table 4 

presents the self-reported asset size of 

the 42 depository institution 

respondents in the cost estimation 

sample.888

For the purposes of estimating onetime costs, the Bureau distinguishes 

between depository institutions and 

nondepository institutions. The majority 

of nondepository institutions are not 

currently subject to any data reporting 

requirements, with the notable 

exception of nondepository CDFIs. The 

Bureau anticipates that covered 

financial institutions that are not 

currently subject to data reporting 

requirements will need to make more 

changes to their existing business 

operations in order to comply with the 

requirements of the new rule. This 

expectation is confirmed by the higher 

estimated one-time costs for 

nondepository institutions relative to 

depository institutions discussed in part 

VII.F.3.i. 

The Bureau categorizes depository 

institution respondents in the cost 

estimation sample into four groups 

according to the respondents’ selfreported total originations. The first 

group contains the two depository 

institutions that reported fewer than 25 

originations; the Bureau assumes these 

institutions would not report under the 

proposed rule. The second group 

contains ten depository institutions that 

reported between 25 and 149 

originations. The Bureau categorizes 

these as Type A DIs (that is, a DI that 

is Type A as defined above.) The third 

group contains the 19 depository 

institutions that reported between 150 

and 999 originations. The Bureau 

categorizes these as Type B DIs. The 

final group contains the 11 depository 

institutions that reported 1,000 or more 

originations. The Bureau categorizes 

these as Type C DIs. 

There are not enough nondepository 

institutions in the cost estimation 

sample to separate nondepository 

institutions into Types A, B, and C and 

obtain meaningful estimates. Instead, 

the Bureau is relying on the assumption 

that nondepository institutions (referred 

to as Non-DIs for purposes of this 

analysis) will incur the same one-time 

costs regardless of complexity. 

The Bureau estimated the one-time 

costs for each of the four categories of 

financial institutions (Type A DI, Type 

B DI, Type C DI, and Non-DI) using the 

following methodology. 

For each of the eight categories of onetime costs, the Bureau asked financial 

institutions to estimate and report the 

total number of hours that junior, midlevel, and senior staff would spend on 

each task, along with any additional 

non-salary expenses. If a respondent did 

not provide estimates for any 

component (i.e., staff hours or nonsalary expenses) of any category, it is 

not counted as part of the cost 

estimation sample. If a respondent 

provided estimates for some 

components but did not provide an 

estimate for a particular component 

(e.g., non-salary expenses for 

preparation/planning) then the Bureau 

assumed that the respondent estimated 

zero for that component. 

The Bureau asked survey respondents 

to report the average hourly wage for 

junior, mid-level, and senior/executive 

staff involved in the one-time cost 

categories. However, for the purposes of 

estimating one-time costs, the Bureau 

assumed a constant wage across 

financial institutions for each level of 

staff. For junior staff, the Bureau used 

$16.18, the 10th percentile hourly wage 

estimate for ‘‘loan officers’’ according to 

the 2020 Occupational Employment 

Statistics compiled by the Bureau of 

Labor Statistics.889 For mid-level staff, 

the Bureau used $36.99, the mean 

hourly wage estimate for ‘‘loan officers.’’ 

For senior staff, the Bureau used $64.35, 

the 90th percentile hourly wage 

estimate for ‘‘loan officers.’’ To account 

for non-monetary compensation, the 

Bureau also scaled these hourly wages 

up by 43 percent.890 The Bureau 

assumed a total hourly compensation of 

$23.14 for junior staff, as compared to 

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reported by respondents. The Bureau 

assumed a total hourly compensation of 

$52.90 for mid-level staff, as compared 

to $48.94, the mean of the mid-level 

wages reported by respondents. The 

Bureau assumed a total hourly 

compensation of $92.02, as compared to 

$90.19, the mean of the senior/executive 

wages reported by respondents. 

For each respondent in the cost 

estimation sample, the Bureau 

calculated the cost of each one-time cost 

category as the sum of the junior wage 

multiplied by the reported junior hours, 

the mid-level wage multiplied by the 

reported mid-level hours, and the senior 

wage multiplied by the reported senior 

hours and the reported non-salary 

expenses. The total cost for the 

respondent was the sum of the costs 

across all eight categories. 

After calculating the total costs for 

each respondent, the Bureau identified 

outliers within the four groups of 

financial institutions (Type A DI, Type 

B DI, Type C DI, and Non-DI) using the 

interquartile range method, a standard 

outlier identification method. For each 

group of financial institutions, an 

observation is considered an outlier if 

the estimated total cost is greater than 

1.5*(P75¥P25) + P75 or less than 

P25¥1.5*(P75¥P25) where P75 and P25

are the 75th and 25th percentiles, 

respectively, of total costs within that 

group. Using this method, the Bureau 

identified one outlier in each Type A DI, 

Type B DI, and Type C DI group and no 

outliers in the Non-DI group. 

In addition to the total estimated onetime costs, the Bureau is interested in 

the hours, non-salary expenses, and 

total costs associated with each of the 

different one-time cost categories. For 

each group, the Bureau estimated each 

component of one-time costs by taking 

the mean of the estimated component 

within the group, after excluding 

outliers. For example, the estimated 

number of junior hours required by DIs 

of Type A to update computer systems 

is the mean number of junior hours 

reported by the nine DIs of Type A that 

were in the cost estimation sample, 

excluding one outlier. The Bureau 

estimated the cost associated with each 

category as the sum of the junior wage 

multiplied by the estimated junior 

hours, the mid-level wage multiplied by 

the estimated mid-level hours, and the 

senior wage multiplied by the estimated 

senior hours, and the estimated nonsalary expenses. 

2. Methodology for Estimating Ongoing 

Costs of Implementation of the Proposed 

Rule 

The Bureau identified 15 specific data 

collection and reporting activities that 

would impose ongoing costs. Table 5 

presents the full list of 15 activities. 

Activities 1 through 3 can broadly be 

described as data collection activities: 

These tasks are required to intake data 

and transfer it to the financial 

institution’s small business data entry 

system. Activities 4 through 10 are 

related to reporting and resubmission: 

These tasks are required to collect 

required data, conduct internal checks, 

and report data consistent with the 

proposed rule. Activities 11 through 13 

are related to compliance and internal 

audits: Employee training, and internal 

and external auditing procedures 

required to ensure data consistency and 

reporting in compliance with the rule. 

Finally, activities 14 and 15 are related 

to 1071 examinations by regulators: 

These tasks will be undertaken to 

prepare for and assist during regulatory 

compliance examinations. 

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891 In this table, the term ‘‘variable’’ means the 

complance cost depends on the number of 

applications. The term ‘‘fixed’’ means the 

compliance cost does not depend on the number of 

applications (even if there are other factors upon 

which it may vary). 

Table 6 provides an example of how 

the Bureau calculated ongoing 

compliance costs associated with each 

compliance task. The table shows the 

calculation for each activity and notes 

whether the task would be a ‘‘variable 

cost,’’ which would depend on the 

number of applications the institution 

receives, or a ‘‘fixed cost’’ that does not 

depend on the number of applications. 

Table 6 shows these calculations for a 

Type A FI, or the institution with the 

least amount of complexity. Table 7 

below summarizes the activities whose 

calculation differs by institution 

complexity and shows the calculations 

for Type B FIs and Type C FIs (where 

they differ from those for a Type A 

FI).891

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892These data reflect the mean hourly wage for 

‘‘loan officers’’ according to the 2020 Occupational 

Employment Statistics compiled by the Bureau of 

Labor Statistics. See Bureau of Labor Statistics, U.S. 

Dep’t of Labor, Occupational Employment and 

Wages (May 2020), https://www.bls.gov/oes/ 

current/oes132072.htm. 

893The March 2020 Employer Costs for Employee 

Compensation from the Bureau of Labor Statistics 

documents that wages and salaries are, on average, 

70 percent of employee compensation for private 

industry workers. The Bureau inflates the hourly 

wage to account for 100 percent of employee 

compensation ((100/70) ¥ 1) * 100 = 43 percent). 

Bureau of Labor Statistics, U.S. Dep’t of Labor, 

Employer Costs for Employee Compensation (Mar. 

2020), https://www.bls.gov/news.release/archives/ 

ecec_06182020.pdf. 

894Home Mortgage Disclosure Act (Regulation C), 

80 FR 66128 (Oct. 28, 2015). 

Some differences, for example, are reflected in 

the number of applications, the number of data 

points per application, and the number of loan 

officers for the representative institutions. 

Many of the activities in Table 6 

require time spent by loan officers and 

other financial institution employees. 

To account for time costs, the 

calculation used the hourly 

compensation of a loan officer 

multiplied by the amount of time 

required for the activity. The Bureau 

used a mean hourly wage of $36.99 for 

loan officers, based on data from the 

Bureau of Labor Statistics.892 To 

account for non-monetary 

compensation, the Bureau scaled this 

hourly wage by 43 percent to arrive at 

a total hourly compensation of $52.90 

for use in these calculations.893 The 

Bureau used assumptions from its 2015 

HMDA final rule analysis, updated to 

reflect differences between mortgage 

lending and small business lending, to 

estimate time spent on ‘‘ongoing 

tasks.’’ 894 As an example of a time 

calculation, the Bureau estimated that 

transcribing the required data points 

would require approximately 11 

minutes per application for a Type A FI. 

The calculation multiplied the number 

of minutes by the number of 

applications and the hourly 

compensation to arrive at the total cost, 

on an annual basis, of transcribing data. 

As another example, the Bureau 

estimated that ongoing training for loan 

officers to comply with a financial 

institution’s 1071 policies and 

procedures would take about two hours 

per loan officer per year. The cost 

calculation multiplies the number of 

hours by the number of loan officers and 

by the hourly compensation. 

To arrive at the amount of time 

required per application for each of the 

15 tasks covered financial institutions 

would conduct to collect, check, and 

report 1071 data, the Bureau began with 

the assumptions made for each task for 

the 35 data points under the 2015 

HMDA final rule and then adjusted 

these required times relative to the 

number of data points required under 

the proposed 1071 rule. The proposed 

rule would require covered financial 

institutions to collect 21 data points for 

each covered application. Several of 

these data points have multiple 

components. For example, the credit 

type data point has three 

subcomponents of product type, the 

type of guarantee, and the term. The 

data points for pricing information and 

the ethnicity, race, and sex of principal 

owners also have multiple 

subcomponents. 

Some activity costs in Table 6 depend 

on the number of applications. It is 

important to differentiate between these 

variable costs and fixed costs because 

the type of cost impacts whether and to 

what extent covered institutions might 

be expected to pass on their costs to 

small business loan applicants in the 

form of higher interest rates or fees 

(discussed in more detail in part VII.F.4 

below). Data collection, reporting, and 

submission activities such as geocoding 

data, standard annual edits and internal 

checks, researching questions, and 

resolving question responses are 

variable costs. All other activities are 

fixed cost because they do not depend 

on the overall number of applications 

being processed. An example of a fixed 

cost calculation is exam preparation, 

where the hourly compensation is 

multiplied by the number of total hours 

required by loan officers to prepare for 

1071-related compliance examinations. 

Table 7 shows where and how the 

Bureau assumed Type B FIs and Type 

C FIs differ from Type A FIs in its 

ongoing cost methodology. Type B FIs 

and Type C FIs use more automated 

procedures, which result in different 

cost calculations. For example, for Type 

B FIs and Type C FIs, transferring data 

to the data entry system and geocoding 

applications are done automatically by 

business application data management 

software licensed annually by the 

financial institution. The relevant 

address is submitted for geocoding via 

batch processing, rather than done 

manually for each application. The 

additional ongoing geocoding costs 

reflect the time spent by loan officers on 

‘‘problem’’ applications—that is, a 

percentage of overall applications that 

the geocoding software misses—rather 

than time spent on all applications. 

However, Type B FIs and Type C FIs 

have the additional ongoing cost of a 

subscription to a geocoding software or 

service as well as a data management 

software that represents an annual fixed 

cost of reporting 1071 application data. 

This is an additional ongoing cost that 

less complex Type A FIs will not incur. 

The Bureau expects that Type A FIs will 

use free geocoding software available 

from the FFIEC or the Bureau, which 

may include a new batch function that 

could be developed by either the FFIEC 

or the Bureau. 

Additionally, audit procedures differ 

between the three representative 

institution types. The Bureau expects a 

Type A FI would not conduct an 

internal audit but would pay for an 

annual external audit. A Type B FI 

would be expected to conduct a simple 

internal audit for data checks and also 

pay for an external audit on an annual 

basis. Type C FIs would have a 

sophisticated internal audit process in 

lieu of an external audit. 

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Table 8 below shows major 

assumptions that the Bureau made for 

each activity for each type of financial 

institution. Table 8 provides the total 

number of hours the Bureau assumes are 

required for each task that requires 

labor. For example, the Bureau assumes 

that transcribing data for 100 

applications will require 18 hours of 

labor. The table also shows the assumed 

fixed cost of software and audits, as well 

as areas where the Bureau assumes there 

will be cost savings due to technology. 

In several cases, the activity does not 

apply to financial institutions of a 

certain type, and are therefore not 

displayed. 


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BILLING CODE 4810–25–C 

3. Methodology for Generating MarketLevel Estimates of One-Time and 

Ongoing Costs 

To generate market-level cost 

estimates, the Bureau relied on the 

estimates of the volume of small 

business lending originations described 

in part VII.D above. As with 

institutional coverage, the Bureau 

separates market-level cost estimates 

into estimates for depository institutions 

and for nondepository institutions. 

For depository institutions, the 

Bureau estimated which institutions of 

those that existed at the end of 2019 

would likely be covered or not covered 

by the proposed rule. An institution 


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895See https://www.consumerfinance.gov/dataresearch/research-reports/supplemental-estimationmethodologies-small-business-lending-datacollection-nprm/. 

896Such concerns have led California, for 

example, to include prepayment policies as a 

required component of pricing disclosures in 

commercial financing (see Cal. S.B. 1235 (Sept. 30, 

2018), https://leginfo.legislature.ca.gov/faces/ 

billTextClient.xhtml?bill_id=201720180SB1235). 

would be required to report data on 

applications received in 2019 if it 

originated at least 25 covered 

originations in each of the preceding 

two years (i.e., 2017 and 2018). If two 

depository institutions merged between 

the end of 2017 and the end of 2019, the 

Bureau assumes that those institutions 

would report as one entity. The Bureau 

then categorized each institution as a 

Type A DI, Type B DI, or Type C DI 

based on its originations in 2019. 

Depository institutions with 0 to 149 

covered originations in 2019 are 

categorized as Type A. Depository 

institutions with 150 to 999 covered 

originations are categorized as Type B. 

Depository institutions with 1,000 or 

more covered originations are 

categorized as Type C. For each 

depository institution, the Bureau 

assigns the appropriate estimated onetime cost, ongoing fixed cost, ongoing 

variable cost per application, and 

applications per origination estimates 

associated with its institution type. The 

estimated number of annual 

applications for each institution is the 

estimated number of originations 

multiplied by the number of 

applications per origination for that 

institution type. The annual ongoing 

cost for each institution is the ongoing 

fixed cost plus the ongoing variable cost 

per application multiplied by the 

estimated number of applications. 

To generate market-level estimates, 

the Bureau first calculates the estimated 

one-time and annual ongoing costs for 

each depository institution covered by 

the proposed rule based on the 

estimated number of originations for 

that institution in 2019. The Bureau 

then sums over the covered depository 

institutions to find market-level 

statistics of total costs. As with coverage 

estimates, the Bureau presents a range of 

estimates for market-level statistics. The 

range reflects the uncertainty associated 

with the estimate of costs for banks and 

savings associations below the CRA 

reporting threshold. The Bureau has 

documented how it calculated these 

ranges in its Supplemental estimation 

methodology for institutional coverage 

and market-level cost estimates in the 

small business lending data collection 

notice of proposed rulemaking.895

The Bureau is unaware of institutionlevel data on originations by 

nondepository institutions that are 

comprehensive enough to estimate costs 

using the same method as that for 

depository institutions. Therefore, to 

generate market-level estimates for 

nondepository institutions, the Bureau 

relies on the estimates discussed above 

and several key assumptions. The 

Bureau assumes that fintech lenders and 

MCAs are Type C FIs because they 

generally have more automated systems 

and originate more products. The 

Bureau assumes that the remaining 

nondepository institutions are Type B 

FIs. The Bureau assumes that each 

nondepository receives the same 

number of applications as the 

representative institution for each type, 

as described above. Hence, the Bureau 

assumes that fintech lenders and MCAs 

each receive 6,000 applications per year 

and all other nondepository institutions 

receive 400 applications per year. As 

explained above, the Bureau also 

assumes that all nondepository 

institutions have the same one-time 

costs. 

F. Potential Benefits and Costs to 

Covered Financial Institutions and 

Small Businesses 

1. Benefits to Small Businesses 

The proposed rule could benefit small 

businesses by collecting data that 

further the two statutory purposes of 

section 1071. Those purposes are to 

facilitate the enforcement of fair lending 

laws and enable communities, 

governmental entities, and creditors to 

identify business and community 

development needs and opportunities of 

women-owned, minority-owned, and 

small businesses. Some of the benefits 

to small businesses discussed below 

stem from the public release of the data 

collected under the proposed rule. As 

discussed in more detail in part VI, the 

Bureau is proposing to exercise its 

discretion under ECOA section 

704B(e)(4) to delete or modify data 

collected under section 1071 which are 

or will be available to the public where 

the Bureau determines that the deletion 

or modification of the data would 

advance a privacy interest. The below 

discussion considers the benefits of 

unmodified data released for public 

consumption, but the Bureau 

acknowledges that the benefits derived 

from public disclosure may be lower if 

modifications are made that reduce the 

utility of the public dataset. 

Data collected under the proposed 

rule would constitute the largest and 

most comprehensive data in the United 

States on credit availability for small 

businesses. These data would provide 

important insight into possible 

discriminatory lending patterns in the 

small business lending market. 

Regulators could use the data to gauge 

fair lending risks and prioritize 

examinations of lenders that have a 

higher likelihood of violating 

antidiscrimination statutes. This would 

lead to a more efficient use of 

government resources in enforcing fair 

lending provisions. Furthermore, the 

public nature of the dataset would allow 

for members of the public to review the 

public dataset for possible violations of 

antidiscrimination statutes. The 

increased ability to perform fair lending 

analyses would benefit women-owned 

and minority-owned small businesses 

both directly, in the form of remediation 

when lenders ultimately are found to 

have violated fair lending laws, and 

indirectly, with increased access 

resulting from the scrutiny placed on 

financial institutions. 

Central to the fair lending benefit of 

the dataset is the proposed collection of 

the action taken data point. Existing 

datasets that collect transaction-level 

data only contain data on originated 

small business loans. Application-level 

data, combined with the collection of 

action taken data, could allow users to 

construct approval or denial rates, for 

example, for particular lenders. Such 

analyses could indicate whether, for 

example, women-owned or minorityowned small businesses are being 

denied credit at higher rates than other 

small businesses. 

The proposed rule would also include 

several data points on the pricing of 

covered credit transactions that are 

originated or approved but not accepted. 

Data users could examine, for example, 

whether women-owned or minorityowned small businesses are charged 

higher interest rates, origination 

charges, or initial annual charges than 

similarly situated businesses that are 

not women- or minority-owned. The 

proposed rule would also require 

information on prepayment penalties, 

which is an area of increasing concern 

due to the potential for predatory 

lending practices.896 Users could 

examine whether women-owned or 

minority-owned small firms are more 

likely to have prepayment penalties on 

extended credit. 

Several data points included in the 

proposed rule would contribute to more 

accurate fair lending analyses by 

allowing users to compare credit 

products with similar characteristics. 

For example, there are likely differences 

in approval rates and prices for covered 

credit transactions based on credit 

amount applied for and approved, all 


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897For examples of how HMDA data has 

facilitated research on the mortgage market, see, 

e.g., Bureau of Consumer Fin. Prot., Data Point: 

Asian American and Pacific Islanders in the 

Mortgage Market (July 2021), https://files.consumer

finance.gov/f/documents/cfpb_aapi-mortgagemarket_report_2021-07.pdf; Bureau of Consumer 

Fin. Prot., Manufactured Housing Finance: New 

Insights from the Home Mortgage Disclosure Act 

Data (May 2021), https://files.consumerfinance.gov/ 

f/documents/cfpb_manufactured-housing-financenew-insights-hmda_report_2021-05.pdf; Neil Bhutta 

& Benjamin J. Keys, Moral Hazard during the 

Housing Boom: Evidence from Private Mortgage 

Insurance, The Review of Fin. Studies (2021), 

https://academic.oup.com/rfs/advance-article/doi/ 

10.1093/rfs/hhab060/6279755; Sumit Agarwal et 

al., The Effectiveness of Mandatory Mortgage 

Counseling: Can One Dissuade Borrowers from 

Choosing Risky Mortgages? (Nat’l Bureau of Econ. 

Research, Working Paper No. 19920, 2014), https:// 

www.nber.org/system/files/working_papers/ 

w19920/w19920.pdf; Alexei Alexandrov & Sergei 

Koulayev, No Shopping in the U.S. Mortgage 

Market: Direct and Strategic Effects of Providing 

Information (Bureau of Consumer Fin. Prot., Off. of 

Research Working Paper No. 2017–01, 2018), 

https://papers.ssrn.com/sol3/papers.cfm?abstract_

id=2948491. 

898See, e.g., JPMorgan Chase & Co. Inst., Small 

business ownership and liquid wealth (Mar. 2021), 

https://www.jpmorganchase.com/institute/ 

research/small-business/small-business-ownershipand-liquid-wealth-report. 

three aspects of credit type (type of 

credit product, types of guarantees, and 

loan term), and credit purpose, since 

these factors influence the risk of 

extending credit. Many creditors also 

consider characteristics about the small 

business, such as industry, gross annual 

revenue, or time in business during 

their underwriting or pricing processes. 

Supply and demand for small business 

credit also varies over time and by 

location, so the inclusion of census 

tract, application date, and action taken 

date could lead to more accurate 

analyses. More accurate screening for 

fair lending risk would, for example, 

reduce the false positive rate observed 

during fair lending prioritization and 

increase the efficiency of fair lending 

reviews. 

Creditors would also likely use the 

data to understand small business 

lending market conditions more 

effectively and at a more granular level 

than is possible with existing data 

sources, such as Call Reports, data from 

public lending programs, or privately 

purchased data. Data collected under 

the proposed rule, combined with the 

institution’s existing information on the 

small business lending market, could 

help creditors to identify potentially 

profitable opportunities to extend 

credit. For example, creditors could use 

the census tract information to find 

areas of high credit demand into which 

they could consider expanding. Small 

business owners would benefit from 

increased credit availability. 

Governmental entities will likely use 

the data to develop solutions that 

achieve policy objectives. For example, 

loan guarantees provided by the SBA’s 

7(a) and 504 programs are designed to 

increase the availability of business 

credit for businesses that otherwise have 

difficulty accessing credit. 

Governmental entities could use the 

comprehensive data on applications for 

covered credit transactions collected 

under the proposed rule to identify 

additional opportunities to create new— 

or tailor existing—programs to advance 

their small business lending policy 

objectives. 

The data collected under the 

proposed rule would be the most 

extensive data on credit access for 

women-owned and minority-owned 

small businesses, and such information 

will help various data users in 

understanding the needs and 

opportunities of women-owned and 

minority-owned small businesses. For 

example, governmental entities often 

create programs that specifically target 

women-owned and minority-owned 

businesses, such as those that reserve 

government contracts, those that 

provide grants, or those specifically 

targeted at women-owned and minorityowned small firms. Governmental 

entities could use data collected under 

the proposed rule to alter existing 

programs or create new ones to meet the 

needs of these business owners. Private 

lenders could also use the data to find 

untapped markets of credit demand 

from women-owned and minorityowned small businesses. 

As one of the premier data sources on 

the small business credit market, data 

collected under the proposed rule 

would also facilitate rigorous academic 

research. HMDA data, which are similar 

in many ways to the data that will be 

collected under the proposed rule, have 

been analyzed in many scholarly 

publications. The data collected under 

section 1071 will provide academics 

and other researchers a clearer window 

into potential discrimination in the 

small business credit market, as well as 

a better understanding of small business 

credit market trends and dynamics. Like 

in the case of HMDA, data collected 

under the proposed rule will be more 

broadly used to understand how 

business owners make borrowing 

decisions, respond to higher prices, and 

respond to risk.897

The proposed data points would 

provide the above benefits in several 

ways. The action taken and pricing 

information data points would allow 

various entities to monitor the tightness 

of the small business credit market and 

identify areas where there are high 

denial rates for small business credit or 

where it is provided only at high cost, 

especially to women-owned or 

minority-owned small businesses. Data 

on census tract, NAICS code, gross 

annual revenue, and number of workers 

will provide insight into the availability 

of small business credit by geography, 

industry, and business size. Credit type 

and credit purpose would provide more 

information on how small womenowned and minority-owned businesses 

use credit and whether their use differs 

from that of other small businesses. 

Time in business information would 

allow data users to understand the 

credit needs of young small businesses, 

and specifically young women-owned 

and minority-owned small businesses. 

Recent research has shown that womenowned and minority-owned businesses 

face different financing challenges early 

in the business lifecycle than other 

firms, primarily driven by less access to 

external financing.898

The Bureau seeks comment on its 

analysis of potential benefits to small 

businesses as described herein. 

2. Benefits to Covered Financial 

Institutions 

The proposed rule would provide 

some benefits to some covered financial 

institutions—i.e., the financial 

institutions that would be required to 

collect and report 1071 data on small 

business applications for credit. The 

first is some reduction of the 

compliance burden of fair lending 

reviews for lower risk financial 

institutions, by reducing the ‘‘false 

positive’’ rates during fair lending 

review prioritization by regulators. 

Currently, financial institutions are 

subject to fair lending reviews by 

regulators to ensure that they are 

complying with the ECOA in their small 

business lending processes. Data 

reported under the proposed rule would 

allow regulators to prioritize fair 

lending reviews of financial institutions 

with higher risk of fair lending 

violations, which reduces the burden on 

institutions with lower fair lending risk. 

Covered financial institutions would 

also be able to use the data to monitor, 

identify, and address their own fair 

lending risks and thereby avoid liability 

from enforcement actions and adverse 

exam findings requiring remedial 

action. 

The proposed data collection could 

also provide an unprecedented window 

into the small business lending market, 

and such transparency may benefit 

financial institutions covered by the 

rule. Comprehensive information on 

small business credit applications and 

originations are currently unavailable. 


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The data made public pursuant to the 

proposed rule could allow financial 

institutions to better understand the 

demand for small business credit 

products and the conditions under 

which they are being supplied by other 

covered financial institutions. 

The Bureau seeks comment on its 

analysis of potential benefits to covered 

persons as described herein. 

3. Costs to Covered Financial 

Institutions 

i. One-Time Costs to Covered Financial 

Institutions 

Using the methodology described in 

part VII.E.1 above, Table 9 shows the 

estimated total expected one-time costs 

for financial institutions covered by the 

proposed rule as well as a breakdown by 

the eight component categories that 

comprise the one-time costs for Type A 

DIs, Type B DIs, and Type C DIs, and 

Non-DIs. 

Table 10 shows the estimated number 

of junior, mid-level, and senior staff 

hours and non-salary expenses for each 

component activity for Type A DIs. 

Tables 11 through 13 show the same 

estimates for Type B DIs, Type C DIs 

and Non-DIs respectively. As discussed 

above, the Bureau estimates all one-time 

costs to covered financial institutions 

using the One-Time Cost Survey results. 

BILLING CODE 4810–25–P 


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899The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 38–39. 

900The Bureau notes that the variation in this 

range comes primarily from the uncertainty in the 

number of originations made by small banks and 

savings associations. The range does not fully 

account for the uncertainty associated with 

estimates of the one-time costs for each type of 

institution. 

BILLING CODE 4810–25–C 

The Bureau estimates that updating 

computer systems would be the biggest 

driver of one-time costs for Type A DIs, 

and Type B DIs and Non-DIs. Type A 

DIs and Type B DIs would be expected 

to spend similar amounts on updating 

computer systems, but Type A DIs 

would rely somewhat more on staff. 

The Bureau expects that Non-DIs 

would have the highest one-time costs 

and the highest costs to update 

computer systems. To update computer 

systems, Non-DIs would rely on midlevel staff hours and third-party 

vendors. Non-DIs would also spend 

relatively more on preparation and 

planning than Type A DIs or Type B 

DIs. These estimates are consistent with 

the expectation that Non-DIs will incur 

higher costs because they are less likely 

to already report data to regulators. 

The Bureau estimates that the biggest 

drivers of one-time costs for Type C DIs 

would be preparation and planning and 

post-implementation review. These 

depository institutions would generally 

rely on mid-level staff hours to 

implement the required one-time 

changes and, in particular, would rely 

on mid-level staff hours for these two 

key activities. The Bureau estimates that 

Type C DIs will spend the most of all 

financial institution types on staff hours 

to implement one-time changes and the 

least on non-salary expenses. 

The Bureau estimates that one-time 

costs would be higher for Type A DIs 

than for Type B DIs. These two types of 

depository institutions have similar 

estimated costs for most activities, but 

Type A DIs are expected to spend more 

on testing/validating systems and legal/ 

compliance review. 

These estimates are generally 

consistent with feedback from SERs 

during the SBREFA process. Several 

SERs stated that changes to their 

computer systems would contribute to 

their one-time costs.899 However, some 

SERs estimated larger one-time costs 

than the Bureau and others estimated 

smaller one-time costs. One SER (a 

commercial finance company) said that 

many financial institutions in their 

industry have no experience reporting 

data such as will be required under the 

1071 rule and that their current 

developer estimates that the costs just to 

develop, test, and integrate their system 

could be up to $200,000. Another SER 

(a fintech) stated that they do not 

anticipate any one-time costs. Two SERs 

estimated that one-time costs would be 

between $15,000 and $25,000 without a 

detailed breakdown of those costs. One 

SER provided a detailed breakdown of 

costs and estimated that total one-time 

costs would be $27,000. 

As mentioned above, the Bureau 

realizes that one-time costs vary by 

institution due to many factors, and that 

this variance exists on a continuum that 

is impossible to fully represent. The 

Bureau focuses on representative types 

of financial institutions in order to 

generate practical and meaningful 

estimates of costs. As a result, the 

Bureau expects that individual financial 

institutions would have slightly 

different one-time costs than the average 

estimates presented here. 

The One-Time Cost Survey instructed 

respondents to assume that covered 

institutions would be required to report 

data at the application level on small 

business financing that constitutes 

‘‘credit’’ for purposes of ECOA for the 

13 statutorily mandated data points one 

time per year, and be responsible for 

validating the accuracy of all data. 

Respondents were further instructed to 

use their own institution’s internal 

definition of small business, assume the 

Regulation B definition of an 

application, and assume a reporting 

structure similar to that under HMDA. 

Finally, respondents were instructed to 

not include any costs associated with 

creating a firewall. As such, respondents 

estimated one-time costs assuming that 

the proposed rule would be different in 

some ways from what the Bureau has 

ultimately proposed here. One SER 

provided feedback during the SBREFA 

Panel that it was hard to estimate onetime costs in the survey without 

knowing all the details of the proposed 

rule. 

The Bureau estimates that the overall 

market impact of one-time costs for 

depository institutions would be 

between $218,000,000 and 

$229,000,000.900 Using a 7 percent 

discount rate and a five-year 

amortization window, the annualized 


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one-time costs for depository 

institutions would be $53,200,000 to 

$55,800,000. The Bureau estimates that 

the overall market impact of one-time 

costs for nondepository institutions 

would be $94,400,000. Using a 7 percent 

discount rate and a five-year 

amortization window, the annualized 

one-time costs for nondepository 

institutions would be $23,000,000. As a 

frame of reference for these market-level 

one-time cost estimates, the estimated 

total non-interest expenses from the 

FFIEC and NCUA Call Reports for 

depository institutions that the Bureau 

estimates would be covered under the 

proposed rule was about $439 billion in 

2019. The upper bound estimate of total 

one-time costs is approximately 0.05 

percent of the total annual non-interest 

expenses. 

The Bureau seeks comment on its 

analysis of one-time costs to covered 

financial institutions as described 

herein. In particular, the Bureau seeks 

comment on how to adjust the estimates 

of one-time costs to account for 

differences between what respondents 

to the survey were asked to assume and 

the proposed rule. 

ii. Ongoing Costs to Covered Financial 

Institutions 

Using the methodology described in 

part VII.E.2, Table 14 shows the total 

expected annual ongoing costs of the 

proposed rule as well as a breakdown by 

the component 15 activities that 

comprise the ongoing costs for Type A 

FIs, Type B FIs, and Type C FIs. The 

bottom of the table shows the total 

estimated annual 1071 ongoing 

compliance cost for each type of 

institution, along with the total cost per 

application the financial institution 

processes. To produce the estimates in 

Table 14, the Bureau used the 

calculations described in Tables 6 and 

7 above and the assumptions for each 

activity in Table 8. In the following 

analysis, the Bureau provides examples 

of these cost calculations for the largest 

drivers of ongoing costs. 

The Bureau estimates that a 

representative low complexity 

institution (i.e., a Type A FI) would 

incur around $7,386 in total annual 

ongoing costs, or about $74 in total cost 

per application processed (assuming a 

representative 100 applications per 

year). For financial institutions of this 

type, the largest driver of ongoing costs 

is the fixed cost of the external audit, 

$3,500. Besides the audit cost, the 

largest drivers of the ongoing costs are 

activities that require employee time to 

complete. Activities like transcribing 

data, transferring data to the data 

management software, standard edits 

and internal checks, and training all 

require loan officer time. The Bureau 

expects training (activity number 11) to 

annually require approximately $638 for 

6 representative loan officers to engage 

in two hours of training. The Bureau 

expects other time-dependent activities 

to cost around $1,000 each. For 


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901There are no broadly available data on profit 

per application for nondepository institutions. The 

Bureau uses the FFIEC Bank and NCUA Credit 

Union Call Report data from December 31, 2019, 

accessed on June 25, 2021. The Bureau uses the 

same internal estimates of small business loan 

originations as discussed in part VI.B above and 

total net income across all products. For estimates 

of net income per origination and per application, 

the Bureau uses only net income per origination for 

depository institutions with over 25 originations in 

2019. 

902The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 39. 

example, the Bureau assumes that Type 

A FIs will spend around 18 hours 

transferring data to 1071 data 

management software (activity number 

3) based on estimates of the required 

time to transfer data to HMDA data 

management software. At the assumed 

hourly compensation, our estimate is 

around $1,013 for the Type A FI 

institutions to transfer data. An 

assumption of around 17 total hours to 

conduct standard annual editing checks 

(activity number 5) with some savings 

assumed due to an online submission 

platform that automatically checks for 

errors, results in an estimated annual 

ongoing cost of $490. 

The Bureau estimates that a 

representative middle complexity 

institution (i.e., a Type B FI), which is 

somewhat automated, would incur 

approximately $35,476 in additional 

ongoing costs per year, or around $89 

per application (assuming a 

representative 400 applications per 

year). The largest components of this 

ongoing cost are the expenses of the 

small business application management 

software and geocoding software 

(activity 10) in the form of an annual 

software subscription fee, and the 

external audit of the data (activity 

number 13). Using interviews of 

financial institutions conducted to 

determine compliance costs with 

HMDA, the Bureau found mid-range 

HMDA data management systems to be 

approximately $8,000 in annual costs; 

the Bureau believes that cost would be 

comparable in the small business 

lending context and thus applies that 

estimate here. This analysis assumes 

that the subscription purchase would be 

separate from HMDA management 

systems, but the development of a 

software to jointly manage HMDA and 

small business lending-related data 

would likely result in cost savings for 

both products. The Bureau also 

estimates that a Type B FI would spend 

around $5,000 on external audits of 

their small business loan application 

data. The Type B FI incurs employee 

time-related fixed costs conducting 

internal checks ($10,576), training 

($3,189), and prepping for examinations 

($4,227) but saves time and expense on 

data entry and geocoding by using data 

management software. As an example, 

the Bureau expects Type B FIs to have 

two full-time employees spend 40 hours 

each to prepare for an examination 

(activity number 14) resulting in a cost 

of $4,227, and have employees spend 

around 12 hours assisting with an 

examination (activity number 15) 

costing $672 annually. 

The Bureau estimates a representative 

high complexity institution (i.e., a Type 

C FI), would incur $243,266 of annual 

ongoing costs, or $41 per application 

(assuming a representative 6,000 

application per year). The largest driver 

of costs for a Type C FI is the employee 

time required to conduct an internal 

audit. The assumed 2,304 hours of 

employee time results in nearly 

$122,000 of ongoing costs annually. 

Exam preparation, training, and 

standard annual and internal checks 

would be expected to cost $25,365, 

$26,262, and $26,181 each year, 

respectively. The Bureau also assumes 

that a Type C institution would need a 

subscription to a small business data 

management software near the upper 

bound of the range found in interviews 

with financial institutions, of $13,271. 

The Bureau estimates that the total 

annual ongoing costs for depository 

institutions would be between about 

$310,000,000 and $330,000,000 per 

year, about $192,000,00 to $201,000,000 

of which would be annual variable 

costs. The Bureau estimates that the 

total annual ongoing costs for 

nondepository institutions would be 

about $62,300,000, about $13,700,000 of 

which would be annual variable costs. 

To understand the impacts of these 

cost estimates on the profits of 

depository institutions, the Bureau 

estimates the average total net income 

across all products per small business 

origination for all DIs by type.901 There 

is no comprehensive published source 

of data on profits earned on small 

business credit transactions. The Bureau 

presents estimates of total net income 

per origination as an indication of a 

financial institution’s ability to cover 

the additional expenses associated with 

the proposed rule. The Bureau estimates 

that banks and savings associations of 

Type A have an average net income per 

origination between $105,000 and 

$119,000. Credit Unions of Type A have 

an average net income per origination of 

$272,000. Assuming two applications 

per origination, a bank or savings 

association of Type A has a net income 

per application of approximately 

$53,000 to $60,000 and a credit union 

of the same type has a net income per 

application of about $136,000. The 

Bureau estimates that banks and savings 

associations of Type B have an average 

net income per origination between 

$50,000 and $57,000 or a net income per 

application between $25,000 and 

$29,000. The Bureau estimates that 

credit unions of Type B have an average 

net income per origination of $218,000 

or an average net income per 

application of $109,000. The Bureau 

estimates that banks and savings 

associations of Type C have a net 

income per origination between 

$237,000 and $267,000, or, assuming 

three applications per origination, a net 

income per application between $79,000 

and $89,000. The Bureau estimates that 

credit unions of Type C have an average 

net income per origination of $8,000, 

and average net income per application 

of about $3,000. 

The Bureau presented early versions 

of these ongoing cost estimates in the 

SBREFA Outline and to SERs during the 

SBREFA process. Since then, the Bureau 

has adjusted its estimates to match the 

total number of data points in the 

proposed rule relative to the SBREFA 

Outline. The Bureau also adjusted its 

estimates in response to SER 

feedback.902 Several SERs provided 

feedback that audit costs in the SBREFA 

Outline were likely too low for the 

lowest complexity (i.e., Type A) 

institution. The Bureau adjusted the 

Type A FI external audit costs to match 

estimates provided to the Bureau from 

a SER of $3,500, an increase from the 

original $500–$1,000 expected. The 

Bureau continues to assume the 

representative low complexity 

institution employs only an external 

audit but acknowledges feedback from 

SERs that this is not necessarily true for 

all Type A institutions. 

The Bureau also seeks additional 

comment on the cost estimates above. 

During the Small Business Panel Review 

Process, several SERs indicated other 

areas where costs estimates should be 

adjusted. A number of SERs remarked 

that the annual training costs estimates 

were likely too low. One SER estimated 

that training costs should be around 20 

percent higher and several suggested 

that the number of employees the 

Bureau is assuming for training costs on 

an annual basis is too low. One SER, for 

example, stated that everyone who 

interacts with customers will need to be 

trained and several indicated that the 

scope of employees who will require 

training includes administrative and 

management staff, as well as those 

directly involved in the credit process. 

One SER stated that the hourly 

compensation the Bureau was using for 


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903 82 FR 22318 (May 15, 2017). 

904For example, one SER was concerned that 

published 1071 data could lead to increased 

litigation and thus a higher cost of credit for small 

businesses. Another SER expressed concern that 

pricing information could be misinterpreted by 

users of 1071 data (for example, according to the 

SER, higher pricing for one race might be used to 

infer discrimination when the pricing was in fact 

unrelated to the race of the applicant). Such a 

misinterpretation may cause reputational damage 

and consequently decrease applications. 905SBREFA Outline at 50–52. 

cost calculations is assuming employees 

are too junior given the complexity of 

the process and should be around $25 

higher. Another suggested that the 

transcribing data costs estimate is too 

low. One SER remarked that researching 

questions and the annual subscription 

cost of 1071 data management or 

geocoding software is too low. While the 

Bureau has not made specific changes in 

response to these suggestions, the 

Bureau seeks comment on its estimation 

methodology and cost estimates. In 

accordance with the balancing test 

discussed in part VI above, the Bureau 

expects to publicly release data 

collected under the rule, potentially 

with certain data modified or deleted. A 

more fulsome discussion of potential 

risks and harms from the publication of 

a public 1071 data can be found in part 

VI.C above, but in this section the 

Bureau acknowledges several potential 

costs to covered entities that stem from 

the publication of a public dataset under 

the proposed rule. 

With the publicly disclosed data, 

users would be able to assess fair 

lending risks at the institution and 

market level, furthering section 1071’s 

fair lending purpose. Several 

commenters to the Bureau’s 2017 RFI 

expressed concerns, however, about 

costs related to these analyses.903

During the SBREFA process, some SERs 

were concerned that published 1071 

data could be used against financial 

institutions in litigation by class action 

attorneys or to harm their public 

reputations.904 Depending on the extent 

of publicly disclosed data, the Bureau 

expects that some financial institutions 

could incur ongoing costs related to 

responding to reports of disparities in 

their small business lending practices. 

Some financial institutions could also 

experience reputational risks associated 

with high profile reports of existing 

disparities where more fulsome analysis 

of its business practices would conclude 

that the disparities do not support a 

finding of discrimination on a 

prohibited basis. In anticipation of 

needing to respond to outside analysis 

and potential reputational risks, it is 

possible that some financial institutions 

may choose to change their product 

offerings available to small businesses, 

underwriting or pricing practices, or 

overall participation in the small 

business lending market. These costs are 

difficult to quantify, but the Bureau 

seeks comment on the extent of the 

possible costs posed by litigation or 

reputational harm as a result of the 

proposed rule. 

The Bureau also received feedback 

that financial institutions could face 

potential costs with the publication of a 

public dataset under the proposed rule 

either because potential clients would 

be concerned about their data being 

collected or because of the additional 

competitive pressure brought by a 

publicly available dataset. During the 

SBREFA process, a number of SERs 

were concerned that full disclosure of 

all 1071 data would result in the reidentification of small business 

applicants and potentially harm their 

privacy interests. Several SERs asserted 

that public knowledge of borrowing 

activity (even without any other 

potential harms) would be very 

concerning to some small businesses as 

some small business owners consider 

that information sensitive or deeply 

personal. Relatedly, one SER said that 

the collection of 1071 data, including 

personal or demographic information, 

could seem like an invasion of privacy 

by the financial institution, particularly 

to minorities, and thus prospective 

applicants may decide to seek financing 

elsewhere. A number of these SERs 

stated that 1071 data could be used to 

generate marketing lists, resulting in a 

financial institution’s competitors 

stealing small business customers. 

Several SERs were concerned about the 

Bureau potentially making public 

pricing data. Several SERs were 

particularly focused on information 

regarding pricing and pricing structure 

being commercially sensitive to 

financial institutions. The Bureau seeks 

comment on this class of potential costs 

to covered financial institutions. 

The Bureau seeks comment on its 

analysis of ongoing costs to covered 

financial institutions as described 

herein. 

4. Costs to Small Businesses 

The Bureau expects that any direct 

costs of the proposed rule on small 

businesses would stem from additional 

fields that the applicant may have to 

complete on credit applications due to 

the proposed rule compared to the 

baseline application process. This could 

include information such as the race, 

ethnicity, and sex of business owners or 

number of workers that are not typically 

required on business credit 

applications. However, the Bureau 

expects that the cost of completing these 

fields on applications to be negligible, 

especially compared to the overall cost 

of credit. Therefore, the Bureau focuses 

the rest of the discussion on the costs of 

small businesses to whether and how 

the Bureau expects financial institutions 

to pass on the costs of compliance with 

the proposed rule to small businesses 

and any possible effects on the 

availability of small business credit. 

Three types of costs (one-time, fixed 

ongoing, and variable ongoing) have the 

potential to influence the price and 

availability of credit to small businesses. 

In a competitive marketplace, standard 

microeconomics suggests that lenders 

will extend loans up to the point at 

which the revenue from granting an 

additional loan is equal to the 

additional cost associated with the 

financial institution providing the loan. 

One-time costs and fixed ongoing costs 

affect the overall profitability of a 

lender’s loan portfolio but do not affect 

the added profit from extending an 

additional loan. Variable ongoing costs, 

however, affect the profitability of each 

additional loan and will influence the 

number of loans a lender provides. 

Based on the Bureau’s available 

evidence, it expects that the variable 

ongoing costs will be passed on in full 

to small business credit applicants in 

the form of higher prices or fees and 

does not expect there to be a significant 

reduction in small businesses’ ability to 

access credit. 

One-time and fixed ongoing costs 

affect the overall profitability of the loan 

portfolio and will be considered in the 

lender’s decision to remain in the small 

business credit market or the market for 

specific small business credit products. 

A financial institution would find it 

worthwhile to incur the one-time costs 

associated with complying with the 

proposed rule if it expects to generate 

enough profit over multiple years to 

cover those costs. Each year, a financial 

institution would find it worthwhile to 

continue extending credit if the total 

expected revenue from its chosen 

quantity of loans is greater than the sum 

of its ongoing fixed and variable costs. 

A financial institution would find it 

worthwhile to exit the market, even if it 

had already incurred the one-time costs, 

if the total expected revenue from that 

year were less than the total expected 

ongoing costs. During the SBREFA 

process, the Bureau asked panelists how 

they would respond to the cost of 

complying with the proposed rule.905

One nondepository institution 

participant did indicate that smaller 

firms in their industry may stop 

participating if one-time costs are too 


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906The SER feedback discussed herein can be 

found in the SBREFA Panel Report at 40. 

907As stated in the SBREFA Panel Report at 40, 

‘‘[g]enerally, SERs did not suggest that they would 

leave the small business lending market in response 

to increased costs under the eventual 1071 rule.’’ 

high, particularly if small business 

lending is a secondary aspect of their 

business model.906 Another 

nondepository institution participant 

indicated that significantly increasing 

the time between application and 

decision could occur due to the 

proposed requirements, which they said 

would threaten their ability to compete 

with other lenders. 

In the One-Time Cost Survey, the 

Bureau asked respondents to rank a list 

of potential actions they may take in 

response to the compliance costs of 

implementing section 1071. 

Respondents ranked the following list: 

‘‘Raise rates or fees on small business 

products’’; ‘‘Raise rates/fees on other 

credit products’’; ‘‘Accept lower 

profits’’; ‘‘Exit some geographic 

markets’’; ‘‘Tighten underwriting 

standards’’; ‘‘Offer fewer or less 

complex products’’; ‘‘No longer offer 

small business credit products’’; or 

‘‘Other’’ with two write-in options. 

Respondents ranked these options from 

‘‘1’’ to ‘‘9’’ indicating their most to least 

likely responses, where ‘‘1’’ was the 

most likely. 

In order to analyze these responses, 

the Bureau pooled data only from 

respondents that answered both the 

ranking question and the number of 

originations question. The Bureau 

implemented these restrictions to the 

pool to eliminate responses from 

institutions that would not be required 

to report under the proposed rule. Of 

the 105 total respondents to the OneTime Cost Survey, 44 ranked every 

option and reported more than 25 

originations in the last year. The Bureau 

will henceforth refer to these 

respondents as the ‘‘impacts of 

implementation’’ sample. 

Table 15 presents the potential 

responses to implementing section 1071 

and the average ranking assigned by 

respondents in the impacts of 

implementation sample. The responses 

are listed in order of most to least likely 

on average, where a lower average 

ranking number means that respondents 

ranked that response most likely. 

Consistent with economic theory, 

respondents reported that they would be 

most likely to raise rates or fees on small 

business products and other credit 

products. On average, respondents 

reported that they would be least likely 

to exit some geographic markets or cease 

offering small business credit products. 

The Bureau expects that the variable 

ongoing costs would be passed on in 

full to small business credit applicants 

in the form of higher prices or fees. This 

expectation is consistent with both 

standard microeconomic theory and 

feedback from SERs during the SBREFA 

process and respondents to the OneTime Cost Survey. Per application, the 

variable costs are approximately $28, 

$24, and $7 for Type A FIs, Type B FIs, 

and Type C FIs, respectively. Even if the 

variable costs were passed on in full to 

small business applicants in the form of 

higher interest rates or fees associated 

with a loan or line of credit (or even 

applicants in the form of application 

fees), the Bureau expects that this would 

comprise a small portion of the total 

cost of the average loan to the small 

business applicant. 

As discussed above, the Bureau 

believes financial institutions would 

decide to remain in or exit the small 

business credit market based on the 

revenue generated from small business 

credit relative to the sum of one-time 

costs, fixed ongoing costs, and variable 

ongoing costs. The Bureau’s total 

estimated one-time and ongoing costs 

are non-negligible and could potentially 

result in exit from the market by 

financial institutions that do not 

regularly originate many covered credit 

transactions. The Bureau’s proposed 

coverage threshold of 25 covered credit 

transactions in two consecutive years 

could prevent some low-volume 

financial institutions from leaving the 

small business credit market in response 

to the compliance costs of the proposed 

rule. For example, the Bureau estimates 

that a Type A DI would incur one-time 

costs of $58,400 and fixed ongoing costs 

of $4,536. A depository institution that 

originates very few covered transactions 

every year may exit the market if it does 

not expect that profits, even over several 

years, would cover that one-time cost or 

if it does not expect annual revenues to 

exceed the annual ongoing costs. 

However, based on the net income per 

application estimates discussed above, 

the Bureau believes that institutions that 

are covered under the proposed rule 

(i.e., above the proposed coverage 

threshold) will earn enough revenue to 

exceed these costs. Furthermore, the 

Bureau’s findings during the SBREFA 

process and the respondents to the OneTime Cost Survey (discussed above) 

additionally support the Bureau’s 

conclusion that the increase in 

compliance costs will likely be passed 

through to customers in the form of 

increased fees, rather than result in 

financial institutions leaving the small 

business credit market.907


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The Bureau seeks comment on other 

potential costs to small businesses not 

discussed here. The Bureau seeks 

comment on its analysis of costs to 

small businesses as described herein. 

5. Alternatives Considered 

This section discusses two categories 

of alternatives considered: Other 

methods for defining a covered financial 

institution and limiting the data points 

to those mandated by section 1071. The 

Bureau uses the methodologies 

discussed in parts VII.D and VII.E to 

estimate the impacts of these 

alternatives. 

First, the Bureau considered multiple 

reporting thresholds for purposes of 

defining a covered financial institution. 

In particular, the Bureau considered 

whether to exempt financial institutions 

with fewer than 50 or 100 originations 

in each of the two preceding calendar 

years instead of 25 originations, as 

proposed. The Bureau also considered 

whether to exempt depository 

institutions with assets under $100 

million or $200 million from section 

1071’s data collection and reporting 

requirements. 

Under a 50-origination threshold, the 

Bureau estimates that about 2,900 to 

3,100 depository institutions would 

report, which is approximately 1,100 

fewer depository institutions relative to 

the proposed threshold of 25 

originations. The Bureau estimates that 

about 2,700 to 2,900 banks and savings 

associations and about 200 credit 

unions would be covered under a 50- 

origination threshold. The Bureau does 

not have sufficient information to 

estimate how many fewer 

nondepository institutions would report 

under this alternative threshold. The 

Bureau estimates that the total one-time 

costs across all financial institutions 

associated with a 50-origination 

threshold would be about $252,000,000 

to $264,000,000, a decrease of about 

$60,000,000 relative to the 25- 

origination threshold. The Bureau 

estimates that the total annual ongoing 

costs associated with this threshold 

would be about $357,000,000 to 

$374,000,000, a decrease of about 

$17,000,000 per year relative to the 25- 

origination threshold. 

Under a 100-origination threshold, the 

Bureau estimates that about 1,800 to 

2,000 depository institutions would 

report, which is approximately 2,200 

fewer depository institutions relative to 

the proposed threshold of 25 

originations. The Bureau estimates that 

about 1,700 to 1,900 banks and savings 

associations and about 100 credit 

unions would be covered under a 100- 

origination threshold The Bureau 

estimates that the total one-time costs 

across all financial institutions 

associated with a 100-origination 

threshold would be about $192,000,000 

to $203,000,000, a decrease of 

$120,000,000 relative to the 25- 

origination threshold. The Bureau 

estimates that the total annual ongoing 

costs associated with this threshold 

would be about $332,000,000 to 

$347,000,000, a decrease of about 

$40,000,000 to $45,000,000 per year 

relative to the 25-origination threshold. 

Again, the Bureau does not have 

sufficient information to estimate how 

many fewer nondepository institutions 

would be required to report under this 

alternative. 

The Bureau also considered $100 

million and $200 million asset-based 

thresholds for depository institutions. 

For the purposes of considering these 

alternatives, the Bureau estimates how 

institutional coverage and costs would 

be different if the Bureau required a 25- 

origination threshold in addition to an 

asset-based threshold for depository 

institutions. The Bureau assumes that 

the alternative proposal would have 

been that a depository institution would 

be required to report its small business 

lending activity for 2019 if it had more 

than 25 originations in 2017 and 2018 

and had assets over the asset-based 

threshold on December 31, 2018. The 

Bureau further assumes that if two 

institutions merged in 2019 then the 

resulting institution would be required 

to report if the sum of the separate 

institutions’ assets on December 31, 

2018 exceeded the asset-based 

threshold. 

Under a $100 million asset-based 

threshold, the Bureau estimates that 

between 3,500 and 3,600 depository 

institutions would report, 

approximately 500 to 600 fewer 

depository institutions relative to a 25- 

origination threshold with no assetbased threshold. The Bureau estimates 

that about 3,100 to 3,300 banks and 

savings associations and about 300 

credit unions would be covered under a 

25-origination and $100 million assetbased threshold. The Bureau estimates 

that the total one-time costs across all 

financial institutions associated with 

the addition of a $100 million asset 

threshold would be about $284,000,000 

to $291,000,000, a decrease of between 

$28,000,000 and $32,000,000 relative to 

the proposed rule. The Bureau estimates 

that the total annual ongoing costs 

associated with this threshold would be 

about $366,000,000 to $384,000,000, a 

decrease of about $7,000,000 to 

$9,000,000 per year relative to the 25- 

origination threshold with no assetbased threshold. 

Under a $200 million asset-based 

threshold, the Bureau estimates that 

between 2,600 and 2,700 depository 

institutions would report, 

approximately 1,400 to 1,500 fewer 

depository institutions relative to a 25- 

origination threshold with no assetbased threshold. The Bureau estimates 

that about 2,300 to 2,400 banks and 

savings associations and about 300 

credit unions would be covered under a 

25-origination and $200 million assetbased threshold. The Bureau estimates 

that the total one-time costs across all 

financial institutions associated with 

the addition of a $200 million asset 

threshold would be about $240,000,000 

to $244,000,000, a decrease of between 

$73,000,000 and $80,000,000 relative to 

the proposed rule. The Bureau estimates 

that the total annual ongoing costs 

associated with this threshold would be 

about $348,000,000 to $363,000,000, a 

decrease of about $25,000,000 to 

$29,000,000 per year relative to the 25- 

origination threshold with no assetbased threshold. 

Second, the Bureau considered the 

costs and benefits for limiting its data 

collection to the data points required by 

the section 1071. In addition to the 

statutorily required data points 

enumerated in section 1071, the statute 

also requires financial institutions to 

collect and report any additional data 

that the Bureau determines would aid in 

fulfilling the purposes of section 1071. 

The Bureau is proposing several 

additional data points that rely solely on 

this authority. Specifically, the Bureau 

is proposing to require that financial 

institutions collect and report data on 

application channel, application 

recipient, denial reasons (for denied 

applications only), pricing information 

(for applications that are originated or 

approved but not accepted), NAICS 

code, number of workers, time in 

business, and number of principal 

owners. The Bureau has considered the 

impact of instead proposing only the 

collection of those data points required 

by statute. 

Requiring the collection and reporting 

of only the statutory data points would 

result in a reduction in the fair lending 

benefit of the data compared to the 

proposed rule. For example, not 

collecting pricing information would 

obscure possible fair lending risk by 

covered financial institutions. Potential 

discriminatory behavior is not limited to 

the action taken on an application, but 

rather includes the terms and conditions 

under which applicants can access 

credit. If the Bureau did not collect 

pricing information, it would not be 

able to evaluate potential discriminatory 

behaviors on the basis of price. As 


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908See Fed. Deposit Ins. Corp., Summary of 

Deposits (SOD)—Annual Survey of Branch Office 

Deposits (last updated June 1, 2021), https://

www.fdic.gov/regulations/resources/call/sod.html. 

The NCUA provides data on credit union branches 

in the quarterly Call Report Data files. See Nat’l 

Credit Union Admin., Call Report Quarterly Data, 

https://www.ncua.gov/analysis/credit-unioncorporate-call-report-data/quarterly-data (last 

visited Aug. 5, 2021). 

909This is the same methodology as used in the 

Bureau’s rural counties list. See Bureau of 

Consumer Fin. Prot., Rural and underserved 

counties list, https://www.consumerfinance.gov/ 

compliance/compliance-resources/mortgageresources/rural-and-underserved-counties-list/ (last 

visited July 28, 2020). 

910The Bureau notes that most credit union 

branches do not belong covered credit unions 

because most credit unions did not report any small 

business loans in the NCUA Call Report data. Of the 

5,437 credit unions that existed in December 2019, 

4,359 (or 81.5 percent) reported no small business 

originations in 2017 or 2018. 

911 If markets are not perfectly competitive or 

financial institutions are not profit maximizers, 

then what financial institutions pass on may differ. 

For example, they may attempt to pass on one-time 

mentioned in part VII.F.1 above, several 

of the data points the Bureau is 

proposing under its ECOA section 

704B(e)(2)(H) authority are useful in 

creating more accurate fair lending 

analyses. A reduction in the rule’s 

ability to facilitate the enforcement of 

fair lending laws would negatively 

impact small businesses and small 

business owners relative to the 

proposed rule. 

Limiting the rule’s data collection to 

only the data points required under the 

statute would also reduce the ability of 

the rule to support the business and 

community development purpose of the 

section 1071. Not including pricing 

information would significantly reduce 

the ability of communities, 

governmental entities, and creditors to 

understand credit conditions available 

to small businesses. Not including 

NAICS code or time in business would 

reduce the ability of governmental 

entities to tailor programs that can 

specifically benefit young businesses or 

businesses in certain industries. This 

reduction in benefits might be 

disproportionately borne by womenowned and minority-owned small 

businesses. 

Only requiring the collection and 

reporting of the statutory data points 

would have reduced the annual ongoing 

cost of complying with the proposed 

rule. Under this alternative, the 

estimated total annual ongoing costs for 

Type A FIs, Type B FIs, and Type C FIs 

would be $6,833; $34,004 and $233,209, 

respectively. Per application, the 

estimated ongoing cost would be $68, 

$85, and $39 for Type A FIs, Type B FIs, 

and Type C FIs, respectively. The 

estimated total annual market-level 

ongoing cost of reporting would be 

between $363,000,000 and $382,000,000 

or about $10,000,000 per year less than 

under the proposed rule. As discussed 

above, respondents to the One-Time 

Cost Survey were instructed to assume 

that they would only report the 

mandatory data fields. Hence, the 

Bureau can only estimate how ongoing 

costs would be different under this 

alternative. 

G. Potential Impact on Depository 

Institutions and Credit Unions With $10 

Billion or Less in Total Assets 

As discussed above, the proposed rule 

would exclude financial institutions 

with fewer than 25 originated covered 

credit transactions in both of the two 

preceding calendar years. The Bureau 

believes that the benefits of the 

proposed rule to banks, savings 

associations, and credit unions with $10 

billion or less in total assets will be 

similar to the benefits to covered 

financial institutions as a whole, 

discussed above. Regarding costs, other 

than as noted here, the Bureau also 

believes that the impact of the proposed 

rule on banks, savings associations, and 

credit unions with $10 billion or less in 

total assets will be similar to the impact 

for covered financial institutions as a 

whole. The primary difference in the 

impact on these institutions is likely to 

come from differences in the level of 

complexity of operations, compliance 

systems, and software, as well as 

number of product offerings and volume 

of originations of these institutions. 

Based on FFIEC and NCUA Call 

Report data for December 2019, 10,375 

of 10,525 banks, savings associations, 

and credit unions had $10 billion or less 

in total assets. The Bureau estimates 

that between 3,900 and 4,000 of such 

institutions would be subject to the 

proposed rule. The Bureau estimates 

that the market-level impact of the 

proposed rule on annual ongoing costs 

for banks, savings associations, and 

credit unions with $10 billion or less in 

assets would be between $151,000,000 

and $171,000,000. Regarding one-time 

costs, the Bureau estimates that the 

market-level impact of the proposed 

rule for banks, savings associations, and 

credit unions with $10 billion or less in 

assets would be between $209,000,000 

and $220,000,000. Using a 7 percent 

discount rate and a five-year 

amortization window, the estimated 

annualized one-time costs would be 

between $51,000,000 and $54,000,000. 

The Bureau seeks comment on its 

analysis of the potential impact on 

depository institutions and credit 

unions with $10 billion or less in total 

assets as described herein. 

H. Potential Impact on Small Businesses 

in Rural Areas 

The proposed rule would not directly 

impact small businesses in rural areas. 

However, as with all small businesses, 

small businesses in rural areas may bear 

some indirect costs of the proposal. This 

would occur if financial institutions 

serving rural areas are covered by the 

proposed rule and if those institutions 

pass on some or all of their cost of 

complying with the proposed rule to 

small businesses. 

The source data from CRA 

submissions that the Bureau uses to 

estimate institutional coverage and 

market estimates provide information 

on the county in which small business 

borrowers are located. However, 

approximately 89 percent of banks did 

not report CRA data in 2019, and as a 

result the Bureau does not believe the 

reported data are robust enough to 

estimate the locations of the small 

business borrowers for the banks that do 

not report CRA data. The Credit Union 

Call Report data do not provide any 

information on the location of credit 

union borrowers. Nonetheless, the 

Bureau is able to provide some 

geographical estimates of institutional 

coverage based on depository institution 

branch locations. 

The Bureau used the FDIC’s Summary 

of Deposits to identify the location of all 

brick and mortar bank and savings 

association branches and the NCUA 

Credit Union Branch Information to 

identify the location of all credit union 

branch and corporate offices.908 A bank, 

savings association, or credit union 

branch was defined as rural if it is in a 

rural county, as specified by the USDA’s 

Urban Influence Codes.909 A branch is 

considered covered by the proposed 

rule if it belongs to a bank, savings 

association, or credit union that the 

Bureau estimated would be included 

under the proposed threshold of 25 

originations in 2017 and 2018. Using the 

estimation methodology discussed in 

part VII.D above, the Bureau estimates 

that about 90 to 92 percent of rural bank 

and savings association branches and 

about 95 percent of non-rural bank and 

savings association branches would be 

covered under the proposed rule. The 

Bureau estimates that about 27 percent 

of rural credit union branches and about 

29 percent of non-rural credit union 

branches would be covered under the 

proposed rule.910

In a competitive framework in which 

financial institutions are profit 

maximizers, financial institutions 

would pass on variable costs to future 

small business applicants, but absorb 

one-time costs and increased fixed costs 

in the short run.911 Based on previous 


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costs and increases in fixed costs, or they may not 

be able to pass on variable costs. Furthermore, some 

financial institutions may exit the market in the 

long run. However, other financial institutions may 

also enter the market in the long run. 912 5 U.S.C. 601 et seq. 913 5 U.S.C. 603(a). For purposes of assessing the 

impacts of the proposed rule on small entities, 

‘‘small entities’’ is defined in the RFA to include 

small businesses, small not-for-profit organizations, 

and small government jurisdictions. 5 U.S.C. 601(6). 

A ‘‘small business’’ is determined by application of 

SBA regulations and reference to the NAICS 

classifications and size standards. 5 U.S.C. 601(3). 

A ‘‘small organization’’ is any ‘‘not-for-profit 

enterprise which is independently owned and 

operated and is not dominant in its field.’’ 5 U.S.C. 

601(4). A ‘‘small governmental jurisdiction’’ is the 

government of a city, county, town, township, 

village, school district, or special district with a 

population of less than 50,000. 5 U.S.C. 601(5). 

914 5 U.S.C. 605(b). 

915 5 U.S.C. 609. 

HMDA rulemaking efforts and feedback 

through the SBREFA process, the 

following seven operational steps affect 

variable costs: Transcribing data, 

resolving reportability questions, 

transferring data to a data entry system, 

geocoding, researching questions, 

resolving question responses, and 

checking post-submission edits. Overall, 

the Bureau estimates that the impact of 

the proposed rule on variable costs per 

application is $28 for a Type A FI, $24 

for type B FIs, and $7 for Type C FIs. 

The covered financial institutions that 

serve rural areas will attempt to pass 

these variable costs on to future small 

business applicants. Amortized over the 

life of the loan, this expense would 

represent a negligible increase in the 

cost of a covered credit transaction. 

The One-Time Cost Survey can shed 

light on how financial institutions that 

serve rural communities will respond to 

the proposed rule. The Bureau asked 

respondents to the survey to report 

whether their institution primarily 

served rural or urban communities or an 

even mix. All respondents in the 

impacts of implementation sample 

answered this question. Of the 44 

respondents in the impacts of 

implementation sample, 13 primarily 

serve rural communities, 15 primarily 

serve urban communities, and 16 serve 

an even mix. Table 16 presents the 

potential responses to implementing 

section 1071 and the average ranking 

assigned by respondents that serve rural 

communities, urban communities, an 

even mix, and all of the respondents in 

the impacts of implementation sample. 

The responses are listed in order of most 

to least likely on average across all 

respondents, where a lower average 

ranking number means that respondents 

ranked that response most likely. 

Respondents that primarily serve rural 

communities or an even mix rank 

raising rates or fees on small business or 

other credit products as the most likely 

response. These institutions also rank 

exiting some geographic markets and no 

longer offering small business credit 

products as the least likely response to 

the proposed rule. 

The Bureau thus does not anticipate 

any material adverse effect on credit 

access in the long or short term to rural 

small businesses. 

The Bureau seeks comment on its 

analysis of potential impacts on small 

businesses in rural areas as described 

herein. 

VIII. Regulatory Flexibility Act 

Analysis 

The Regulatory Flexibility Act 

(RFA) 912 generally requires an agency to 

conduct an initial regulatory flexibility 

analysis (IRFA) and a final regulatory 

flexibility analysis (FRFA) of any rule 

subject to notice-and-comment 

rulemaking requirements. These 

analyses must ‘‘describe the impact of 

the proposed rule on small entities.’’ 913

An IRFA or FRFA is not required if the 

agency certifies that the rule will not 

have a significant economic impact on 

a substantial number of small 

entities.914 The Bureau also is subject to 

certain additional procedures under the 

RFA involving the convening of a panel 

to consult with small business 

representatives prior to proposing a rule 

for which an IRFA is required.915 The 

Bureau has not certified that the 

proposed rule would not have a 

significant economic impact on a 

substantial number of small entities 

within the meaning of the RFA. 

Accordingly, the Bureau convened and 

chaired a Small Business Review Panel 

under SBREFA to consider the impact of 

the proposed rule on small entities that 

would be subject to that rule and to 

obtain feedback from representatives of 

such small entities. The Small Business 

Review Panel for this rulemaking is 

discussed below in part VIII.A. The 

Bureau is also publishing an IRFA. 

Among other things, the IRFA estimates 

the number of small entities that will be 

subject to the proposed rule and 


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916 5 U.S.C. 609(b). 

917 Id. 

918 5 U.S.C. 609(b)(1). 

919 5 U.S.C. 609(b)(2). 

920 5 U.S.C. 609(b)(3). 

921 5 U.S.C. 609(b)(4). As described in part VIII.B 

below, sections 603(b)(3) through (5) and 603(c) of 

the RFA, respectively, require a description of and, 

where feasible, provision of an estimate of the 

number of small entities to which the proposed rule 

will apply; a description of the projected reporting, 

record keeping, and other compliance requirements 

of the proposed rule, including an estimate of the 

classes of small entities which will be subject to the 

requirement and the type of professional skills 

necessary for preparation of the report or record; an 

identification, to the extent practicable, of all 

relevant Federal rules which may duplicate, 

overlap, or conflict with the proposed rule; and a 

description of any significant alternatives to the 

proposed rule which accomplish the stated 

objectives of applicable statutes and which 

minimize any significant economic impact of the 

proposed rule on small entities. 5 U.S.C. 603(b)(3) 

through (5), (c). 

922 5 U.S.C. 609(b)(5). 

923 5 U.S.C. 609(b)(6). 

924See SBREFA Panel Report at 15. 

925These questions also appeared in a shorter 

Discussion Guide for Small Entity Representatives. 

Bureau of Consumer Fin. Prot., Small Business 

Advisory Review Panel, Consumer Financial 

Protection Bureau, Small Business Lending Data 

Collection Rulemaking, Discussion Guide for Small 

Entity Representatives (Sept. 15, 2020), https://

files.consumerfinance.gov/f/documents/cfpb_1071- 

sbrefa_discussion-guide_2020-09.pdf. 

926This written feedback is attached as appendix 

A to the SBREFA Panel Report. 

927Bureau of Consumer Fin. Prot., Consumer 

Financial Protection Bureau Releases Report on 

Implementing the Dodd-Frank Act’s Small Business 

Lending Data Collection Requirement (Dec. 15, 

2021), https://www.consumerfinance.gov/about-us/ 

newsroom/consumer-financial-protection-bureaureleases-report-on-implementing-the-dodd-frankacts-small-business-lending-data-collectionrequirement/. 

928 5 U.S.C. 609(b)(5). 

describes the impact of that rule on 

those entities. The IRFA for this 

rulemaking is set forth below in part 

VIII.B. 

A. Small Business Review Panel 

Under section 609(b) of the RFA, as 

amended by SBREFA and the DoddFrank Act,916 the Bureau must seek, 

prior to conducting the IRFA, 

information from representatives of 

small entities that may potentially be 

affected by its proposed rules to assess 

the potential impacts of that rule on 

such small entities.917 Section 609(b) 

sets forth a series of procedural steps 

with regard to obtaining this 

information. The Bureau first notifies 

the Chief Counsel for Advocacy of the 

SBA (Chief Counsel) and provides the 

Chief Counsel with information on the 

potential impacts of the proposed rule 

on small entities and the types of small 

entities that might be affected.918 Not 

later than 15 days after receipt of the 

formal notification and other 

information described in section 

609(b)(1) of the RFA, the Chief Counsel 

then identifies the small entity 

representatives, the individuals 

representative of affected small entities 

for the purpose of obtaining advice and 

recommendations from those 

individuals about the potential impacts 

of the proposed rule.919 The Bureau 

convenes a Small Business Review 

Panel for such rule consisting wholly of 

full-time Federal employees of the office 

within the Bureau responsible for 

carrying out the proposed rule, OIRA 

within the OMB, and the Chief 

Counsel.920 The Small Business Review 

Panel reviews any material the Bureau 

has prepared in connection with the 

SBREFA process and collects the advice 

and recommendations of each 

individual small entity representative 

identified by the Bureau after 

consultation with the Chief Counsel on 

issues related to sections 603(b)(3) 

through (b)(5) and 603(c) of the RFA.921

No later than 60 days after the date the 

Bureau convenes the Small Business 

Review Panel, the panel reports on the 

comments of the small entity 

representatives (SERs) and its findings 

as to the issues on which the Small 

Business Review Panel consulted with 

the SERs, and the report is made public 

as part of the rulemaking record.922

Where appropriate, the Bureau modifies 

the proposed rule or the IRFA in light 

of the foregoing process.923

On August 10, 2020, the Bureau 

provided the Chief Counsel (as well as 

OIRA) with the formal notification and 

other information required under 

section 609(b)(1) of the RFA. To obtain 

feedback from small entities to inform 

the Small Business Review Panel 

pursuant to section 609(b)(2) and (4) of 

the RFA, the Bureau, in consultation 

with the Chief Counsel, identified 

several categories of small entities that 

may be subject to the proposed rule for 

purposes of the IRFA: Depository 

institutions; fintech lenders and MCA 

providers; commercial finance 

companies; nondepository CDFIs; 

nondepository lenders of other 5+ unit 

mortgages; Farm Credit System 

members; and governmental lending 

entities. Section 3 of the IRFA, in part 

VIII.B.3 below, describes in greater 

detail the Bureau’s analysis of the 

number and types of entities that may 

be affected by the proposed rule. Having 

identified the categories of small entities 

that may be subject to the proposed rule 

for purposes of an IRFA, the Bureau 

then, in consultation with the Chief 

Counsel and OIRA, selected 20 SERs to 

participate in the SBREFA process. As 

discussed in section 7 of the SBREFA 

Panel Report,924 described below, the 

SERs included representatives from 

each of the categories identified by the 

Bureau and comprised a diverse group 

of individuals with regard to geography 

and type of locality (i.e., rural, urban, 

suburban, or metropolitan areas). 

On October 15, 2020, the Bureau 

formally convened the Small Business 

Review Panel pursuant to section 

609(b)(3) of the RFA. Afterwards, to 

collect the advice and recommendations 

of the SERs under section 609(b)(4) of 

the RFA, the Small Business Review 

Panel held a total of four Panel Outreach 

Meetings with the SERs during October 

19–22, 2020, conducted online via video 

conference. To help SERs and to 

facilitate an informed and detailed 

discussion of the proposals under 

consideration, discussion questions for 

the SERs were included throughout the 

Bureau’s SBREFA Outline.925 In 

advance of the Panel Outreach 

Meetings, the Bureau, SBA’s Office of 

Advocacy, and OIRA held a series of 

video conferences with the SERs to 

describe the Small Business Review 

Process, obtain important background 

information about each SER’s current 

business practices, and begin 

discussions on selected portions of the 

proposals under consideration. All 20 

SERs participated in the Panel Outreach 

Meetings. The Panel also invited SERs 

to submit written feedback by November 

9, 2020; the Bureau received written 

feedback from 15 of the SERs.926

The Bureau also invited other 

stakeholders to submit feedback on the 

SBREFA Outline, which was due by 

December 14, 2020. See generally 

SBREFA Outline. Feedback from these 

other stakeholders was not considered 

by the Panel and is not reflected in the 

Panel Report. See part III above for 

additional information. 

On December 15, 2020, the Bureau 

publicly released the written SBREFA 

Panel Report.927 The SBREFA Panel 

Report includes the following: 

Background information on the 

proposals under consideration at the 

time; information on the types of small 

entities that would be subject to those 

proposals and on the SERs who were 

selected to advise the Panel; a summary 

of the Panel’s outreach to obtain the 

advice and recommendations of those 

small entity representatives; a 

discussion of the comments and 

recommendations of the small entity 

representatives; and a discussion of the 

Panel’s findings, focusing on the 

statutory elements required under 

section 603 of the RFA.928

In preparing this proposed rule and 

the IRFA, the Bureau has considered the 


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929 5 U.S.C. 603(a). 

930 5 U.S.C. 603(b)(1). 

931 5 U.S.C. 603(b)(2). 

932 5 U.S.C. 603(b)(3). 

933 5 U.S.C. 603(b)(4). 

934 5 U.S.C. 603(b)(5). 

935 5 U.S.C. 603(c). 

936 5 U.S.C. 603(d)(1); Dodd-Frank Act section 

1100G(d)(1), 124 Stat. 2112. 

937ECOA section 704B. 

938While Call Report and CRA data provide some 

indication of the level of supply of small business 

credit, the lack of data on small business credit 

applications makes demand for credit by small 

businesses more difficult to assess, including with 

respect to local markets or protected classes. 

feedback from SERs through the 

SBREFA process and the findings and 

recommendations in the SBREFA Panel 

Report. The section-by-section analysis 

of the proposed rule in part V above and 

the IRFA discuss this feedback and the 

specific findings and recommendations 

of the Panel, as applicable. The SBREFA 

process provided the Panel and the 

Bureau with an opportunity to identify 

and explore opportunities to minimize 

the burden of the proposed rule on 

small entities while achieving the rule’s 

purposes. It is important to note, 

however, that the Panel prepared the 

SBREFA Panel Report at a preliminary 

stage of the proposal’s development and 

that the SBREFA Panel Report—in 

particular, the Panel’s findings and 

recommendations—should be 

considered in that light. Also, any 

options identified in the SBREFA Panel 

Report for reducing the proposed rule’s 

regulatory impact on small entities were 

expressly subject to further 

consideration, analysis, and data 

collection by the Bureau to ensure that 

the options identified were practicable, 

enforceable, and consistent with section 

1071 of the Dodd-Frank Act and its 

statutory purposes. The proposed rule 

and the IRFA reflect further 

consideration, analysis, and data 

collection by the Bureau. 

B. Initial Regulatory Flexibility Analysis 

Under RFA section 603(a), an IRFA 

‘‘shall describe the impact of the 

proposed rule on small entities.’’ 929

Section 603(b) of the RFA sets forth the 

required elements of the IRFA. Section 

603(b)(1) requires the IRFA to contain a 

description of the reasons why action by 

the agency is being considered.930

Section 603(b)(2) requires a succinct 

statement of the objectives of, and the 

legal basis for, the proposed rule.931 The 

IRFA further must contain a description 

of and, where feasible, an estimate of 

the number of small entities to which 

the proposed rule will apply.932 Section 

603(b)(4) requires a description of the 

projected reporting, recordkeeping, and 

other compliance requirements of the 

proposed rule, including an estimate of 

the classes of small entities that will be 

subject to the requirement and the types 

of professional skills necessary for the 

preparation of the report or record.933 In 

addition, the Bureau must identify, to 

the extent practicable, all relevant 

Federal rules which may duplicate, 

overlap, or conflict with the proposed 

rule.934 Furthermore, the Bureau must 

describe any significant alternatives to 

the proposed rule which accomplish the 

stated objectives of applicable statutes 

and which minimize any significant 

economic impact of the proposed rule 

on small entities.935 Finally, as 

amended by the Dodd-Frank Act, RFA 

section 603(d) requires that the IRFA 

include a description of any projected 

increase in the cost of credit for small 

entities, a description of any significant 

alternatives to the proposed rule which 

accomplish the stated objectives of 

applicable statutes and which minimize 

any increase in the cost of credit for 

small entities (if such an increase in the 

cost of credit is projected), and a 

description of the advice and 

recommendations of representatives of 

small entities relating to the cost of 

credit issues.936

1. Description of the Reasons Why 

Agency Action Is Being Considered 

As discussed in part I above, section 

1071 of the Dodd-Frank Act amended 

ECOA to require that financial 

institutions collect and report to the 

Bureau certain data regarding 

applications for credit for womenowned, minority-owned, and small 

businesses.937 Section 1071’s statutory 

purposes are (1) to facilitate 

enforcement of fair lending laws, and (2) 

to enable communities, governmental 

entities, and creditors to identify 

business and community development 

needs and opportunities of womenowned, minority-owned, and small 

businesses. 

Section 1071 specifies a number of 

data points that financial institutions 

are required to collect and report, and 

also provides authority for the Bureau to 

require any additional data that the 

Bureau determines would aid in 

fulfilling its statutory purposes. Section 

1071 also contains a number of other 

requirements, including those that 

address restricting the access of 

underwriters and other persons to 

certain 1071 data, publication of 1071 

data, and the Bureau’s discretion to 

modify or delete data prior to 

publication in order to advance a 

privacy interest. 

As discussed throughout this notice, 

Congress amended ECOA by adding 

section 1071, which directs the Bureau 

to adopt regulations governing the 

collection and reporting of small 

business lending data. Section 1071 

directs the Bureau to prescribe such 

rules and issue such guidance as may be 

necessary to carry out, enforce, and 

compile data pursuant to section 1071, 

and permits the Bureau to adopt 

exceptions to any requirement or to 

exempt financial institutions from the 

requirements of section 1071 as the 

Bureau deems necessary or appropriate 

to carry out the purposes of section 

1071. 

In addition, as discussed in part II 

above, currently available data on small 

business lending are fragmented, 

incomplete, and not standardized, 

making it difficult to make meaningful 

comparisons across products, financial 

institutions, and over time. This hinders 

attempts by policymakers and other 

stakeholders to understand the size, 

shape, and dynamics of the small 

business lending marketplace, including 

the interaction of supply and demand, 

as well as potentially problematic 

lending practices, gaps, or trends in 

funding that may be holding back some 

communities.938

Data collected under the proposed 

rule would constitute the largest and 

most comprehensive data in the United 

States on credit availability for small 

businesses. The proposed data 

collection would also provide an 

unprecedented window into the small 

business lending market, and such 

transparency will benefit financial 

institutions covered by the rule. The 

public data published under the 

proposed rule would allow financial 

institutions to better understand the 

demand for small business credit 

products and the conditions under 

which they are being supplied by other 

lenders. Lenders would likely use the 

data to understand small business 

lending market conditions more 

effectively and at a more granular level 

than is possible with existing data 

sources, such as Call Reports, data from 

public lending programs, or privately 

purchased data. Data collected under 

the proposed rule could enable lenders 

to identify promising opportunities to 

extend credit. 

The proposed rule will also provide 

some reduction of the compliance 

burden of fair lending reviews for lower 

risk financial institutions by reducing 

the ‘‘false positive’’ rates during fair 

lending review prioritization by 

regulators. Currently, financial 

institutions are subject to fair lending 

reviews by regulators to ensure that they 


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939See SBREFA Panel Report at 41–42. 

940 5 U.S.C. 601(6). 

941The current SBA size standards are found on 

SBA’s website, Small Bus. Admin., Table of size 

standards (Aug. 19, 2019), http://www.sba.gov/ 

content/table-small-businesssize-standards. 

are complying with the ECOA in their 

small business lending processes. Data 

reported under the proposed rule will 

allow regulators to prioritize fair 

lending reviews of lenders with higher 

risk of potential fair lending violations, 

which reduces the burden on 

institutions with lower fair lending risk. 

The proposed rule effectuates 

Congress’s specific mandate to the 

Bureau to adopt rules to implement 

section 1071. For a further description 

of the reasons why agency action is 

being considered, see the background 

discussion for the proposed rule in part 

II above. 

2. Succinct Statement of the Objectives 

of, and Legal Basis for, the Proposed 

Rule 

This rulemaking has multiple 

objectives. The proposed rule is 

intended to advance the two statutory 

purposes of section 1071, which are (1) 

facilitating enforcement of fair lending 

laws and (2) enabling communities, 

governmental entities, and creditors to 

identify business and community 

development needs and opportunities of 

women-owned, minority-owned, and 

small businesses. To achieve these 

objectives, the proposed rule would 

require covered financial institutions to 

collect and report certain data on 

applications for covered credit 

transactions for small businesses, 

including minority-owned and womenowned small businesses. The data to be 

collected and reported would include a 

number of statutorily required data 

fields regarding small business 

applications, as well as several 

additional data fields that the Bureau 

preliminarily determines would help 

fulfill the purposes of section 1071. The 

Bureau would make available to the 

public, annually on the Bureau’s 

website, the data submitted to it by 

financial institutions, subject to 

deletions or modifications made by the 

Bureau, at its discretion, if the Bureau 

determines that such deletions or 

modifications would advance a privacy 

interest. 

As described above, the Dodd-Frank 

Act amended ECOA by adding section 

1071, which directs the Bureau to adopt 

regulations governing the collection and 

reporting of small business lending data. 

ECOA section 704B(g)(1) grants the 

Bureau general rulemaking authority, 

providing that the Bureau shall 

prescribe such rules and issue such 

guidance as may be necessary to carry 

out, enforce, and compile data pursuant 

to section 1071. Section 704B(g)(2) also 

permits the Bureau to adopt exceptions 

to any requirement of section 1071 and 

to conditionally or unconditionally 

exempt any financial institution or class 

of financial institutions from the 

requirements of section 1071, as the 

Bureau deems necessary or appropriate 

to carry out the purposes of section 

1071. In addition, section 703(a) of 

ECOA authorizes the Bureau to 

prescribe regulations to carry out the 

purposes of ECOA. 

Much of section 1071 establishes 

requirements or obligations for financial 

institutions that the Bureau would 

implement in this proposed rule. ECOA 

section 704B(e)(2) requires that the 

information compiled and maintained 

be itemized in order to clearly and 

conspicuously disclose an enumerated 

list of data points. Section 704B(e)(2)(H) 

requires financial institutions to collect 

and report any additional data that the 

Bureau determines would aid in 

fulfilling the purposes of section 1071. 

Other parts of section 1071 require the 

Bureau to adopt regulations to 

implement certain requirements, 

including how financial institutions 

must compile and maintain data 

pursuant to section 1071, and the form 

of information made available by 

financial institutions to the public and 

the form and manner that the Bureau 

itself should make 1071 data available 

to the public generally. Additional 

section 1071 provisions give the Bureau 

the discretionary authority to delete or 

modify 1071 data before making it 

available to the public if the Bureau 

determines that the deletion or 

modification of the data would advance 

a privacy interest, and to compile and 

aggregate 1071 data for its own use, as 

well as to make public such 

compilations of aggregate data. The legal 

basis for the proposed rule is discussed 

in detail in the legal authority analysis 

in part IV and in the section-by-section 

analyses in part V above. 

3. Description of and, Where Feasible, 

Provision of an Estimate of the Number 

of Small Entities to Which the Proposed 

Rule Will Apply 

As discussed in the SBREFA Panel 

Report,939 for the purposes of assessing 

the impacts of the proposed rule on 

small entities, ‘‘small entities’’ is 

defined in the RFA to include small 

businesses, small nonprofit 

organizations, and small government 

jurisdictions.940 A ‘‘small business’’ is 

determined by application of SBA 

regulations in reference to the North 

American Industry Classification 

System (NAICS) classification and size 

standards.941 Under such standards, the 

Bureau identified several categories of 

small entities that may be subject to the 

proposed provisions: Depository 

institutions; fintech lenders and MCA 

providers; commercial finance 

companies; nondepository CDFIs; 

nondepository lenders of other 5+ unit 

mortgages; Farm Credit System 

members; and governmental lending 

entities. The NAICS codes covered by 

these categories are described below. 

The following table provides the 

Bureau’s estimate of the number and 

types of entities that may be affected by 

the proposed rule: 


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942The Bureau notes that the category of 

depository institutions also includes CDFIs that are 

also depository institutions. 

The following paragraphs describe the 

categories of entities that the Bureau 

expects would be affected by the 

proposed rule. 

Depository institutions (banks and 

credit unions): The Bureau estimates 

that there are about 4,100 banks, savings 

associations, and credit unions engaged 

in small business lending that originate 

enough covered transactions to be 

covered by the proposed rule.942 These 

companies potentially fall into four 

different industry categories, including 

‘‘Commercial Banking’’ (NAICS 

522110), ‘‘Savings Institutions’’ (NAICS 

522120), ‘‘Credit Unions’’ (NAICS 

522130), and ‘‘Credit Card Issuing’’ 

(NAICS 522210). All of these industries 

have a size standard threshold of $600 

million in assets. The Bureau estimates 

that about 2,700 of these institutions are 

small entities according to this 

threshold. See part VII.D above for more 

detail on how the Bureau arrived at 

these estimates. 

Fintech lenders and MCA providers: 

As discussed in more detail in part II.D 

above, the Bureau estimates that there 

are about 130 fintech lenders and MCA 

providers engaged in small business 

lending that originate enough covered 

transactions to be covered by the 

proposed rule. These companies span 

multiple industries, including ‘‘All 

Other Nondepository Credit 

Intermediation’’ (NAICS 522298), 

‘‘Consumer Lending’’ (NAICS 522291), 

‘‘Financial Transactions, Processing, 

Reserve, and Clearinghouse Activities’’ 

(NAICS 522320), and ‘‘Data Processing, 

Housing and Related Services’’ (NAICS 

518210). All of these industries have a 

size standard threshold of $35 million 

in sales (NAICS 518210) or $41.5 

million in sales (all other NAICS). The 


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943Fed. Farm Credit Banks Funding Corp., Farm 

Credit 2019 Annual Information Statement of the 

Farm Credit System, at 7 (Feb. 28, 2020), https:// 

www.farmcreditfunding.com/ffcb_live/serve/public/ 

pressre/finin/report.pdf?assetId=395570. The 

Bureau notes that Farm Credit System banks do not 

report FFIEC Call Reports and are thus not counted 

in the number of banks and savings associations 

discussed above. 

Bureau assumes that about 90 percent, 

or 117, of these entities are small 

according to these size standards. 

Commercial finance companies: As 

discussed in more detail in part II.D 

above, the Bureau estimates that there 

are about 300 commercial finance 

companies, including captive and 

independent financing, engaged in 

small business lending that originate 

enough covered credit transactions to be 

covered by the proposed rule. These 

companies span multiple industries, 

including ‘‘Software Publishers’’ 

(NAICS 511210), ‘‘Commercial Air, Rail, 

and Water Transportation Equipment 

Rental and Leasing’’ (NAICS 532411), 

‘‘Other Commercial and Industrial 

Machinery and Equipment Rental and 

Leasing’’ (NAICS 532490), ‘‘Sales 

financing’’ (NAICS 522220) and 

‘‘Consumer Lending’’ (NAICS 522291). 

These industries have size standard 

thresholds of $41.5 million in sales 

(NAICS 511210 and 522220) or $35 

million in sales (NAICS 532411, 532490, 

and 522291). The Bureau assumes that 

about 90 percent, or 270, commercial 

finance companies are small according 

to these size standards. 

Nondepository CDFIs: As discussed in 

more detail in part II.D above, the 

Bureau estimates that there are 240 

nondepository CDFIs engaged in small 

business lending that originate enough 

covered credit transactions to be 

covered by the proposed rule. CDFIs 

generally fall into ‘‘Activities Related to 

Credit Intermediation (Including Loan 

Brokers)’’ (NAICS 522390), 

‘‘Miscellaneous Intermediation’’ (NAICS 

523910), ‘‘Civic and Social 

Organizations’’ (NAICS 813410), and 

‘‘Mortgage and Nonmortgage Loan 

Brokers’’ (NAICS 522310). These 

industries have size standard thresholds 

of $8 million in sales (NAICS 522310, 

813410), $22 million in sales (NAICS 

522390), and $41.5 million in sales 

(NAICS 523910). The Bureau assumes 

that about 95 percent, or 228, 

nondepository CDFIs are small entities. 

Nondepository lenders of other 5+ 

unit mortgages: As discussed in more 

detail in part II.D above, the Bureau 

estimates that there are about 50 

nondepository mortgage lenders 

engaged in small business lending that 

originate enough covered credit 

transactions to be covered by the 

proposed rule. These institutions are in 

either ‘‘Real estate credit’’ (NAICS 

522292) or ‘‘Mortgage and Nonmortgage 

Loan Brokers’’ (NAICS 522310). These 

industries both have a size standard 

threshold of $41.5 million. The Bureau 

estimates that about 90 percent, or 45, 

nondepository mortgage lenders are 

small entities. 

Farm Credit System members: The 

Bureau estimates that there are 72 

members of the Farm Credit System 

(banks and associations) that are 

engaged in small business lending and 

that originate enough covered credit 

transactions to be covered by the 

proposed rule.943 These institutions are 

in the ‘‘All Other Nondepository Credit 

Intermediation’’ (NAICS 522298) 

industry. The size standard for this 

industry is $41.5 million in sales. The 

Bureau estimates that 18 members of the 

Farm Credit System are small entities. 

Governmental lending entities: As 

discussed in more detail in part II.D 

above, the Bureau estimates that there 

are about 100 governmental lending 

entities engaged in small business 

lending that originate enough covered 

credit transactions to be covered by the 

proposed rule. ‘‘Small governmental 

jurisdictions’’ are the governments of 

cities, counties, towns, townships, 

villages, school districts, or special 

districts, with a population of less than 

fifty thousand. The Bureau assumes that 

none of the governmental lending 

entities covered by the proposed rule 

are considered small. 

4. Projected Reporting, Recordkeeping, 

and Other Compliance Requirements of 

the Proposed Rule, Including an 

Estimate of the Classes of Small Entities 

Which Will Be Subject to the 

Requirement and the Type of 

Professional Skills Necessary for the 

Preparation of the Report 

Reporting requirements. ECOA 

section 704B(f)(1) provides that ‘‘[t]he 

data required to be compiled and 

maintained under [section 1071] by any 

financial institution shall be submitted 

annually to the Bureau.’’ Section 1071 

requires financial institutions to collect 

and report information regarding any 

application for ‘‘credit’’ made by 

women-owned, minority-owned, and 

small businesses. The Bureau is also 

proposing that the following 

transactions are not covered by the rule: 

leases, factoring, consumer-designated 

credit, credit secured by certain 

properties, trade credit, public utilities 

credit, securities credit, and incidental 

credit. 

Under the proposed rule, financial 

institutions would be required to report 

data on small business credit 

applications if they originated at least 

25 covered transactions in each of the 

previous two calendar years. The 

Bureau is proposing that 1071 data 

collection be done on a calendar-year 

basis and submitted to the Bureau by a 

specified time after the end of each 

calendar year. The section-by-section 

analyses of the proposed rule in part V 

above discuss the required data points 

and the scope of the proposed rule in 

greater detail. More information is also 

available in section 3 of the SBREFA 

Panel Report. 

Recordkeeping requirements. ECOA 

section 704B(f)(2)(A) requires that 

information compiled and maintained 

under section 1071 be ‘‘retained for not 

less than 3 years after the date of 

preparation.’’ The Bureau is proposing 

that financial institutions retain 1071 

data for at least three years after it is 

submitted to the Bureau. Further, 

704B(f)(2) generally requires that the 

information compiled and maintained 

by financial institutions, and submitted 

annually to the Bureau, be made 

available to the public. Publication of 

these data would fill existing gaps in the 

public’s general understanding of the 

small business lending environment and 

help identify potential fair lending 

concerns regarding small businesses as 

well as the needs and opportunities for 

both business and community 

development. In accordance with 

704B(e)(3), the Bureau is also proposing 

a prohibition on including certain 

personally identifiable information 

about any individuals associated with 

small business applicants in the data 

that a financial institution is required to 

compile, maintain, and report to the 

Bureau, other than information 

specifically required to be collected and 

reported (such as the race, sex, and 

ethnicity of principal owners). Financial 

institutions must, unless subject to an 

exception, limit the access of a certain 

officers and employees to applicants’ 

responses to the inquiries regarding 

women-owned and minority-owned 

business status, as well as the race, sex, 

and ethnicity of principal owners. In 

addition, applicants’ responses to the 

inquiries regarding women-owned and 

minority-owned business status, as well 

as the race, sex, and ethnicity of 

principal owners, must be maintained 

separately from the application and 

accompanying information. 

Costs to small entities. The Bureau 

expects that the proposed rule may 

impose one-time and ongoing costs on 

small-entity providers of credit to small 

businesses. The Bureau has 

preliminarily identified eight categories 

of one-time costs that make up the 

components necessary for a financial 


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944The Bureau notes that the variation in this 

range comes primarily from the uncertainty in the 

number of originations made by small banks and 

savings associations. The range does not fully 

account for the uncertainty associated with 

estimates of the one-time costs for each type of 

institution. 

945The Bureau applied the same methodology for 

the ongoing costs for small entities as that found in 

part VII.E.2 above. 

institution to develop the infrastructure 

to collect and report data required by 

the eventual 1071 rule. Those categories 

are preparation/planning; updating 

computer systems; testing/validating 

systems; developing forms/applications; 

training staff and third parties (such as 

dealers and brokers); developing 

policies/procedures; legal/compliance 

review; and post-implementation review 

of compliance policies and procedures. 

The Bureau conducted a survey 

regarding potential one-time 

implementation costs for section 1071 

compliance targeted at financial 

institutions who extend small business 

credit. The Bureau used the results of 

this survey to estimate the one-time 

costs for financial institutions covered 

by the proposed rule using the 

methodology described in part VII.E.1 

above. The Bureau estimates that 

depository institutions with the lowest 

level of complexity in compliance 

operations (i.e., Type A DIs) would 

incur one-time costs of $58,400. The 

Bureau estimates that depository 

institutions with a middle level of 

complexity in compliance operations 

(i.e., Type B DIs) would incur one-time 

costs of $44,500. The Bureau estimates 

that depository institutions with the 

highest level of complexity in 

compliance operations (i.e., Type C DIs) 

would incur one-time costs of $75,700. 

Finally, the Bureau estimates that NonDIs would incur one-time costs of 

$95,200. 

The Bureau estimates that the overall 

market impact of one-time costs for 

small depository institutions will be 

between $143,000,000 and 

$153,000,000.944 The Bureau estimates 

that the overall market impact of onetime costs for Non-DIs will be 

$63,000,000. 

Adapting ongoing cost methodology 

from previous HMDA rulemaking 

efforts, the Bureau identified 15 specific 

data collection and reporting activities 

that would impose ongoing costs to 

financial institutions covered by the 

rule.945 The Bureau estimated that 

financial institutions with the lowest 

level of complexity in compliance 

operations (i.e. Type A FIs) would incur 

around $7,386 in total annual ongoing 

costs, or about $74 in total cost per 

application processed (assuming a 

representative 100 applications per 

year). For financial institutions of this 

type, the largest drivers of the ongoing 

costs are activities that require 

employee time to complete. Activities 

like transcribing data, transferring data 

to the data management software, 

standard edits and internal checks, and 

training all require loan officer time. 

The Bureau estimates that financial 

institutions with a middle level of 

complexity in compliance operations 

(i.e. Type B FIs), which is somewhat 

automated, would incur approximately 

$35,476 in additional ongoing costs per 

year, or around $89 per application 

(assuming a representative 400 

applications per year). The largest 

components of this ongoing cost are the 

expenses of the small business 

application management software and 

geocoding software (in the form of an 

annual software subscription fee) and 

the external audit of the data. The 

Bureau estimates that financial 

institutions with the highest level of 

complexity in compliance operations 

(i.e. Type C FIs), which is significantly 

automated, would incur approximately 

$243,266 in additional ongoing costs per 

year, or around $41 per application 

(assuming a representative 6,000 

applications per year). The largest 

components of this ongoing cost are the 

cost of an internal audit, transcribing 

data, and annual edits and internal 

checks. 

The Bureau estimates that the overall 

market impact of ongoing costs for small 

entities will be between $112,000,000 

and $126,000,000 per year. 

Estimate of the classes of small 

entities that will be subject to the 

requirement and the type of professional 

skills necessary for the preparation of 

the report or record. Section 603(b)(4) of 

the RFA also requires an estimate of the 

type of professional skills necessary for 

the preparation of the reports or records. 

The recordkeeping and compliance 

requirements of the proposed rule that 

would affect small entities are 

summarized above. Based on outreach 

with financial institutions, vendors, and 

governmental agency representatives, 

the Bureau classified the operational 

activities that financial institutions 

would likely use for Section 1071 data 

collection and reporting into 15 

operational ‘‘tasks’’ which can be 

further grouped into four ‘‘primary 

tasks.’’ These are: 

1. Data collection: Transcribing data, 

resolving reportability questions, and 

transferring data to a 1071 data 

management system. 

2. Reporting and resubmission: 

Geocoding, standard annual edit and 

internal checks, researching questions, 

resolving question responses, checking 

post-submission edits, filing postsubmission documents, and using 

vendor data management software. 

3. Compliance and internal audits: 

Training, internal audits, and external 

audits. 

4. Section 1071-related exams: Exam 

preparation and exam assistance. 

All these tasks are related to the 

preparation of reports or records and 

most of them are performed by 

compliance personnel in the 

compliance department of financial 

institutions. For some financial 

institutions, however, the data intake 

and transcribing stage could involve 

loan officers or processors whose 

primary function is to evaluate or 

process loan applications. For example, 

at some financial institutions the loan 

officers would take in information from 

the applicant to complete the 

application and input that information 

into the reporting system. However, the 

Bureau believes that such roles 

generally do not require any additional 

professional skills related to 

recordkeeping or other compliance 

requirements of this proposed rule that 

are not otherwise required during the 

ordinary course of business for small 

entities. 

The type of professional skills 

required for compliance varies 

depending on the particular task 

involved. For example, data transcribing 

requires data entry skills. Transferring 

data to a data entry system and using 

vendor data management software 

requires knowledge of computer 

systems and the ability to use them. 

Researching and resolving reportability 

questions requires a more complex 

understanding of the regulatory 

requirements and the details of the 

relevant line of business. Geocoding 

requires skills in using the geocoding 

software, web systems, or, in cases 

where geocoding is difficult, knowledge 

of the local area in which the property 

is located. Standard annual editing, 

internal checks, and post-submission 

editing require knowledge of the 

relevant data systems, data formats, and 

section 1071 regulatory requirements in 

addition to skills in quality control and 

assurance. Filing post-submission 

documents requires skills in 

information creation, dissemination, 

and communication. Training, internal 

audits, and external audits require 

communications skills, educational 

skills, and regulatory knowledge. 

Section 1071-related exam preparation 

and exam assistance involve knowledge 

of regulatory requirements, the relevant 

line of business, and the relevant data 

systems. 


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946Rules are duplicative or overlapping if they 

are based on the same or similar reasons for the 

regulation, the same or similar regulatory goals, and 

if they regulate the same classes of industry. Rules 

are conflicting when they impose two conflicting 

regulatory requirements on the same classes of 

industry. 

947See SBREFA Panel Report at app. C. 

948 15 U.S.C. 631 et seq. 

949 12 U.S.C. 4701 et seq. 

The Standard Occupational 

Classification (SOC) code has 

compliance officers listed under code 

13–1041. The Bureau believes that most 

of the skills required for preparation of 

the reports or records related to this 

proposal are the skills required for job 

functions performed in this occupation. 

However, the Bureau recognizes that 

under this general occupational code 

there is a high level of heterogeneity in 

the type of skills required as well as the 

corresponding labor costs incurred by 

the financial institutions performing 

these functions. During the SBREFA 

process, some SERs noted that, for 

instance, high-level corporate officers 

such as CEOs and senior vice presidents 

could be directly involved in some 

regulatory tasks. As such, the Bureau 

seeks comment regarding the skills 

required for the preparation of the 

records related to this proposed rule. 

The Bureau acknowledges the 

possibility that certain aspects of the 

proposed rule may require some small 

entities to hire additional compliance 

staff. The Bureau has no evidence that 

such additional staff will possess a 

qualitatively different set of professional 

skills than small entity staff employed 

currently for compliance purposes. It is 

possible, however, that compliance with 

the proposed rule may emphasize 

certain skills. For example, new data 

points may increase demand for skills 

involved in researching questions, 

standard annual editing, and postsubmission editing. Nevertheless, the 

Bureau believes that compliance would 

still involve the general set of skills 

identified above. The recordkeeping and 

reporting requirements associated with 

this proposal would also involve skills 

for information technology system 

development, integration, and 

maintenance. Financial institutions 

required to report data under HMDA 

often use data management systems 

called HMDA Management Systems 

(HMS) for existing regulatory purposes. 

A similar software for reporting the data 

required under the proposed rule could 

be developed by the institution 

internally or purchased from a thirdparty vendor. It is possible that other 

systems used by financial institutions, 

such as loan origination systems, might 

also need to be upgraded to capture new 

data fields required to be collected and 

reported under the proposed rule. The 

professional skills required for this onetime upgrade would be related to 

software development, testing, system 

engineering, information technology 

project management, budgeting and 

operation. 

5. Identification, to the Extent 

Practicable, of All Relevant Federal 

Rules Which May Duplicate, Overlap, or 

Conflict With the Proposed Rule 

The proposed rule contains 

requirements related to the collection 

and reporting of small business lending 

information by certain financial 

institutions and publication by the 

Bureau. In its SBREFA Outline, the 

Bureau identified certain other Federal 

statutes and regulations that relate in 

some fashion to these areas and has 

considered the extent to which they 

may duplicate, overlap, or conflict with 

this proposal.946 The SBREFA Panel 

Report included an updated list of these 

Federal statutes and regulations, as 

informed by SER feedback.947 Each of 

the statutes and regulations identified in 

the SBREFA Panel Report is discussed 

below. 

ECOA, implemented by the Bureau’s 

Regulation B (12 CFR part 1002), 

prohibits creditors from discriminating 

in any aspect of a credit transaction, 

including a business-purpose 

transaction, on the basis of race, color, 

religion, national origin, sex (including 

sexual orientation and gender identity), 

marital status, age (if the applicant is 

old enough to enter into a contract), 

receipt of income from any public 

assistance program, or the exercise in 

good faith of a right under the Consumer 

Credit Protection Act. The Bureau has 

certain oversight, enforcement, and 

supervisory authority over ECOA 

requirements and has rulemaking 

authority under the statute. 

Regulation B generally prohibits 

creditors from inquiring about an 

applicant’s race, color, religion, national 

origin, or sex (including sexual 

orientation and gender identity), with 

limited exceptions, including if it is 

required by law. Regulation B requires 

creditors to request information about 

the race, ethnicity, sex, marital status, 

and age of applicants for certain 

dwelling-secured loans and to retain 

that information for certain periods. 

Regulation B requires this data 

collection for credit primarily for the 

purchase or refinancing of a dwelling 

occupied or to be occupied by the 

applicant as a principal residence, 

where the extension of credit will be 

secured by the dwelling, and requires 

the data to be maintained by the creditor 

for 25 months for purposes of 

monitoring and enforcing compliance 

with ECOA/Regulation B and other 

laws. Section 1071 of the Dodd-Frank 

Act amended ECOA to require financial 

institutions to compile, maintain, and 

submit to the Bureau certain data on 

credit applications by women-owned, 

minority-owned, and small businesses. 

The Small Business Act,948

administered through the SBA, defines 

a small business concern as a business 

that is ‘‘independently owned and 

operated and which is not dominant in 

its field of operation’’ and empowers the 

Administrator to prescribe detailed size 

standards by which a business concern 

may be categorized as a small business. 

The SBA has adopted more than one 

thousand industry-specific size 

standards, classified by 6-digit NAICS 

codes, to determine whether a business 

concern is ‘‘small.’’ In addition, the 

Small Business Act authorizes loans for 

qualified small business concerns for 

purposes of plant acquisition, 

construction, conversion, or expansion, 

including the acquisition of land, 

material, supplies, equipment, and 

working capital. The SBA sets the 

guidelines that govern the ‘‘7(a) loan 

program,’’ determining which 

businesses financial institutions may 

lend to through the program and the 

type of loans they can provide. The 

Bureau’s proposed rule would include 

reporting on SBA lending and guarantee 

programs. 

The CRA, implemented through 

regulations issued by the OCC, the 

Board, and the FDIC, requires some 

institutions to collect, maintain, and 

report certain data about small business, 

farm, and consumer lending to ensure 

they are serving their communities. The 

purpose of the CRA is to encourage 

institutions to help meet the credit 

needs of the local communities in 

which they do business, including lowand moderate-income neighborhoods. 

The Bureau has been working with the 

CRA regulatory agencies to ensure that 

a 1071 rule and the CRA do not conflict 

and that 1071 data can be used as part 

of the CRA compliance process. 

The Riegle Community Development 

and Regulatory Improvement Act of 

1994949 authorized the Community 

Development Financial Institution Fund 

(CDFI Fund). The Department of the 

Treasury administers the regulations 

that govern the CDFI Fund. A certified 

CDFI is a specialized financial 

institution that works in markets that 

are underserved by traditional financial 

institutions, including regulated 

institutions such as community 


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950Public Law 91–508, tit. II, 84 Stat. 1118 (1970). 

951Public Law 107–56, 115 Stat. 272 (2001). 

952 12 U.S.C. 1811 et seq. 953Public Law 102–242, 105 Stat. 2236 (1991). 

development banks and credit unions, 

and non-regulated institutions such as 

loan and venture capital funds. The 

CDFI program includes an annual 

mandatory Certification and Data 

Collection Report. The Bureau is 

proposing to require that financial 

institutions reporting 1071 data identify 

if they are CDFIs. 

HMDA, implemented by the Bureau’s 

Regulation C (12 CFR part 1003), 

requires lenders who meet certain 

coverage tests to collect, report, and 

disclose detailed information to their 

Federal supervisory agencies about 

mortgage applications and loans at the 

transaction level. The HMDA data are a 

valuable source for regulators, 

researchers, economists, industry, and 

advocates assessing housing needs, 

public investment, and possible 

discrimination as well as studying and 

analyzing trends in the mortgage market 

for a variety of purposes, including 

general market and economic 

monitoring. There may be some overlap 

between what is required to be reported 

under HMDA and what is proposed to 

be covered by section 1071 for certain 

credit applications secured by 

dwellings. 

The Currency and Foreign 

Transactions Reporting Act,950 as 

amended by the USA PATRIOT Act,951

and commonly referred to as the Bank 

Secrecy Act, authorized the Financial 

Crimes Enforcement Network (FinCEN), 

a bureau of the Department of the 

Treasury, to combat money laundering 

and promote financial security. FinCEN 

regulations require covered financial 

institutions to establish and maintain 

written procedures that are reasonably 

designed to identify and verify 

beneficial owners of legal entity 

customers, which is sometimes called 

the customer due diligence (CDD) rule. 

The Federal Credit Union Act, 

implemented by the NCUA (12 CFR part 

1756), requires Federal credit unions to 

make financial reports as specified by 

the agency. The NCUA requires 

quarterly reports of the total number of 

outstanding loans, total outstanding 

loan balance, total number of loans 

granted or purchased year-to-date, total 

amount granted or purchased year-todate for commercial loans to members, 

not including loans with original 

amounts less than $50,000. The NCUA 

also requires quarterly reports of the 

total number and total outstanding 

balance (including the guaranteed 

portion) of loans originated under an 

SBA loan program. 

The Federal Deposit Insurance Act,952

implemented by the FDIC (12 CFR part 

304), requires insured banks and savings 

associations to file Call Reports in 

accordance with applicable instructions. 

These instructions require quarterly 

reports of loans to small businesses, 

defined as loans for commercial and 

industrial purposes to sole 

proprietorships, partnerships, 

corporations, and other business 

enterprises and loans secured by nonfarm non-residential properties with 

original amounts of $1 million or less. 

In accordance with amendments by the 

Federal Deposit Insurance Corporation 

Improvement Act of 1991,953 the 

instructions require quarterly reports of 

loans to small farms, defined as loans to 

finance agricultural production, other 

loans to farmers, and loans secured by 

farmland (including farm residential 

and other improvements) with original 

amounts of $500,000 or less. The Bureau 

intends to work with the FDIC to ensure 

that a 1071 rule and the Federal Deposit 

Insurance Act do not conflict. 

The Bureau requests comment to 

identify any additional such Federal 

statutes or regulations that impose 

duplicative, overlapping, or conflicting 

requirements on financial institutions 

and potential changes to the proposed 

rules in light of duplicative, 

overlapping, or conflicting 

requirements. 

6. Description of Any Significant 

Alternatives to the Proposed Rule 

Which Accomplish the Stated 

Objectives of Applicable Statutes and 

Minimize Any Significant Economic 

Impact of the Proposed Rule on Small 

Entities 

In drafting this proposed rule, the 

Bureau considered multiple financial 

institution reporting thresholds. In 

particular, the Bureau considered 

whether to exempt financial institutions 

with fewer than 50 or 100 originations 

of covered credit transactions for small 

businesses in each of the two preceding 

calendar years, instead of 25 

originations as proposed. The Bureau 

also considered whether to exempt 

depository institutions with assets 

under $100 million or $200 million 

from section 1071’s data collection and 

reporting requirements. The Bureau 

understands that some burden reduction 

may result from a threshold higher than 

25 loans. However, the Bureau is 

concerned that a higher threshold 

would result in the elimination of data 

that are important in fulfilling the 

purposes of section 1071. Therefore, the 

Bureau is proposing an originations 

threshold of at least 25 covered 

transactions in each of the previous two 

calendar years. 

The following table shows the 

estimated impact that different reporting 

thresholds the Bureau considered would 

have had on financial institution 

coverage. For the purposes of 

considering the asset-based threshold 

alternatives, the Bureau estimates how 

institutional coverage and costs would 

be different if the Bureau required a 25- 

origination threshold in addition to an 

asset-based threshold for depository 

institutions. For the asset-based 

threshold alternatives, the Bureau 

assumes that the alternative proposal 

would have been that a depository 

institution would be required to report 

its small business lending activity for 

2019 if it had more than 25 originations 

in both 2017 and 2018 and had assets 

over the asset-based threshold on 

December 31, 2018. The Bureau further 

assumes that if two institutions merged 

in 2019 then the resulting institution 

would be required to report if the sum 

of the separate institutions’ assets on 

December 31, 2018 exceeded the assetbased threshold. 


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954The SER feedback discussed herein can be 

found in the SBREFA Panel Report at 30–32. 955SBREFA Outline at 50. 

956The SER feedback discussed in this sectionby-section analysis can be found in the SBREFA 

Panel Report at 40. 

957See One-Time Cost Survey at 11. 

Further, the Bureau is proposing a 

number of discretionary data points 

(i.e., data points that are not expressly 

listed in section 1071 but that the 

Bureau is proposing to add pursuant to 

its authority under ECOA section 

704B(e)(2)(H)) in this rule. The Bureau 

concluded that seven discretionary data 

points (application channel, application 

recipient, pricing, number of principal 

owners, NAICS code, number of 

workers, and time in business) would 

help the data collection fulfill the 

purposes of section 1071. 

During the SBREFA process, SERs 

provided detailed feedback on the 

discretionary data points that the 

Bureau is considering.954 One SER 

stated that the cost of collecting and 

reporting the discretionary data points 

under consideration would be 

significant, and another SER stated that 

the Bureau should include as few data 

points as possible to avoid unnecessary 

costs. Another SER stated that the 

Bureau should finalize a rule with just 

the statutorily required data points and 

avoid adding any discretionary data 

points. Other SERs favored or opposed 

the inclusion of some or all of the 

individual discretionary data points 

under consideration during the SBREFA 

process. 

The Bureau understands that 

discretionary data points may introduce 

additional burden to small entities. 

However, the Bureau has preliminarily 

determined that these data points would 

aid in fulfilling the statutory purposes of 

section 1071—facilitating enforcement 

of fair lending laws and enabling 

communities, governmental entities, 

and creditors to identify business and 

community development needs and 

opportunities of women-owned, 

minority-owned, and small businesses. 

The Bureau seeks comment on the likely 

impact of the proposed rule on the 

compliance cost to small entities. 

7. Discussion of Impact on Cost of 

Credit for Small Entities 

Three types of costs (one-time, fixed 

ongoing, and variable ongoing) have the 

potential to influence the price and 

availability of credit to small businesses. 

In a competitive marketplace, standard 

microeconomics suggests that lenders 

will extend loans up to the point at 

which the value of granting an 

additional loan is equal to the 

additional cost associated with the 

financial institution providing the loan. 

One-time costs and fixed ongoing costs 

affect the overall profitability of a 

lender’s loan portfolio but do not affect 

the profitability of extending an 

additional loan. Variable ongoing costs, 

however, affect the profitability of each 

additional loan and will influence the 

number of loans a lender provides. 

Based on the Bureau’s available 

evidence, it expects that the variable 

ongoing costs to comply with the 

proposed rule will be passed on in full 

to small business credit applicants in 

the form of higher prices or fees to small 

businesses. 

During the SBREFA process, the 

Bureau asked SERs how they would 

respond to the cost of complying with 

the proposals under consideration.955

One nondepository SER did indicate 

that smaller firms in their industry may 

stop participating if one-time costs are 

too high, particularly if small business 

lending is a secondary aspect of their 

business model.956 Another 

nondepository SER indicated that 

significantly increasing the time 

between application and decision could 

occur due to the proposed requirements, 

which they said would threaten their 

ability to compete with other lenders. 

When asked if they expected the costs 

of the eventual 1071 rule to be passed 

on in the form of higher rates and fees, 

a number of SERs (from banks, credit 

unions, and nondepositories) indicated 

that they expected to do so at their 

institutions. However, a number of other 

SERs indicated that they did not believe 

an eventual 1071 rule would result in 

higher rates or fees. Several depository 

institution SERs said that they would be 

able to absorb the costs in their 

operating budgets as they have with 

previous regulations. 

In the One-Time Cost Survey, the 

Bureau asked respondents to rank a list 

of potential actions they may take in 

response to the compliance costs of 

implementing section 1071.957

Respondents ranked the following list: 

‘‘Raise rates or fees on small business 

products’’; ‘‘Raise rates/fees on other 

credit products’’; ‘‘Accept lower 

profits’’; ‘‘Exit some geographic 

markets’’; ‘‘Tighten underwriting 

standards’’; ‘‘Offer fewer or less 

complex products’’; ‘‘No longer offer 

small business credit products’’; or 

‘‘Other’’ with two write-in options. 

Respondents ranked these options from 

‘‘1’’ to ‘‘9’’ indicating their most to least 

likely responses. Respondents also had 

the opportunity to write in their own 

responses. Consistent with economic 


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958 44 U.S.C. 3501 et seq. 

theory, respondents reported that they 

would be most likely to raise rates or 

fees on small business products and 

other credit products. On average, 

respondents reported that they would be 

least likely to exit some geographic 

markets or cease offering small business 

credit products. Accordingly, the 

Bureau expects the likely impact of an 

eventual 1071 rule on the cost of credit 

to small entities to be higher rates and 

fees because financial institutions pass 

on the variable ongoing costs of the 

required data collection. The Bureau 

estimates that $28, $24, and $7 in 

variable costs would be passed through 

per application to Type A, B, and C FIs, 

respectively. To put these values in 

context, the Bureau estimates that the 

per application net income is in a range 

of $53,000–$60,500; $25,000–$28,500; 

and $79,000–$89,000 for banks and 

savings associations of Types A, B, and 

C, respectively. 

IX. Paperwork Reduction Act 

Under the Paperwork Reduction Act 

of 1995 (PRA),958 Federal agencies are 

generally required to seek approval from 

the Office of Management and Budget 

(OMB) for information collection 

requirements prior to implementation. 

Under the PRA, the Bureau may not 

conduct nor sponsor, and, 

notwithstanding any other provision of 

law, a person is not required to respond 

to, an information collection unless the 

information collection displays a valid 

control number assigned by OMB. 

As part of its continuing effort to 

reduce paperwork and respondent 

burden, the Bureau conducts a 

preclearance consultation program to 

provide the general public and Federal 

agencies with an opportunity to 

comment on the information collection 

requirements in accordance with the 

PRA. This helps ensure that the public 

understands the Bureau’s requirements 

or instructions, respondents can provide 

the requested data in the desired format, 

reporting burden (time and financial 

resources) is minimized, information 

collection instruments are clearly 

understood, and the Bureau can 

properly assess the impact of 

information collection requirements on 

respondents. 

The proposed rule would amend 12 

CFR part 1002 (Regulation B), which 

implements the ECOA. The Bureau’s 

OMB control number for Regulation B is 

3170–0013. This proposed rule would 

revise the information collection 

requirements contained in Regulation B 

that OMB has approved under that OMB 

control number. 

Under the proposal, the Bureau would 

add four information collection 

requirements to Regulation B: 

1. Compilation of reportable data 

(proposed § 1002.107), including a notice 

requirement (in proposed § 1002.107(a)(18) 

through (20)). 

2. Reporting data to the Bureau (proposed 

§ 1002.109). 

3. Firewall notice requirement (proposed 

§ 1002.108(d)). 

4. Recordkeeping (proposed § 1002.111). 

The information collection 

requirements in this proposed rule 

would be mandatory. Certain data fields 

would be modified or deleted by the 

Bureau, in its discretion, to advance a 

privacy interest before the 1071 data are 

made available to the public (as 

permitted by section 1071 and the 

Bureau’s proposed rule). The data that 

are not modified or deleted would be 

made available to the public and are not 

considered confidential. The rest of the 

data would be considered confidential if 

the information: 

• Identifies any natural persons who 

might not be applicants (e.g., owners of 

a business where a legal entity is the 

applicant); or 

• Implicates the privacy interests of 

financial institutions. 

The collections of information 

contained in this proposed rule, and 

identified as such, have been submitted 

to OMB for review under section 

3507(d) of the PRA. A complete 

description of the information collection 

requirements (including the burden 

estimate methods) is provided in the 

information collection request (ICR) that 

the Bureau has submitted to OMB under 

the requirements of the PRA. Please 

send your comments to the Office of 

Information and Regulatory Affairs, 

OMB, Attention: Desk Officer for the 

Bureau of Consumer Financial 

Protection. Send these comments by 

email to oira_submission@omb.eop.gov 

or by fax to 202–395–6974. If you wish 

to share your comments with the 

Bureau, please send a copy of these 

comments as described in the 

ADDRESSES section above. The ICR 

submitted to OMB requesting approval 

under the PRA for the information 

collection requirements contained 

herein is available at 

www.regulations.gov as well as on 

OMB’s public-facing docket at 

www.reginfo.gov. 

Title of Collection: Regulation B: 

Equal Credit Opportunity Act. 

OMB Control Number: 3170–0013. 

Type of Review: Revision of a 

currently approved collection. 

Affected Public: Private Sector; 

Federal and State Governments. 

Estimated Number of Respondents: 

188,800. 

Estimated Total Annual Burden 

Hours: 5,688,000. 

Comments are invited on: (a) Whether 

the collection of information is 

necessary for the proper performance of 

the functions of the Bureau, including 

whether the information will have 

practical utility; (b) the accuracy of the 

Bureau’s estimate of the burden of the 

collection of information, including the 

validity of the methods and the 

assumptions used; (c) ways to enhance 

the quality, utility, and clarity of the 

information to be collected; and (d) 

ways to minimize the burden of the 

collection of information on 

respondents, including through the use 

of automated collection techniques or 

other forms of information technology. 

Comments submitted in response to this 

proposal will be summarized and/or 

included in the request for OMB 

approval. All comments will become a 

matter of public record. 

If applicable, the notice of final rule 

will display the control number 

assigned by OMB to any information 

collection requirements proposed herein 

and adopted in the final rule. 

List of Subjects in 12 CFR Part 1002 

Banks, Banking, Civil rights, 

Consumer protection, Credit, Credit 

unions, Marital status discrimination, 

National banks, Penalties. 

Authority and Issuance 

For the reasons set forth in the 

preamble, the Bureau proposes to 

amend Regulation B, 12 CFR part 1002, 

as set forth below: 

PART 1002—EQUAL CREDIT 

OPPORTUNITY ACT (REGULATION B) 

■ 1. The authority citation for part 1002 

is revised to read as follows: 

Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 

1691b. Subpart B is also issued under 15 

U.S.C. 1691c–2. 

Subpart A—General 

■ 2. Sections 1002.1 through 1002.16 

are designated as subpart A under the 

heading set forth above. 

■ 3. Section 1002.5 is amended by 

revising paragraph (a)(4) introductory 

text and adding paragraphs (a)(4)(vii) 

through (ix) to read as follows: 

§ 1002.5 Rules concerning requests for 

information. 

(a) General rules— 

* * * * * 

(4) Other permissible collection of 

information. Notwithstanding paragraph 

(b) of this section, a creditor may collect 


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information under the following 

circumstances provided that the creditor 

collects the information in compliance 

with appendices F and G to this part, or 

appendix B to 12 CFR part 1003, as 

applicable: 

* * * * * 

(vii) A creditor that was required to 

report small business lending data 

pursuant to § 1002.109 for any of the 

preceding five calendar years but is not 

currently a covered financial institution 

under § 1002.105(b) may collect 

information pursuant to subpart B of 

this part for a covered application as 

defined in § 1002.103 regarding whether 

the applicant is a minority-owned 

business or a women-owned business, 

and the ethnicity, race, and sex of the 

applicant’s principal owners if it 

complies with the requirements of 

subpart B as otherwise required for 

covered financial institutions pursuant 

to §§ 1002.107, 1002.108, 1002.111, 

1002.112, and 1002.114 for that 

application. 

(viii) A creditor that exceeded the 

loan-volume threshold in the first year 

of the two-year threshold period 

provided in § 1002.105(b) may, in the 

second year, collect information 

pursuant to subpart B of this part for a 

covered application as defined in 

§ 1002.103 regarding whether the 

applicant is a minority-owned business 

or a women-owned business, and the 

ethnicity, race, and sex of the 

applicant’s principal owners if it 

complies with the requirements of 

subpart B as otherwise required for 

covered financial institutions pursuant 

to §§ 1002.107, 1002.108, 1002.111, 

1002.112, and 1002.114 for that 

application. 

(ix) A creditor that is not currently a 

covered financial institution under 

§ 1002.105(b), and is not otherwise a 

creditor to which § 1002.5(a)(4)(vii) or 

(viii) applies, may collect information 

pursuant to subpart B of this part for a 

covered application as defined in 

§ 1002.103 regarding whether an 

applicant for a covered credit 

transaction is a minority-owned 

business or a women-owned business, 

and the ethnicity, race, and sex of the 

applicant’s principal owners for a 

transaction if it complies with the 

requirements of subpart B as otherwise 

required for covered financial 

institutions pursuant to §§ 1002.107 

through 1002.112 and 1002.114 for that 

application. 

* * * * * 

■ 4. Subpart B is added to read as 

follows: 

Subpart B—Small Business Lending 

Data Collection 

§ 1002.101 Authority, purpose, and scope. 

§ 1002.102 Definitions. 

§ 1002.103 Covered applications. 

§ 1002.104 Covered credit transactions and 

excluded transactions. 

§ 1002.105 Covered financial institutions 

and exempt institutions. 

§ 1002.106 Business and small business. 

§ 1002.107 Compilation of reportable data. 

§ 1002.108 Firewall. 

§ 1002.109 Reporting of data to the Bureau. 

§ 1002.110 Publication of data. 

§ 1002.111 Recordkeeping. 

§ 1002.112 Enforcement. 

§ 1002.113 Severability. 

§ 1002.114 Effective date, compliance date, 

and special transitional rules. 

§ 1002.101 Authority, purpose, and scope. 

(a) Authority and scope. This subpart 

to Regulation B is issued by the Bureau 

pursuant to section 704B of the Equal 

Credit Opportunity Act (15 U.S.C. 

1691c–2). Except as otherwise provided 

herein, this subpart Applies to covered 

financial institutions, as defined in 

§ 1002.105(b), other than a person 

excluded from coverage of this part by 

section 1029 of the Consumer Financial 

Protection Act of 2010, title X of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law 

111–203, 124 Stat. 1376, 2004 (2010). 

(b) Purpose. This subpart implements 

section 704B of the Equal Credit 

Opportunity Act, which is intended: 

(i) To facilitate enforcement of fair 

lending laws; and 

(ii) To enable communities, 

governmental entities, and creditors to 

identify business and community 

development needs and opportunities of 

women-owned, minority-owned, and 

small businesses. 

§ 1002.102 Definitions. 

In this subpart: 

(a) Affiliate means, with respect to a 

financial institution, any company that 

controls, is controlled by, or is under 

common control with, another 

company, as set forth in the Bank 

Holding Company Act of 1956 (12 

U.S.C. 1841 et seq.). With respect to a 

business or an applicant, affiliate shall 

have the same meaning as in 13 CFR 

121.103. 

(b) Applicant means any person who 

requests or who has received an 

extension of business credit from a 

financial institution. 

(c) Business is defined in 

§ 1002.106(a). 

(d) Business credit shall have the 

same meaning as in § 1002.2(g). 

(e) Closed-end credit transaction 

means an extension of credit that is not 

an open-end credit transaction under 

paragraph (n) of this section. 

(f) Covered application is defined in 

§ 1002.103. 

(g) Covered credit transaction is 

defined in § 1002.104. 

(h) Covered financial institution is 

defined in § 1002.105(b). 

(i) Credit shall have the same meaning 

as in § 1002.2(j). 

(j) Dwelling shall have the same 

meaning as in Regulation C, 12 CFR 

1003.2(f). 

(k) Financial institution is defined in 

§ 1002.105(a). 

(l) Minority individual means a 

natural person who is American Indian 

or Alaska Native, Asian, Black or 

African American, Native Hawaiian or 

Other Pacific Islander, and/or Hispanic 

or Latino. 

(m) Minority-owned business means a 

business for which more than 50 

percent of its ownership or control is 

held by one or more minority 

individuals, and more than 50 percent 

of its net profits or losses accrue to one 

or more minority individuals. 

(n) Open-end credit transaction 

means an open-end credit plan as 

defined in Regulation Z, 12 CFR 

1026.2(a)(20), but without regard to 

whether the credit is consumer credit, 

as defined in § 1026.2(a)(12), is 

extended by a creditor, as defined in 

§ 1026.2(a)(17), or is extended to a 

consumer, as defined in § 1026.2(a)(11). 

(o) Principal owner means a natural 

person who directly owns 25 percent or 

more of the equity interests of a 

business. 

(p) Small business is defined in 

§ 1002.106(b). 

(q) Small business lending application 

register or register means the data 

reported, or required to be reported, 

annually pursuant to § 1002.109. 

(r) State shall have the same meaning 

as in § 1002.2(aa). 

(s) Women-owned business means a 

business for which more than 50 

percent of its ownership or control is 

held by one or more women, and more 

than 50 percent of its net profits or 

losses accrue to one or more women. 

§ 1002.103 Covered applications. 

(a) Covered application. Except as 

provided in paragraph (b) of this 

section, covered application means an 

oral or written request for a covered 

credit transaction that is made in 

accordance with procedures used by a 

financial institution for the type of 

credit requested. 

(b) Circumstances that are not 

covered applications. A covered 

application does not include: 

(1) Reevaluation, extension, or 

renewal requests on an existing business 

credit account, unless the request seeks 

additional credit amounts. 


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(2) Inquiries and prequalification 

requests. 

§ 1002.104 Covered credit transactions 

and excluded transactions. 

(a) Covered credit transaction means 

an extension of business credit that is 

not an excluded transaction under 

paragraph (b) of this section. 

(b) Excluded transactions. The 

requirements of this subpart do not 

apply to: 

(1) Trade credit. A financing 

arrangement wherein a business 

acquires goods or services from another 

business without making immediate 

payment to the business providing the 

goods or services. 

(2) Public utilities credit. Public 

utilities credit as defined in 

§ 1002.3(a)(1). 

(3) Securities credit. Securities credit 

as defined in § 1002.3(b)(1). 

(4) Incidental credit. Incidental credit 

as defined in § 1002.3(c)(1), but without 

regard to whether the credit is consumer 

credit, as defined in § 1002.2(h). 

§ 1002.105 Covered financial institutions 

and exempt institutions. 

(a) Financial institution means any 

partnership, company, corporation, 

association (incorporated or 

unincorporated), trust, estate, 

cooperative organization, or other entity 

that engages in any financial activity. 

(b) Covered financial institution 

means a financial institution that 

originated at least 25 covered credit 

transactions for small businesses in each 

of the two preceding calendar years. For 

purposes of this definition, if more than 

one financial institution was involved 

in the origination of a covered credit 

transaction, only the financial 

institution that made the credit decision 

approving the application shall count 

the origination for purposes of this 

paragraph (b). 

§ 1002.106 Business and small business. 

(a) Business has the same meaning as 

the term ‘‘business concern or concern’’ 

in 13 CFR 121.105. 

(b) Small business has the same 

meaning as the term ‘‘small business 

concern’’ in 15 U.S.C. 632(a), as 

implemented in 13 CFR 121.101 

through 121.107. Notwithstanding the 

size standards set forth in 13 CFR 

121.201, for purposes of this subpart, a 

business is a small business if and only 

if its gross annual revenue, as defined in 

§ 1002.107(a)(14), for its preceding fiscal 

year is $5 million or less. 

§ 1002.107 Compilation of reportable data. 

(a) Data format and itemization. A 

covered financial institution shall 

compile and maintain data regarding 

covered applications from small 

businesses. The data shall be compiled 

in the manner prescribed below and as 

explained in associated Official 

Interpretations and the Filing 

Instructions Guide for this subpart for 

the appropriate year. The data compiled 

shall include the items described in 

paragraphs (a)(1) through (21) of this 

section. 

(1) Unique identifier. An 

alphanumeric identifier, starting with 

the legal entity identifier of the financial 

institution, unique within the financial 

institution to the specific covered 

application, and which can be used to 

identify and retrieve the specific file or 

files corresponding to the application 

for or extension of credit. 

(2) Application date. The date the 

covered application was received by the 

financial institution or the date shown 

on a paper or electronic application 

form. 

(3) Application method. The means 

by which the applicant submitted the 

covered application directly or 

indirectly to the financial institution. 

(4) Application recipient. Whether the 

applicant submitted the covered 

application directly to the financial 

institution or its affiliate, or whether the 

applicant submitted the covered 

application indirectly to the financial 

institution via a third party. 

(5) Credit type. The following 

information regarding the type of credit 

applied for or originated: 

(i) Credit product. The credit product. 

(ii) Guarantees. The type or types of 

guarantees that were obtained for an 

extension of credit, or that would have 

been obtained if the covered credit 

transaction were originated. 

(iii) Loan term. The length of the loan 

term, in months, if applicable. 

(6) Credit purpose. The purpose or 

purposes of the credit applied for or 

originated. 

(7) Amount applied for. The initial 

amount of credit or the initial credit 

limit requested by the applicant. 

(8) Amount approved or originated. (i) 

For an application for a closed-end 

credit transaction that is approved but 

not accepted, the amount approved by 

the financial institution; or 

(ii) For a closed-end credit transaction 

that is originated, the amount of credit 

originated; or 

(iii) For an application for an openend credit transaction that is originated 

or approved but not accepted, the 

amount of the credit limit approved. 

(9) Action taken. The action taken by 

the financial institution on the covered 

application, reported as originated, 

approved but not accepted, denied, 

withdrawn by the applicant, or 

incomplete. 

(10) Action taken date. The date of the 

action taken by the financial institution. 

(11) Denial reasons. For denied 

applications, the principal reason or 

reasons the financial institution denied 

the covered application. 

(12) Pricing information. The 

following information regarding the 

pricing of a covered credit transaction 

that is originated or approved but not 

accepted, as applicable: 

(i) Interest rate. (A) If the interest rate 

is fixed, the interest rate that is or would 

be applicable to the covered credit 

transaction; or 

(B) If the interest rate is adjustable, 

the margin, index value, and index 

name that is or would be applicable to 

the covered credit transaction at 

origination; 

(ii) Total origination charges. The 

total amount of all charges payable 

directly or indirectly by the applicant 

and imposed directly or indirectly by 

the financial institution at or before 

origination as an incident to or a 

condition of the extension of credit, 

expressed in dollars; 

(iii) Broker fees. The total amount of 

all charges included in paragraph 

(a)(12)(ii) of this section that are fees 

paid by the applicant directly to a 

broker or to the financial institution for 

delivery to a broker, expressed in 

dollars; 

(iv) Initial annual charges. The total 

amount of all non-interest charges that 

are scheduled to be imposed over the 

first annual period of the covered credit 

transaction, expressed in dollars; 

(v) Additional cost for merchant cash 

advances or other sales-based financing. 

For a merchant cash advance or other 

sales-based financing transaction, the 

difference between the amount 

advanced and the amount to be repaid, 

expressed in dollars; and 

(vi) Prepayment penalties. (A) 

Notwithstanding whether such a 

provision was in fact included, whether 

the financial institution could have 

included a charge to be imposed for 

paying all or part of the transaction’s 

principal before the date on which the 

principal is due under the policies and 

procedures applicable to the covered 

credit transaction; and 

(B) Notwithstanding the response to 

paragraph (a)(20)(iv)(A) of this section, 

whether the terms of the covered credit 

transaction do in fact include a charge 

imposed for paying all or part of the 

transaction’s principal before the date 

on which the principal is due. 

(13) Census tract. The census tract in 

which is located: 


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(i) The address or location where the 

proceeds of the credit applied for or 

originated will be or would have been 

principally applied; or 

(ii) If the information in paragraph 

(a)(13)(i) of this section is unknown, the 

address or location of the main office or 

headquarters of the applicant; or 

(iii) If the information in both 

paragraphs (a)(13)(i) and (ii) of this 

section is unknown, another address or 

location associated with the applicant. 

(iv) The financial institution shall also 

indicate which one of the three types of 

addresses or locations listed in 

paragraphs (a)(13)(i), (ii), or (iii) of this 

section the census tract is based on. 

(14) Gross annual revenue. The gross 

annual revenue of the applicant for its 

preceding full fiscal year prior to when 

the information is collected. 

(15) NAICS code. A 6-digit North 

American Industry Classification 

System (NAICS) code appropriate for 

the applicant. 

(16) Number of workers. The number 

of non-owners working for the 

applicant. 

(17) Time in business. The time the 

applicant has been in business, 

described in whole years, as relied on or 

collected by the financial institution. 

(18) Minority-owned business status. 

Whether the applicant is a minorityowned business and whether minorityowned business status is being reported 

based on previously collected data 

pursuant to § 1002.107(c)(2). The 

financial institution shall collect and 

report minority-owned business status 

as prescribed in appendix F to this part. 

When requesting minority-owned 

business status from an applicant, the 

financial institution shall inform the 

applicant that the financial institution 

cannot discriminate on the basis of 

minority-owned business status, or on 

whether the applicant provides this 

information. 

(19) Women-owned business status. 

Whether the applicant is a womenowned business and whether womenowned business status is being reported 

based on previously collected data 

pursuant to § 1002.107(c)(2). The 

financial institution shall collect and 

report women-owned business status as 

prescribed in appendix F to this part. 

When requesting women-owned 

business status from an applicant, the 

financial institution shall inform the 

applicant that the financial institution 

cannot discriminate on the basis of 

women-owned business status, or on 

whether the applicant provides this 

information. 

(20) Ethnicity, race, and sex of 

principal owners. The ethnicity, race, 

and sex of the applicant’s principal 

owners and whether ethnicity, race, and 

sex are being reported based on 

previously collected data pursuant to 

§ 1002.107(c)(2). The data compiled for 

purposes of this paragraph (a)(20) shall 

also include whether ethnicity and race 

are being reported based on visual 

observation or surname. The financial 

institution shall collect and report 

principal owners’ ethnicity, race, and 

sex information as prescribed in 

appendix G to this part. When 

requesting ethnicity, race, and sex 

information from an applicant, the 

financial institution shall inform the 

applicant that the financial institution 

cannot discriminate on the basis of a 

principal owner’s ethnicity, race, or sex, 

or on whether the applicant provides 

this information. 

(21) Number of principal owners. The 

number of the applicant’s principal 

owners. 

(b) Verification of applicant-provided 

information. Unless otherwise provided 

in this subpart, the financial institution 

may rely on statements of the applicant 

when compiling data unless it verifies 

the information provided, in which case 

it shall use the verified information. 

(c) Time and manner of collection— 

(1) In general. A covered financial 

institution shall maintain procedures to 

collect applicant-provided data under 

paragraph (a) of this section at a time 

and in a manner that is reasonably 

designed to obtain a response. 

(2) Previously collected data. A 

covered financial institution is 

permitted, but not required, to reuse 

previously collected data to satisfy 

paragraphs (a)(13) through (21) of this 

section if: 

(i) The data were collected within the 

same calendar year as the current 

covered application; and 

(ii) The financial institution has no 

reason to believe the data are inaccurate. 

§ 1002.108 Firewall. 

(a) Definitions. For purposes of this 

section, the following terms shall have 

the following meanings: 

(1) Involved in making any 

determination concerning a covered 

application means participating in a 

decision regarding the evaluation of a 

covered application, including the 

creditworthiness of an applicant for a 

covered credit transaction. 

(2) Should have access means that an 

employee or officer may need to collect, 

see, consider, refer to, or otherwise use 

the information to perform that 

employee’s or officer’s assigned job 

duties. 

(b) Prohibition on access to certain 

information. Unless the exception under 

paragraph (c) of this section applies, an 

employee or officer of a covered 

financial institution or a covered 

financial institution’s affiliate shall not 

have access to an applicant’s responses 

to inquiries that the financial institution 

makes pursuant to this subpart 

regarding whether the applicant is a 

minority-owned business under 

§ 1002.107(a)(18) or a women-owned 

business under § 1002.107(a)(19), and 

regarding the ethnicity, race, and sex of 

the applicant’s principal owners under 

§ 1002.107(a)(20), if that employee or 

officer is involved in making any 

determination concerning that 

applicant’s covered application. 

(c) Exception to the prohibition on 

access to certain information. The 

prohibition in paragraph (b) of this 

section shall not apply to an employee 

or officer if the financial institution 

determines that it is not feasible to limit 

that employee’s or officer’s access to an 

applicant’s responses to the financial 

institution’s inquiries under 

§ 1002.107(a)(18) through (20) and the 

financial institution provides the notice 

required under paragraph (d) of this 

section to the applicant. It is not feasible 

to limit access as required pursuant to 

paragraph (b) of this section if the 

financial institution determines that an 

employee or officer involved in making 

any determination concerning a covered 

application should have access to one or 

more applicants’ responses to the 

financial institution’s inquiries under 

§ 1002.107(a)(18) through (20). 

(d) Notice. In order to satisfy the 

exception set forth in paragraph (c) of 

this section, a financial institution shall 

provide a notice to each applicant 

whose responses will be accessed, 

informing the applicant that one or 

more employees or officers involved in 

making determinations concerning the 

covered application may have access to 

the applicant’s responses to the 

financial institution’s inquiries 

regarding whether the applicant is a 

minority-owned business or a womenowned business, and regarding the 

ethnicity, race, and sex of the 

applicant’s principal owners. The 

financial institution shall provide the 

notice required by this paragraph (d) 

when making the inquiries required 

under § 1002.107(a)(18) through (20) 

and together with the notices required 

pursuant to § 1002.107(a)(18) through 

(20). 

§ 1002.109 Reporting of data to the 

Bureau. 

(a) Reporting to the Bureau—(1) 

Annual reporting. (i) On or before June 

1 following the calendar year for which 

data are compiled and maintained as 

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financial institution shall submit its 

small business lending application 

register in the format prescribed by the 

Bureau. 

(ii) An authorized representative of 

the covered financial institution with 

knowledge of the data shall certify to 

the accuracy and completeness of the 

data reported pursuant to this paragraph 

(a). 

(iii) When the last day for submission 

of data prescribed under paragraph 

(a)(1) falls on a date that is not a 

business day, a submission shall be 

considered timely if it is submitted no 

later than the next business day. 

(2) Reporting by subsidiaries. A 

covered financial institution that is a 

subsidiary of another covered financial 

institution shall complete a separate 

small business lending application 

register. The subsidiary shall submit its 

small business lending application 

register, directly or through its parent, to 

the Bureau. 

(3) Reporting obligations where 

multiple financial institutions are 

involved in a covered credit transaction. 

If a covered application results in an 

origination, only one covered financial 

institution shall report the covered 

credit transaction. If more than one 

financial institution is involved in the 

origination of a covered credit 

transaction, the financial institution that 

makes the final credit decision 

approving the application shall report 

the loan as an origination (if that 

financial institution is a covered 

financial institution). If there was no 

origination, then any covered financial 

institution that made a credit decision 

shall report the application. 

(b) Financial institution identifying 

information. A financial institution 

shall provide each of the following with 

its submission: 

(1) Its name. 

(2) Its headquarters address. 

(3) The name and business contact 

information of a person who may be 

contacted with questions about the 

financial institution’s submission. 

(4) Its Federal prudential regulator, if 

applicable. 

(5) Its Federal Taxpayer Identification 

Number (TIN). 

(6) Its Legal Entity Identifier (LEI). 

(7) Its Research, Statistics, 

Supervision, and Discount 

identification (RSSD ID) number, if 

applicable. 

(8) Parent entity information, if 

applicable, including: 

(i) The name of the immediate parent 

entity; 

(ii) The LEI of the immediate parent 

entity, if available; 

(iii) The RSSD ID number of the 

immediate parent entity, if available; 

(iv) The name of the top-holding 

parent entity; 

(v) The LEI of the top-holding parent 

entity, if available; and 

(vi) The RSSD ID number of the topholding parent entity, if available. 

(9) The type of financial institution 

that it is, indicated by selecting the 

appropriate type or types of institution 

from the list provided. 

(10) Whether the financial institution 

is voluntarily reporting covered 

applications for covered credit 

transactions. 

(c) Procedures for the submission of 

data to the Bureau. The Bureau shall 

make available a Filing Instructions 

Guide, containing technical instructions 

for the submission of data to the Bureau 

pursuant to this section, as well as any 

related materials, available at [a 

designated Bureau website]. 

§ 1002.110 Publication of data. 

(a) Publication of small business 

lending application registers and 

associated financial institution 

information. The Bureau shall make 

available to the public generally the data 

reported to it by financial institutions 

pursuant to § 1002.109, subject to 

deletions or modifications made by the 

Bureau, at its discretion, if the Bureau 

determines that the deletion or 

modification of the data would advance 

a privacy interest. The Bureau shall 

make such data available on an annual 

basis, by publishing it on the Bureau’s 

website at [a designated Bureau 

website]. 

(b) Publication of aggregate data. The 

Bureau may, at its discretion, compile 

and aggregate data submitted by 

financial institutions pursuant to 

§ 1002.109, and make any compilations 

or aggregations of such data publicly 

available as the Bureau deems 

appropriate. 

(c) Statement of financial institution’s 

small business lending data available 

on the Bureau’s website. A covered 

financial institution shall make 

available to the public on its website, or 

otherwise upon request, a statement that 

the covered financial institution’s small 

business lending application register, as 

modified by the Bureau pursuant to 

§ 1002.110(a), is or will be available on 

the Bureau’s website at [a designated 

Bureau website]. A financial institution 

shall use language provided by the 

Bureau, or substantially similar 

language, to satisfy the requirement to 

provide a statement pursuant to this 

paragraph (c). 

(d) Availability of statements. A 

covered financial institution shall make 

the notice required by paragraph (c) of 

this section available to the public on its 

website when it submits a small 

business lending application register to 

the Bureau pursuant to § 1002.109(a)(1), 

and shall maintain the notice for as long 

as it has an obligation to retain its small 

business lending application registers 

pursuant to § 1002.111(a). 

§ 1002.111 Recordkeeping. 

(a) Record retention. A covered 

financial institution shall retain 

evidence of compliance with this 

subpart, which includes a copy of its 

small business lending application 

register, for at least three years after the 

register is required to be submitted to 

the Bureau pursuant to § 1002.109. 

(b) Certain information kept separate 

from the rest of the application. A 

financial institution shall maintain, 

separately from the rest of the 

application and accompanying 

information, an applicant’s responses to 

the financial institution’s inquiries 

pursuant to this subpart regarding 

whether an applicant for a covered 

credit transaction is a minority-owned 

business under § 1002.107(18) or a 

women-owned business under 

§ 1002.107(19), and regarding the 

ethnicity, race, and sex of the 

applicant’s principal owners under 

§ 1002.107(20). 

(c) Limitation on personally 

identifiable information in records 

retained under this section. In 

compiling and maintaining any records 

under § 1002.107 or paragraph (b) of this 

section, or reporting data pursuant to 

§ 1002.109, a financial institution shall 

not include any name, specific address, 

telephone number, email address, or 

any personally identifiable information 

concerning any individual who is, or is 

connected with, an applicant, other than 

as required pursuant to § 1002.107 or 

paragraph (b) of this section. 

§ 1002.112 Enforcement. 

(a) Administrative enforcement and 

civil liability. A violation of section 

704B of the Act or this subpart is subject 

to administrative sanctions and civil 

liability as provided in sections 704 (15 

U.S.C. 1691c) and 706 (15 U.S.C. 1691e) 

of the Act, where applicable. 

(b) Bona fide errors. A bona fide error 

in compiling, maintaining, or reporting 

data with respect to a covered 

application is one that was 

unintentional and occurred despite the 

maintenance of procedures reasonably 

adapted to avoid such an error. A bona 

fide error is not a violation of the Act 

or this subpart. A financial institution is 

presumed to maintain procedures 

reasonably adapted to avoid such errors 

with respect to a given data field if the 

number of errors found in a random 


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sample of the financial institution’s 

submission for the data field does not 

equal or exceed a threshold specified by 

the Bureau for this purpose in appendix 

H to this part. However, an error is not 

a bona fide error if either there is a 

reasonable basis to believe the error was 

intentional or there is other evidence 

that the financial institution does not or 

has not maintained procedures 

reasonably adapted to avoid such errors. 

(c) Safe harbors. (1) Incorrect entry for 

census tract. An incorrect entry for 

census tract is not a violation of the Act 

or this subpart if the financial 

institution obtained the census tract by 

correctly using a geocoding tool 

provided by the FFIEC or the Bureau. 

(2) Incorrect entry for NAICS code. If 

a financial institution identifies the 

NAICS code for an applicant itself, 

without the applicant or another source 

providing the NAICS code, and the 

identified NAICS code is incorrect, the 

incorrect entry for the NAICS code is 

not a violation of the Act or this subpart 

provided that the first two digits of the 

NAICS code are correct and the 

financial institution maintains 

procedures reasonably adapted to 

correctly identify the subsequent four 

digits. 

(3) Incorrect determination of small 

business status. A financial institution 

that initially determines that an 

applicant for a covered credit 

transaction is a small business, as 

defined in § 1002.106(b), but later 

concludes the applicant is not a small 

business, does not violate the Act or this 

regulation if the financial institution 

collected information pursuant to this 

subpart regarding whether an applicant 

for a covered credit transaction is a 

minority-owned business or a womenowned business, and the ethnicity, race, 

and sex of the applicant’s principal 

owners. A financial institution seeking 

to avail itself of this safe harbor shall 

comply with the requirements of this 

subpart As otherwise required pursuant 

to §§ 1002.107, 1002.108, and 1002.111 

with respect to the collected 

information. 

(4) Incorrect application date. A 

financial institution does not violate the 

Act or this subpart if it reports on its 

small business lending application 

register an application date that is 

within three calendar days of the actual 

application date pursuant to 

§ 1002.107(a)(2). 

§ 1002.113 Severability. 

The provisions of this subpart are 

separate and severable from one 

another. If any provision is stayed or 

determined to be invalid, the remaining 

provisions shall continue in effect. 

§ 1002.114 Effective date, compliance 

date, and special transitional rules. 

(a) Effective date. The effective date 

for this subpart is [90 days after the date 

of publication of the final rule in the 

Federal Register]. 

(b) Compliance date. The compliance 

date for this subpart is [approximately 

18 months after the date of publication 

of the final rule in the Federal Register]. 

(c) Special transitional rules—(1) 

Collection of information prior to the 

compliance date. A financial institution 

that will be a covered financial 

institution as of the compliance date in 

paragraph (b) of this section is 

permitted, but not required, to collect 

information regarding whether an 

applicant for a covered credit 

transaction is a minority-owned 

business under § 1002.107(a)(18), a 

women-owned business under 

§ 1002.107(a)(19), and the ethnicity, 

race, and sex of the applicant’s principal 

owners under § 1002.107(a)(20) 

beginning [12 months prior to the 

compliance date]. A financial institution 

collecting such information pursuant to 

this paragraph (c)(1) must do so in 

accordance with the requirements set 

out in §§ 1002.107(18) through (20) and 

1002.108. 

(2) Determining whether a financial 

institution is a covered financial 

institution for purposes of this subpart. 

For purposes of determining whether a 

financial institution is a covered 

financial institution under § 1002.105(b) 

as of the compliance date specified in 

paragraph (b) of this section, a financial 

institution is permitted, but not 

required, to use its to use its 

originations of covered credit 

transactions for small businesses in the 

second and third preceding calendar 

years (rather than its originations in the 

two immediately preceding calendar 

years). 

■ 5. Appendices E through H are added 

to read as follows: 

Appendix E to Part 1002—Sample Form 

for Collecting Certain ApplicantProvided Data under Subpart B 

BILLING CODE 4810–25–P 


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BILLING CODE 4825–25–C 

Appendix F to Part 1002—Instructions 

for Collecting and Reporting Small 

Business Applicants’ Minority-Owned 

Business Status and Women-Owned 

Business Status Under Subpart B 

Covered financial institutions are required 

by subpart B of this part to collect certain 

information from small business applicants 

about covered applications, including 

whether the applicant is a minority-owned 

business or a women-owned business. This 

appendix provides instructions for collecting 

that information. 

1. Unless a financial institution is reporting 

based on previously collected data as 

discussed in Instruction 11, the financial 

institution must ask the applicant about its 

minority-owned business status and womenowned business status for each of the 

applicant’s covered applications. However, 

the financial institution cannot require an 

applicant to provide this information. 

2. Generally, a financial institution must 

ask the applicant whether it is a minorityowned business and whether it is a womenowned business on a paper or electronic data 

collection form that is separate from the 

application form and other documents used 

to collect other information related to the 

application. See the sample data collection 

form in appendix E for sample language. For 

a covered application taken solely by 

telephone or another medium that does not 

involve providing any paper or electronic 

documents, the financial institution must ask 

the applicant about its minority-owned 

business status and women-owned business 

status orally if the financial institution is not 

reporting based on previously collected data. 

The financial institution may combine these 

business status questions with questions 

regarding principal owners’ ethnicity, race, 

and sex pursuant to § 1002.107(a)(20) and a 

question about the applicant’s number of 

principal owners pursuant to 

§ 1002.107(a)(21). See the sample data 

collection form in appendix E. 

3. When asking the questions regarding 

minority-owned business status and womenowned business status (regardless of whether 

they are asked on a paper form, 

electronically, or orally), the financial 

institution also must provide the applicant 

with definitions of the terms ‘‘minority 

individual,’’ ‘‘minority-owned business,’’ and 

‘‘women-owned business’’ as set forth in 

§ 1002.102(l), (m), and (s). The financial 

institution satisfies this requirement if it 

provides the definitions of minority 

individual, minority-owned business, and 

women-owned business set forth in the 

sample data collection form in appendix E. 

4. A financial institution may inform the 

applicant that Federal law requires it to ask 

for an applicant’s minority-owned business 

status and women-owned business status to 

help ensure that all small business applicants 

for credit are treated fairly and that 

communities’ small business credit needs are 

being fulfilled. The financial institution must 

inform the applicant that it is not required to 

respond to the financial institution’s 

questions regarding the applicant’s minorityowned business status and women-owned 

business status. The financial institution also 

must inform the applicant that the financial 

institution cannot discriminate on the basis 

of minority-owned business status or womenowned business status, or on the basis of 

whether the applicant provides this 

information. 

5. A financial institution must report the 

answers to the minority-owned business 

status and women-owned business status 

questions that the applicant provided on the 

paper or electronic data collection form the 

financial institution uses to satisfy the 

requirements of § 1002.107(a)(18) and (19) 

without regard to any answers provided for 

other purposes. If the financial institution 

asks the minority-owned business status and 

women-owned business status questions 

orally, the financial institution must report 

the answers the applicant provided in 

response to the inquiries the financial 

institution makes to satisfy the requirements 

of § 1002.107(a)(18) and (19) without regard 

to any answers provided for other purposes. 

For example, if a financial institution uses a 

paper data collection form to ask an 

applicant if it is a minority-owned business 

or women-owned business for purposes of 

§ 1002.107(a)(18) and (19) and the applicant 

responds that it is not a minority-owned 

business or a women-owned business, the 

financial institution must report that the 

applicant is not a minority-owned business 

or a women-owned business, even if the 

applicant indicates that it is a minorityowned business for other purposes, such as 

for a special purpose credit program or a 

Small Business Administration program. 

6. A financial institution is neither 

required nor permitted to verify the minorityowned business status or women-owned 

business status that the applicant provides. 

7. If the applicant declines to provide 

information on the applicant’s minorityowned business status or women-owned 

business status (such as by checking only the 

‘‘I do not wish to provide this information’’ 

box on a paper or electronic data collection 

form or stating orally that it does not wish 

to provide this information), the financial 

institution must report that the applicant 

declined to provide information on the 

applicant’s minority-owned business status 

or women-owned business status, as 

applicable. 

8. If the applicant does not respond to the 

financial institution’s inquiry regarding its 

minority-owned business status (such as by 

leaving the response blank or failing to 

submit a data collection form), the financial 

institution must report that the information 

was not provided by the applicant. Similarly, 

if the applicant does not respond to the 

financial institution’s inquiry regarding its 

women-owned business status, the financial 

institution must report that the information 

was not provided by the applicant. 

9. If the applicant both provides a 

substantive response to a question requesting 

business status (that is, checks either ‘‘yes’’ 

or ‘‘no’’) and also checks the ‘‘I do not wish 

to provide this information’’ box for that 

question, the financial institution reports the 

minority-owned business status or womenowned business status provided by the 

applicant (rather than reporting that the 

applicant declined to provide the 

information). 

10. A financial institution does not report 

minority-owned business status or womenowned business status based on visual 

observation, surname, or any basis other than 

the applicant’s responses to the inquiries that 

the financial institution makes to satisfy 

§ 1002.107(a)(18) and (19) or, as discussed in 

Instruction 11, on the basis of the applicant’s 

responses to the inquiries that the financial 

institution previously made to satisfy 

§ 1002.107(a)(18) and (19). 

11. Section 1002.107(c)(2) and its 

commentary set forth when a financial 

institution is permitted to report information 

based on previously collected data. If the 

financial institution is permitted to report 

minority-owned business status or womenowned business status based on previously 

collected data, the financial institution may 

but is not required to do so. 

12. If a financial institution reports 

minority-owned business status or womenowned business status based on previously 

collected data, the financial institution must 

also report that it is providing that 

information based on previously collected 

data. 

Appendix G to Part 1002—Instructions 

for Collecting and Reporting Ethnicity, 

Race, and Sex of Small Business 

Applicants’ Principal Owners Under 

Subpart B 

Covered financial institutions are required 

by subpart B of this part to collect certain 

information from small business applicants 

about covered applications, including the 

ethnicity, race, and sex of the applicant’s 

principal owners. This appendix provides 

instructions for collecting that information. 

General Instructions 

1. Unless a financial institution is reporting 

based on previously collected data as 

discussed in Instructions 26 through 29, the 

financial institution must ask the applicant 

for the ethnicity, race, and sex of its principal 

owners for each of the applicant’s covered 

applications. However, a financial institution 

cannot require an applicant or any principal 

owner to provide this information. 

2. Generally, a financial institution must 

ask the applicant about the ethnicity, race, 

and sex of the applicant’s principal owners 

on a paper or electronic data collection form 

that is separate from the application form and 

other documents used to collect other 

information related to the application. See 

the sample data collection form in appendix 

E for sample language. For a covered 

application taken solely by telephone or 

another medium that does not involve 

providing any paper or electronic documents, 

the financial institution must ask the 

applicant for the principal owners’ ethnicity, 

race, and sex orally if the financial institution 

is not reporting based on previously collected 

data. A financial institution may combine the 

questions regarding the principal owners’ 

ethnicity, race, and sex with a question 

regarding the applicant’s number of principal 

owners pursuant to § 1002.107(a)(21) and 

questions regarding the applicant’s minorityowned business status and women-owned 


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business status pursuant to § 1002.107(a)(18) 

and (19). See the sample data collection form 

in appendix E. 

3. When asking about principal owners’ 

ethnicity, race, and sex, the financial 

institution must also provide the applicant 

with the definition of the term ‘‘principal 

owner’’ as set forth in § 1002.102(o). The 

financial institution satisfies this requirement 

if it provides the definition of principal 

owner set forth in the sample data collection 

form in appendix E. 

4. A financial institution may inform the 

applicant that Federal law requires it to ask 

for the principal owners’ ethnicity, race, and 

sex to help ensure that all small business 

applicants for credit are treated fairly and 

that communities’ small business credit 

needs are being fulfilled. The financial 

institution must inform the applicant that the 

applicant is not required to respond to the 

financial institution’s questions regarding the 

principal owner’s ethnicity, race, and sex. 

The financial institution also must inform the 

applicant that the financial institution cannot 

discriminate on the basis of a principal 

owner’s ethnicity, race, or sex, or on whether 

the applicant provides this information. 

5. If it is possible that a financial 

institution will meet in person with one or 

more of the applicant’s principal owners and 

the financial institution is not reporting 

based on previously collected data, the 

financial institution must inform the 

applicant that if the applicant does not 

provide any ethnicity, race, or sex 

information for at least one principal owner, 

the financial institution is required to report 

ethnicity and race on the basis of visual 

observation and/or surname for at least one 

of the principal owners that the financial 

institution has met in person. If a financial 

institution collects ethnicity, race, and sex 

information using a paper or electronic data 

collection form, the financial institution may 

satisfy this requirement by providing a 

statement on that form. See the sample data 

collection form in appendix E. If a financial 

institution meets in person with a natural 

person representing an applicant but does 

not know if the natural person is a principal 

owner, the financial institution must ask or 

otherwise determine if that person is a 

principal owner. See comment 107(a)(20)–10 

for examples of when a financial institution 

has and has not met in person with one or 

more principal owners. As described in 

Instruction 23, financial institutions do not 

report a principal owner’s sex based on 

visual observation or surname. 

Instructions Regarding Ethnicity, Race, and 

Sex Categories 

6. When asking for a principal owner’s sex, 

a financial institution must allow the 

applicant to respond using the sex categories 

set forth in the sample data collection form 

in appendix E and discussed in comment 

107(a)(20)–8. These categories must include 

the option to self-identify using free-form text 

on a paper or electronic form or using 

language that informs the applicant of the 

opportunity to self-identify when taking the 

application by means other than a paper or 

electronic data collection form, such as by 

telephone. 

7. When asking for a principal owner’s 

ethnicity and race, a financial institution 

must allow the applicant to respond using 

the aggregate and disaggregated ethnicity and 

race categories and subcategories as set forth 

in the sample data collection form in 

appendix E and discussed in comments 

107(a)(20)–6 and –7. The disaggregated 

subcategories must include the ‘‘other’’ 

disaggregated subcategories that provide the 

option to self-identify using free-form text on 

a paper or electronic data collection form or 

using language that informs the applicant of 

the opportunity to self-identify when taking 

the application by means other than a paper 

or electronic data collection form, such as by 

telephone. 

8. A financial institution must permit an 

applicant to identify its principal owners as 

being of a particular Hispanic or Latino 

disaggregated subcategory (Cuban, Mexican, 

Puerto Rican, Other Hispanic or Latino) or of 

a particular Asian disaggregated subcategory 

(Asian Indian, Chinese, Filipino, Japanese, 

Korean, Vietnamese, Other Asian) or of a 

particular Native Hawaiian or Other Pacific 

Islander disaggregated subcategory 

(Guamanian or Chamorro, Native Hawaiian, 

Samoan, Other Pacific Islander) or of a 

particular Black or African American 

disaggregated subcategory (African 

American, Ethiopian, Haitian, Jamaican, 

Nigerian, Somali, or Other Black or African 

American) or of a particular American Indian 

or Alaska Native enrolled or principal tribe. 

An applicant must be permitted to select a 

disaggregated ethnicity or race subcategory 

even if the applicant does not also select the 

corresponding aggregate ethnicity or 

aggregate race category. For example, if an 

applicant selects only the ‘‘Mexican’’ 

disaggregated subcategory, the financial 

institution reports ‘‘Mexican’’ for the 

ethnicity of the applicant but does not also 

report ‘‘Hispanic or Latino.’’ 

9. A financial institution must offer the 

applicant the option of selecting more than 

one ethnicity, race, and sex for each principal 

owner. If an applicant selects more than one 

ethnicity, race, or sex for a principal owner, 

the financial institution must report each 

selected designation. The financial 

institution must also report any additional 

information that the applicant has provided 

as free-form text in the appropriate data 

reporting field. For example, if the applicant 

chooses to self-identify a principal owner’s 

sex and provides additional information, the 

financial institution must report that 

information as free-form text in the 

appropriate data reporting field. Similarly, if 

an applicant indicates that a principal owner 

is Other Asian and provides additional 

information, such as writing in Cambodian, 

the financial institution must report that 

information as free-form text in the 

appropriate data reporting field. 

10. If an applicant provides ethnicity, race, 

or sex information for one or more principal 

owners, the financial institution must report 

the ethnicity, race, and sex as provided by 

the applicant. For example, if an applicant 

selects ‘‘Asian’’ for a principal owner’s race, 

the financial institution reports ‘‘Asian’’ for 

the race of that principal owner. Similarly, if 

the applicant selects ‘‘Asian’’ and ‘‘Native 

Hawaiian’’ for a particular principal owner, 

the financial institution reports that principal 

owner’s race as ‘‘Asian’’ and ‘‘Native 

Hawaiian,’’ even though ‘‘Native Hawaiian’’ 

is not a disaggregated subcategory for the 

aggregate ‘‘Asian’’ category. 

11. A financial institution is neither 

required nor permitted to verify the ethnicity, 

race, or sex information that the applicant 

provides. 

Instructions for Reporting if the Applicant 

Fails To Provide or Declines To Provide 

Responses to a Financial Institution’s 

Inquiries 

12. Except as noted in Instruction 17, if the 

applicant declines to provide a principal 

owner’s ethnicity, race, or sex (such as by 

answering these questions by checking only 

the ‘‘I do not wish to provide this 

information’’ box on a paper or electronic 

data collection form or stating orally that it 

does not wish to provide this information), 

the financial institution must report that the 

applicant declined to provide this 

information. The financial institution only 

reports that the applicant declined to provide 

information if the applicant specifically 

declines to provide that information. See 

Instruction 13 for reporting if the applicant 

does not respond rather than specifically 

declines to provide information. 

13. Except as noted in Instruction 17, if the 

applicant does not respond to a request about 

a principal owner’s ethnicity, race, or sex, the 

financial institution must report that the 

information was not provided by the 

applicant. For example, if the financial 

institution provides the applicant with a 

paper data collection form and asks the 

applicant to complete and return the form 

but the applicant does not return it, the 

financial institution reports that the principal 

owner’s ethnicity, race, and sex was not 

provided by the applicant. Similarly, if the 

financial institution provides an electronic 

data collection form, the applicant indicates 

that it has two principal owners, the 

applicant provides ethnicity, race, and sex 

for the first principal owner, and the 

applicant does not check any of the boxes 

(including the ‘‘I do not wish to provide this 

information’’ boxes) for the second principal 

owner’s ethnicity, race, and sex, the financial 

institution reports the ethnicity, race, and sex 

that the applicant provided for the first 

principal owner and reports that ethnicity, 

race, and sex for the second principal owner 

were not provided by the applicant. 

14. If an applicant provides some but not 

all of the requested ethnicity, race, and sex 

information, the financial institution reports 

the information that was provided by the 

applicant and reports that the applicant 

declined to provide or did not provide (as 

applicable) the remainder of the information. 

For example, assume an applicant indicates 

that it has two principal owners and provides 

ethnicity, race, and sex information for the 

first principal owner and provides only 

ethnicity for the second principal owner. 

Further assume that the applicant does not 

indicate that it does not wish to provide race 

or sex information for the second principal 

owner. In this case, the financial institution 

reports the ethnicity, race, and sex 


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information provided for the first principal 

owner. The financial institution also reports 

the ethnicity provided for the second 

principal owner, and reports that the 

applicant did not provide race and sex 

information for the second principal owner. 

15. If an applicant provides any ethnicity, 

race, or sex information for any principal 

owner, the financial institution does not 

report any additional information based on 

visual observation and/or surname. For 

example, if an applicant indicates that it has 

four principal owners and provides sex 

information for one principal owner and no 

other ethnicity, race, or sex information, the 

financial institution reports the sex 

information provided for one principal 

owner. It reports either that the applicant did 

not provide or declined to provide (as 

applicable) the ethnicity and race 

information for one principal owner and the 

ethnicity, race, and sex information for the 

other principal owners. The financial 

institution does not report any ethnicity or 

race information based on visual observation 

or surname, even if it is has met in person 

with one or more principal owners. 

16. If an applicant provides information in 

response to the question requesting a given 

principal owner’s ethnicity, race, or sex and 

also checks the ‘‘I do not wish to provide this 

information’’ box for that question or 

otherwise indicates that the applicant does 

not wish to provide the information, the 

financial institution reports the information 

on ethnicity, race, or sex that was provided 

by the applicant (rather than reporting that 

the applicant declined to provide the 

information). For example, if an applicant is 

completing a paper data collection form and 

provides information that a principal owner 

is female and also checks a box to indicate 

that the applicant does not wish to provide 

information regarding that principal owner’s 

sex, the financial institution reports the 

principal owner’s sex as female. 

Instructions for Collecting Ethnicity and 

Race Information via Visual Observation 

and/or Surname if the Applicant Declines To 

Provide Information or Does Not Respond 

17. If an applicant does not provide any 

ethnicity, race, or sex information for any of 

its principal owners or declines to provide all 

of the requested ethnicity, race, or sex 

information, and during the application 

process the financial institution meets in 

person with at least one principal owner of 

that applicant, the financial institution must 

collect the ethnicity and race of the principal 

owner(s) with whom it meets on the basis of 

visual observation and/or surname. For 

example, assume a financial institution 

provides electronic data collection forms to 

applicants, and an applicant fails to complete 

and submit the data collection form. Assume 

that the financial institution is not permitted 

to report based on previously collected data. 

Also, assume that the financial institution 

meets in person with two of the applicant’s 

four principal owners at the same time 

during the application process. The financial 

institution reports the ethnicity and race 

information for the two principal owners it 

met with in person based on visual 

observation and/or surname. Additionally, as 

noted in Instruction 21, the financial 

institution reports that it is reporting this 

information based on visual observation and/ 

or surname. The financial institution reports 

that the applicant did not provide sex 

information for these two principal owners. 

It also reports that the applicant did not 

provide ethnicity, race, and sex information 

for the other two principal owners. For 

additional information on when a financial 

institution has or has not met in person with 

a principal owner, see comment 107(a)(20)– 

10. 

18. For purposes of determining whether 

reporting based on visual observation and/or 

surname is required, a financial institution is 

considered to have met in person with a 

principal owner if the financial institution 

has a meeting via an electronic medium with 

the principal owner and can visually observe 

the principal owner using a video 

component. For additional information on 

when a financial institution has or has not 

met in person with a principal owner, see 

comment 107(a)(20)–10. For additional 

information on when reporting based on 

visual observation and/or surname is 

required, see comment 107(a)(20)–9. 

19. A financial institution is not required 

to report ethnicity and race information 

based on visual observation and/or surname 

if the financial institution only meets in 

person with one or more principal owners 

after the application process is complete, for 

example, at loan closing or account opening. 

In those circumstances, the financial 

institution may report that the information 

was not provided by the applicant or that the 

applicant declined to provide the 

information, as applicable. 

20. A financial institution is required to 

collect race and ethnicity information based 

on visual observation and/or surname at only 

one meeting with one or more principal 

owners. If the financial institution meets in 

person with another principal owner at a 

different meeting, the financial institution is 

permitted, but not required, to also collect 

the other principal owner’s race and 

ethnicity information via visual observation 

and/or surname. For example, assume that a 

financial institution meets in person with 

one of an applicant’s principal owners on 

June 1 and records that principal owner’s 

ethnicity and race. Also, assume that the 

financial institution meets in person with all 

four of the applicant’s principal owners on 

June 10. The financial institution is 

permitted, but not required, to record the 

other principal owners’ ethnicity and race 

information based on the meeting that occurs 

on June 10, because it already recorded one 

principal owner’s ethnicity and race based on 

the meeting that occurred on June 1. 

21. If a financial institution reports 

ethnicity and race based on visual 

observation and/or surname and is not 

relying on previously collected data, the 

financial institution also must report that the 

information was collected on the basis of 

visual observation and/or surname. If a 

financial institution is relying on previously 

collected data that the financial institution 

collected via visual observation and/or 

surname, the financial institution reports that 

it is reporting the information based on 

previously collected data, and that it is 

providing the information based on visual 

observation and/or surname. 

22. When a financial institution reports 

ethnicity and race on the basis of visual 

observation and/or surname, the financial 

institution must select only from the 

following aggregate categories: Ethnicity 

(Hispanic or Latino; not Hispanic or Latino); 

race (American Indian or Alaska Native; 

Asian; Black or African American; Native 

Hawaiian or Other Pacific Islander; White). 

23. A financial institution never reports sex 

based on visual observation or surname. If an 

applicant declines or otherwise does not 

provide a principal owner’s sex, the financial 

institution reports that the applicant declined 

to provide that information or that the 

information was not provided by the 

applicant, as applicable. 

Instructions Regarding Persons who Are Not 

Principal Owners and When an Applicant 

Has Fewer Than Four Principal Owners 

24. A financial institution does not report 

a guarantor’s ethnicity, race, and sex unless 

the guarantor is also a principal owner of the 

applicant. 

25. Because there are data reporting fields 

for four principal owners, when submitting 

data to the Bureau, a financial institution will 

need to report that the requirement to report 

ethnicity, race, and sex is not applicable for 

some principal owners if the applicant has 

fewer than four principal owners. For 

example, if an applicant has only one 

principal owner (i.e., only one natural person 

directly owns 25 percent or more of the 

applicant’s equity interests), the financial 

institution reports that the requirement to 

report ethnicity, race, and sex is not 

applicable in the data fields for principal 

owners two through four. 

Instructions for Reporting Based on 

Previously Collected Data 

26. Section 1002.107(c)(2) and its 

commentary set forth when a financial 

institution is permitted to report information 

based on previously collected data. If the 

financial institution is permitted to report 

ethnicity, race, or sex information based on 

previously collected data, the financial 

institution may but is not required to do so. 

27. If a financial institution reports 

ethnicity, race, or sex information based on 

previously collected data, the financial 

institution must also report that it is 

providing that information based on 

previously collected data. 

28. If a financial institution reports one or 

more principal owner’s ethnicity, race, or sex 

information based on previously collected 

data, the financial institution does not need 

to collect any additional ethnicity, race, or 

sex information. However, the financial 

institution may need to report that the 

applicant did not provide or declined to 

provide information when the financial 

institution previously collected the data, as 

applicable. 

29. If a financial institution is reporting a 

principal owner’s ethnicity and/or race based 

on data that the financial institution 

previously collected via visual observation 

and/or surname, the financial institution 


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959For a financial institution with fewer than 30 

entries in its small business lending application 

register, the full sample size is the financial 

insitution’s total number of entries. The threshold 

number for such financial institution’s remains 

three. Accordingly, the threshold percentage will be 

higher for financial institions with fewer than 30 in 

their registers. 

reports that it is reporting ethnicity and race 

based on previously collected data and based 

on visual observation and/or surname. 

Additionally, the financial institution reports 

that the applicant declined to provide 

information about the principal owner’s sex 

or that the applicant did not provide the 

principal owner’s sex, as applicable, and 

reports that the financial institution is 

reporting sex based on previously collected 

data. 

Appendix H to Part 1002—Tolerances 

for Bona Fide Errors in Data Reported 

Under Subpart B 

As set out in § 1002.112(b) and in comment 

112(b)–1, a financial institution is presumed 

to maintain procedures reasonably adapted to 

avoid errors with respect to a given data field 

if the number of errors found in a random 

sample of a financial institution’s data 

submission for a given data field do not equal 

or exceed the threshold in column C of the 

following table (Table 1, Tolerance 

Thresholds for Bona Fide Errors): 

The size of the random sample, under 

column B, shall depend on the size of the 

financial institution’s small business lending 

application register, as shown in column A 

of the Threshold Table.959

The thresholds in column C of the 

Threshold Table reflect the number of 

unintentional errors a financial institution 

may make within a particular data field (e.g., 

loan amount or gross annual revenue) in a 

small business lending application register 

that would be deemed bona fide errors for 

purposes of § 1002.112(b). 

For instance, a financial institution that 

submitted a small business lending 

application register containing 45 

applications would be subject to a threshold 

of three errors per data field. If the financial 

institution had made two errors in reporting 

loan amount and two errors reporting gross 

annual income, all of these errors would be 

covered by the bona fide error provision of 

§ 1002.112(b) and would not constitute a 

violation of the Act or this part. If the same 

financial institution had made four errors in 

reporting loan amount and two errors 

reporting gross annual income, the bona fide 

error provision of § 1002.112(b) would not 

apply to the four loan amount errors but 

would still apply to the two gross annual 

income errors. 

Even when the number of errors in a 

particular data field do not equal or exceed 

the threshold in column C, if either there is 

a reasonable basis to believe that errors in 

that field were intentional or there is other 

evidence that the financial institution did not 

maintain procedures reasonably adapted to 

avoid such errors, then the errors are not 

bona fide errors under § 1002.112(b). To 

illustrate, assume that a financial institution 

has incorrectly coded withdrawn 

applications as denials to such an extent that 

it likely prevents reliable fair lending 

analysis of underwriting disparities. If so, the 

errors would not be deemed bona fide errors 

under § 1002.112(b) and would violate the 

Act and this part. 

For purposes of determining bona fide 

errors under § 1002.112(b), the term ‘‘data 

field’’ generally refers to individual fields. 

However, with respect to information on the 

ethnicity or race of an applicant or borrower, 

or co-applicant or co-borrower, a data field 

group may consist of more than one field. If 

one or more of the fields within an ethnicity 

or race field group have errors, they count as 

one (and only one) error for that data field 

group. 

■ 6. In Supplement I to part 1002: 

■ a. Under Section 1005.5—Rules 

Concerning Requests for Information, 

revise Paragraph 5(a)(2) by revising the 

heading and adding comment –4, and 

revise Paragraph 5(a)(4) including the 

heading. 

■ b. Add Section 1002.102—Definitions; 

Section 1002.103—Covered 

Applications; Section 1002.104— 

Covered Credit Transactions and 

Excluded Transactions; Section 

1002.105—Covered Financial 

Institutions and Exempt Institutions; 

Section 1002.106—Business and Small 

Business; Section 1002.107— 

Compilation of Reportable Data; Section 

1002.108—Firewall; Section 1002.109— 

Reporting of Data to the Bureau; Section 

1002.110—Publication of Data; Section 

1002.111—Recordkeeping; and Section 

1002.112—Enforcement. 

The revisions and additions read as 

follows: 

Supplement I to Part 1002—Official 

Interpretations 

Section 1002.5—Rules Concerning Requests 

for Information 

5(a) General rules. 

* * * * * 

5(a)(2) Required collection of information. 

* * * * * 

4. Information required by subpart B. 

Subpart B of this part generally requires 

creditors that are covered financial 

institutions as defined in § 1002.105(a) to 

collect and report information about the 


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ethnicity, race, and sex of the principal 

owners of applicants for certain small 

business credit, as well as whether the 

applicant is minority-owned or womenowned as defined in § 1002.102(m) and (s), 

respectively. 

5(a)(4) Other permissible collection of 

information. 

1. Other permissible collection of 

information. Information regarding ethnicity, 

race, and sex that is not required to be 

collected pursuant to Regulation C, 12 CFR 

part 1003, or subpart B of this part, may 

nevertheless be collected under the 

circumstances set forth in § 1002.5(a)(4) 

without violating § 1002.5(b). The 

information collected pursuant to 12 CFR 

part 1003 must be retained pursuant to the 

requirements of § 1002.12. The information 

collected pursuant to subpart B of this part 

must be retained pursuant to the 

requirements set forth in § 1002.111. 

* * * * * 

Section 1002.102—Definitions 

102(j) Dwelling. 

1. Consistency with Regulation C. Bureau 

interpretations that appear in supplement I to 

part 1003 containing official commentary in 

connection with § 1003.2(f) are applicable to 

the definition of a dwelling in § 1002.102(j). 

2. Dwelling under subpart A. The 

definition of dwelling under § 1002.14(b)(2) 

applies to relevant provisions under subpart 

A, and § 1002.102(j) is not intended to repeal, 

abrogate, annul, impair, or interfere with any 

existing interpretations, orders, agreements, 

ordinances, rules, or regulations adopted or 

issued pursuant to § 1002.14(b)(2). 

102(l) Minority individual. 

1. Purpose of definition. The definition of 

minority individual is used only when an 

applicant determines if it is a minorityowned business pursuant to §§ 1002.102(m) 

and 1002.107(a)(18). A financial institution 

provides an applicant with the definition of 

minority individual when asking the 

applicant to determine if its business is a 

minority-owned business, as defined in 

§ 1002.102(m). An applicant determines if 

the natural persons who own and control and 

to whom the business’s profits or losses 

accrue are minority individuals when the 

applicant provides its minority-owned 

business status pursuant to § 1002.107(a)(18). 

Separately, pursuant to § 1002.107(a)(20) and 

related commentary, a financial institution 

may be required to report a principal owner’s 

ethnicity and race based on visual 

observation and/or surname. However, the 

definition of minority individual in 

§ 1002.102(l) is not used when determining 

the race or ethnicity of a principal owner. 

2. Multi-racial and multi-ethnic 

individuals. For purposes of subpart B of this 

part, a natural person who is multi-racial or 

multi-ethnic is a minority individual. For 

example, a natural person who is both Asian 

and White is a minority individual. 

3. Relationship to disaggregated 

subcategories used to determine ethnicity 

and race of principal owners. The term 

‘‘minority individual’’ is defined in 

§ 1002.102(l) using aggregate ethnicity 

(Hispanic or Latino) and race (American 

Indian or Alaska Native, Asian, Black or 

African American, and Native Hawaiian or 

Other Pacific Islander) categories. Separately 

an applicant may provide a principal owner’s 

ethnicity and race using aggregate categories 

and/or disaggregated subcategories for 

purposes of § 1002.107(a)(20). However, as 

discussed in comment 107(a)(20)–11, a 

financial institution may only use aggregate 

ethnicity and race categories when required 

to report a principal owner’s ethnicity and 

race based on visual observation and/or 

surname. 

102(m) Minority-owned business. 

1. In general. In order to be a minorityowned business for purposes of subpart B of 

this part, a business must satisfy both prongs 

of the definition of minority-owned business. 

First, one or more minority individuals must 

own or control more than 50 percent of the 

business. However, it is not necessary that 

one or more minority individuals both own 

and control more than 50 percent of the 

business. For example, a business that is 

owned entirely by minority individuals, but 

is not controlled by any minority individuals 

satisfies the first prong of the definition. If a 

business does not satisfy this first prong of 

the definition, it is not a minority-owned 

business. Second, 50 percent or more of the 

net profits or losses must accrue to one or 

more minority individuals. If a business does 

not satisfy this second prong of the 

definition, it is not a minority-owned 

business, regardless of whether it satisfies the 

first prong of the definition. 

2. Purpose of definition. The definition of 

minority-owned business is used only when 

an applicant determines if it is a minorityowned business for purposes of 

§ 1002.107(a)(18). A financial institution 

provides an applicant with the definition of 

minority-owned business when asking the 

applicant to provide its minority-owned 

business status pursuant to § 1002.107(a)(18), 

but the financial institution is neither 

permitted nor required to make its own 

determination regarding the applicant’s 

minority-owned business status. 

3. Further clarifications of terms used in 

the definition of minority-owned business. In 

order to assist an applicant when 

determining whether it is a minority-owned 

business, a financial institution may provide 

the applicant with the definitions of 

ownership, control, and accrual of net profits 

or losses and related concepts set forth in 

comments 102(m)–4 through –6. A financial 

institution may assist an applicant when the 

applicant is determining its minority-owned 

business status but is not required to do so. 

For purposes of reporting an applicant’s 

status, a financial institution relies on the 

applicant’s determinations of its ownership, 

control, and accrual of net profits and losses. 

4. Ownership. For purposes of determining 

if a business is a minority-owned business, 

a natural person owns a business if that 

natural person directly or indirectly, through 

any contract, arrangement, understanding, 

relationship or otherwise, has an equity 

interest in the business. Examples of 

ownership include being the sole proprietor 

of a sole proprietorship, directly or indirectly 

owning or holding the stock of a corporation 

or company, directly or indirectly having a 

partnership interest in a business, or directly 

or indirectly having a membership interest in 

a limited liability company. Indirect as well 

as direct ownership are used when 

determining ownership for purposes of 

§§ 1002.102(m) and 1002.107(a)(18). Thus, 

where applicable, ownership must be traced 

through corporate or other indirect 

ownership structures. For example, assume 

that the applicant is company A. If company 

B owns 60 percent of applicant company A 

and a natural person owns 100 percent of 

company B, the natural person owns 60 

percent of applicant company A. Similarly, if 

a natural person directly owns 20 percent of 

applicant company A and is an equal partner 

in partnership B that owns the remaining 80 

percent of applicant company A, the natural 

person owns 60 percent of applicant 

company A (i.e., 20 percent due through 

direct ownership and 40 percent indirectly 

through partnership B). A trustee is 

considered the owner of the trust. Thus, if a 

trust owns a business and the trust has two 

co-trustees, each co-trustee owns 50 percent 

of the business. 

5. Control. A natural person controls a 

business if that natural person has significant 

responsibility to manage or direct the 

business. A natural person controls a 

business if the natural person is an executive 

officer or senior manager (e.g., a chief 

executive officer, chief financial officer, chief 

operating officer, managing member, general 

partner, president, vice president, or 

treasurer) or regularly performs similar 

functions. Additionally, a business may be 

controlled by two or more minority 

individuals if those individuals collectively 

control the business, such as constituting a 

majority of the board of directors or a 

majority of the partners of a partnership. 

6. Accrual of net profits or losses. A 

business’s net profits and losses accrue to a 

natural person if that natural person receives 

the net profits or losses, is legally entitled or 

required to receive the net profits or losses, 

or is legally entitled or required to recognize 

the net profits or losses for tax purposes. 

102(o) Principal owner. 

1. Natural person. Only a natural person 

can be a principal owner of a business for 

purposes of subpart B of this part. Entities, 

such as trusts, partnerships, limited liability 

companies, and corporations, are not 

principal owners for this purpose. 

Additionally, a natural person must directly 

own an equity share of 25 percent or more 

in the business in order to be a principal 

owner. Unlike the determination of 

ownership for purposes of collecting and 

reporting minority-owned business status 

and women-owned business status, indirect 

ownership is not considered when 

determining if someone is a principal owner 

for purposes of collecting and reporting 

principal owners’ ethnicity, race, and sex or 

the number of principal owners. Thus, when 

determining who is a principal owner, 

ownership is not traced through multiple 

corporate structures to determine if a natural 

person owns 25 percent or more of the equity 

interests. For example, if natural person A 

directly owns 20 percent of a business, 

natural person B directly owns 20 percent, 

and partnership C owns 60 percent, the 

business does not have any owners who 


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satisfy the definition of principal owner set 

forth in § 1002.102(o), even if natural person 

A and natural person B are the only partners 

in the partnership C. Similarly, if natural 

person A directly owns 30 percent of a 

business, natural person B directly owns 20 

percent, and trust D owns 50 percent, natural 

person A is the only principal owner as 

defined in § 1002.102(o), even if natural 

person B is the sole trustee of trust D. 

2. Purpose of definition. A financial 

institution shall provide an applicant with 

the definition of principal owner when 

asking the applicant to provide the number 

of its principal owners pursuant to 

§ 1002.107(a)(21) and the ethnicity, race, and 

sex of its principal owners pursuant to 

§ 1002.107(a)(20). If a financial institution 

meets in person with a natural person about 

a covered application, the financial 

institution may be required to determine if a 

natural person with whom it meets is a 

principal owner in order to collect and report 

the principal owner’s ethnicity and race 

based on visual observation and/or surname. 

(See comments 107(a)(20)–5 and –9.) 

Additionally, if an applicant does not 

provide the number of its principal owners 

in response to the financial institution’s 

request pursuant to § 1002.107(a)(21), the 

financial institution may need to determine 

and report the number of the applicant’s 

principal owners based on other documents 

or information. (See comments 107(a)(21)–1 

through –3.) 

102(s) Women-owned business. 

1. In general. In order to be a womenowned business for purposes of subpart B of 

this part, a business must satisfy both prongs 

of the definition of women-owned business. 

First, one or more women must own or 

control more than 50 percent of the business. 

However, it is not necessary that one or more 

women both own and control more than 50 

percent of the business. For example, a 

business that is owned entirely by women, 

but is not controlled by any women satisfies 

the first prong of the definition. If a business 

does not satisfy this first prong of the 

definition, it is not a women-owned business. 

Second, 50 percent or more of the net profits 

or losses must accrue to one or more women. 

If a business does not satisfy this second 

prong of the definition, it is not a womenowned business, regardless of whether it 

satisfies the first prong of the definition. 

2. Purpose of definition. The definition of 

women-owned business is used only when 

an applicant determines if it is a womenowned business pursuant to 

§ 1002.107(a)(19). A financial institution 

provides an applicant with the definition of 

women-owned business when asking the 

applicant to provide its women-owned 

business status pursuant to § 1002.107(a)(19), 

but the financial institution is neither 

permitted nor required to make its own 

determination regarding the applicant’s 

women-owned business status. 

3. Further clarifications of terms used in 

the definition of women-owned business. In 

order to assist an applicant when 

determining whether it is a women-owned 

business, a financial institution may provide 

the applicant with the definitions of 

ownership, control, and accrual of net profits 

or losses and related concepts set forth in 

comments 102(s)–4 through –6. A financial 

institution may assist an applicant when the 

applicant is determining its women-owned 

business status but is not required to do so. 

For purposes of reporting an applicant’s 

status, a financial institution relies on the 

applicant’s determinations of its ownership, 

control, and accrual of net profits and losses. 

4. Ownership. For purposes of determining 

if a business is a women-owned business, a 

natural person owns a business if that natural 

person directly or indirectly, through any 

contract, arrangement, understanding, 

relationship or otherwise, has an equity 

interest in the business. Examples of 

ownership include being the sole proprietor 

of a sole proprietorship, directly or indirectly 

owning or holding the stock of a corporation 

or company, directly or indirectly having a 

partnership interest in a business, or directly 

or indirectly having a membership interest in 

a limited liability company. Indirect as well 

as direct ownership are used when 

determining ownership for purposes of 

§§ 1002.102(s) and 1002.107(a)(19). Thus, 

where applicable, ownership must be traced 

through corporate or other indirect 

ownership structures. For example, assume 

that the applicant is company A. If company 

B owns 60 percent of the applicant company 

A and a natural person owns 100 percent of 

company B, the natural person owns 60 

percent of the applicant company A. 

Similarly, if a natural person directly owns 

20 percent of the applicant company A and 

is an equal partner in a partnership B that 

owns the remaining 80 percent of the 

applicant company A, the natural person 

owns 60 percent of applicant company A 

(i.e., 20 percent due through direct 

ownership and 40 percent indirectly through 

partnership B). A trustee is considered the 

owner of the trust. Thus, if a trust owns a 

business and the trust has two co-trustees, 

each co-trustee owns 50 percent of the 

business. 

5. Control. A natural person controls a 

business if that natural person has significant 

responsibility to manage or direct the 

business. A natural person controls a 

business if the natural person is an executive 

officer or senior manager (e.g., a chief 

executive officer, chief financial officer, chief 

operating officer, managing member, general 

partner, president, vice president, or 

treasurer) or regularly performs similar 

functions. Additionally, a business may be 

controlled by two more women if those 

women collectively control the business, 

such as constituting a majority of the board 

of directors or a majority of the partners of 

a partnership. 

6. Accrual of net profits or losses. A 

business’s net profits and losses accrue to a 

natural person if that natural person receives 

the net profits or losses, is legally entitled or 

required to receive the net profits or losses, 

or is legally entitled or required to recognize 

the net profits or losses for tax purposes. 

Section 1002.103—Covered Applications 

103(a) In general. 

1. In general. Subject to the requirements 

of subpart B of this part, a financial 

institution has latitude to establish its own 

application process or procedures, including 

designating the type and amount of 

information it will require from applicants. 

2. Procedures used. The term ‘‘procedures’’ 

refers to the actual practices followed by a 

financial institution as well as its stated 

application procedures. For example, if a 

financial institution’s stated policy is to 

require all applications to be in writing on 

the financial institution’s application form, 

but the financial institution also makes credit 

decisions based on oral requests, the 

financial institution’s procedures are to 

accept both oral and written applications. 

3. Consistency with subpart A. Bureau 

interpretations that appear in this 

supplement I in connection with §§ 1002.2(f) 

and 1002.9 are generally applicable to the 

definition of a covered application in 

§ 1002.103. However, the definition of a 

covered application in § 1002.103 does not 

include inquiries and prequalification 

requests. The definition of a covered 

application also does not include 

reevaluation, extension, or renewal requests 

on an existing business credit account, unless 

the request seeks additional credit amounts. 

See § 1002.103(b). 

4. Requests for multiple covered credit 

transactions at one time. Assuming the 

requirements of a covered application are 

met, if an applicant makes a request for two 

or more covered credit transactions at the 

same time, the financial institution reports 

each request for a covered credit transaction 

as a separate covered application. For 

example, if an applicant requests both a term 

loan and a line of credit on an application 

form, the financial institution reports each 

request for a covered credit transaction as a 

separate covered application. Section 

1002.107(c)(2) sets forth the requirements for 

reusing certain data required under 

§ 1002.107(a) across multiple applications. 

5. Initial request for a single covered credit 

transaction that results in the origination of 

multiple covered credit transactions. 

Assuming the requirements of a covered 

application are met, if an applicant initially 

makes a request for one covered credit 

transaction, but over the course of the 

application process requests and obtains 

multiple covered credit transactions, each 

covered credit transaction must be reported 

as a separate covered application. 

6. Requests for multiple lines of credit at 

one time. Assuming the requirements of a 

covered application are met, if an applicant 

requests multiple lines of credit on a single 

credit account, it is reported as one or more 

covered applications based on the procedures 

used by the financial institution for the type 

of credit account. For example, if a financial 

institution treats a request for multiple lines 

of credit at one time as sub-components of a 

single account, the financial institution 

reports the request as a single covered 

application. If, on the other hand, the 

financial institution treats each line of credit 

as a separate account, then the financial 

institution reports each request for a line of 

credit as a separate covered application, as 

set forth in comment 103(a)–4. 

7. Changes in whether there is a covered 

credit transaction. In certain circumstances, 

an applicant may change the type of product 


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requested during the course of the 

application process. Assuming other 

requirements of a covered application are 

met, if an applicant initially requests a 

product that is not a covered credit 

transaction, but during the application 

process decides to seek instead a product that 

is a covered credit transaction, the 

application is a covered application and must 

be reported. If, on the other hand, an 

applicant initially requests a product that is 

a covered credit transaction, but then during 

the application process decides instead to 

seek a product that is not a covered credit 

transaction, the application is not a covered 

application and thus is not reported. If an 

applicant initially requests a product that is 

a covered credit transaction, the financial 

institution counteroffers with a product that 

is not a covered credit transaction, and the 

applicant declines to proceed or fails to 

respond, the application is reported as a 

covered application. For example, if an 

applicant initially applies for a term loan, but 

then, after consultation with the financial 

institution, decides that a lease would better 

meet its needs and decides to proceed with 

that product, the application is not a covered 

application and thus is not reported. 

However, if an applicant initially applies for 

a term loan, the financial institution offers to 

consider the applicant only for a lease, and 

the applicant refuses, the transaction is a 

covered application that must be reported. 

103(b) Circumstances that are not covered 

applications. 

1. In general. The circumstances set forth 

in § 1002.103(b) are not covered applications 

for purposes of subpart B of this part, even 

if considered applications under subpart A of 

this part. However, in no way are the 

exclusions in § 1002.103(b) intended to 

repeal, abrogate, annul, impair, change, or 

interfere with the scope of the term 

application in § 1002.2(f) as applicable to 

subpart A. 

2. Reevaluation, extension, or renewal 

requests that do not request additional credit 

amounts. An applicant’s request to change 

one or more terms of an existing account 

does not constitute a covered application, 

unless the applicant is requesting additional 

credit amounts on the account. For example, 

an applicant’s request to extend the duration 

on a line of credit or to remove a guarantor 

would not be a covered application. 

3. Reevaluation, extension, or renewal 

requests that request additional credit 

amounts. An applicant’s request for 

additional credit amounts on an existing 

account that is a covered credit transaction 

constitutes a covered application. For 

example, an applicant’s request for a line 

increase on an existing line of credit, made 

in accordance with a financial institution’s 

procedures for the type of credit requested, 

would be a covered application. As discussed 

in comment 107(a)(7)–4, when reporting a 

covered application that seeks additional 

credit amounts on an existing account, the 

financial institution need only report the 

additional credit amount sought, and not the 

entire credit amount. For example, if an 

applicant currently has a line of credit 

account for $100,000, and seeks to increase 

the line to $150,000, the financial institution 

reports the amount applied for as $50,000. 

4. Reviews or evaluations initiated by the 

financial institution. For purposes of subpart 

B of this part, the term covered application 

does not include evaluations or reviews of 

existing accounts initiated by the financial 

institution because the applicant has not 

made the request. For example, if a creditor 

conducts periodic reviews of its existing 

lines of credit and decides to increase the 

applicant’s line by $10,000, it is not a 

covered application because the applicant 

never made a request for the additional credit 

amounts. However, if such an evaluation or 

review of an existing account by a financial 

institution results in the financial institution 

inviting the applicant to apply for additional 

credit amounts on an existing account that is 

a covered credit transaction, and the 

applicant does so, the applicant’s request 

constitutes a covered application for 

purposes of subpart B of this part. Similarly, 

the term covered application also does not 

include solicitations and firm offers of credit. 

5. Inquiries and prequalification requests. 

An inquiry is a request by a prospective 

applicant for information about credit terms 

offered by the financial institution. A 

prequalification request is a request by a 

prospective applicant for a preliminary 

determination on whether the prospective 

applicant would likely qualify for credit 

under a financial institution’s standards or 

for a determination on the amount of credit 

for which the prospective applicant would 

likely qualify. Inquiry and prequalification 

requests are not covered applications under 

subpart B of this part, even though in certain 

circumstances inquiries and prequalification 

requests may constitute applications under 

subpart A. 

Section 1002.104—Covered Credit 

Transactions and Excluded Transactions 

104(a) Covered credit transaction. 

1. General. The term ‘‘covered credit 

transaction’’ includes all business credit 

(including loans, lines of credit, credit cards, 

and merchant cash advances) unless 

otherwise excluded under § 1002.104(b). 

104(b) Excluded transactions. 

1. Factoring. The term ‘‘covered credit 

transaction’’ does not cover factoring as 

described herein. For the purpose of this 

subpart, factoring is an accounts receivable 

purchase transaction between businesses that 

includes an agreement to purchase, transfer, 

or sell a legally enforceable claim for 

payment for goods that the recipient has 

supplied or services that the recipient has 

rendered but for which payment has not yet 

been made. This description of factoring is 

not intended to repeal, abrogate, annul, 

impair, or interfere with any existing 

interpretations, orders, agreements, 

ordinances, rules, or regulations adopted or 

issued pursuant to comment 9(a)(3)–3. A 

financial institution shall report an extension 

of business credit incident to a factoring 

arrangement that is otherwise a covered 

credit transaction as a ‘‘Other sales-based 

financing transaction’’ under 

§ 1002.107(a)(5). 

2. Leases. The term ‘‘covered credit 

transaction’’ does not cover leases as 

described herein. A lease, for the purpose of 

this subpart, is a transfer from one business 

to another of the right to possession and use 

of goods for a term, and for primarily 

business or commercial (including 

agricultural) purposes, in return for 

consideration. A lease does not include a 

sale, including a sale on approval or a sale 

or return, or a transaction resulting in the 

retention or creation of a security interest. 

3. Consumer-designated credit. The term 

‘‘covered credit transaction’’ does not include 

consumer-designated credit used for business 

purposes. A transaction qualifies as 

consumer-designated credit if the financial 

institution offers or extends the credit 

primarily for personal, family, or household 

purposes. For example, an open-end credit 

account used for both personal and business 

purposes is not business credit for the 

purpose of subpart B of this part unless the 

financial institution designated or intended 

for the primary purpose of the account to be 

business-related. 

4. Credit secured by certain investment 

properties. The term ‘‘covered credit 

transaction’’ does not include an extension of 

credit that is secured by 1–4 individual 

dwelling units that the applicant (or one or 

more of the applicant’s principal owners) 

does not, or will not, occupy. A financial 

institution should determine whether the 

property to which the covered credit 

transaction or application relates is or will be 

used as an investment property. For purposes 

of this comment, a property is an investment 

property if the applicant or one or more of 

the applicant’s principal owners does not or 

will not occupy the property. For example, 

if an applicant purchases a property, does not 

occupy the property, and generates income 

by renting the property, the property is an 

investment property for purposes of this 

comment. Similarly, if an applicant 

purchases a property, does not occupy the 

property, and does not generate income by 

renting the property, but intends to generate 

income by selling the property, the property 

is an investment property. A property is an 

investment property if the applicant does not 

or will not occupy the property, even if the 

applicant does not consider the property as 

owned for investment purposes. For 

example, if a corporation purchases a 

property that is a dwelling under 

§ 1002.102(j), that it does not occupy, but that 

is for the long-term residential use of its 

employees, the property is an investment, 

even if the corporation considers the 

property as owned for business purposes 

rather than investment purposes, does not 

generate income by renting the property, and 

does not intend to generate income by selling 

the property at some point in time. If the 

property is for transitory use by employees, 

the property would not be considered a 

dwelling under § 1002.102(j). 

104(b)(1) Trade credit. 

1. General. Trade credit, as defined in 

§ 1002.104(b)(1), is excluded from the 

definition of a covered credit transaction. An 

example of trade credit involves a supplier 

that finances the sale of equipment, supplies, 

or inventory. However, an extension of 

business credit by a financial institution 

other than the supplier for the financing of 

such items is not trade credit. 

2. Trade credit under subpart A. The 

definition of trade credit under comment 


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9(a)(3)–2 applies to relevant provisions under 

subpart A, and § 1002.104(b)(1) is not 

intended to repeal, abrogate, annul, impair, 

or interfere with any existing interpretations, 

orders, agreements, ordinances, rules, or 

regulations adopted or issued pursuant to 

comment 9(a)(3)–2. 

Section 1002.105—Covered Financial 

Institutions and Exempt Institutions 

105(a) Financial institution. 

1. Examples. Section 1002.105(a) defines a 

financial institution as any partnership, 

company, corporation, association 

(incorporated or unincorporated), trust, 

estate, cooperative organization, or other 

entity that engages in any financial activity. 

This definition includes, but is not limited 

to, banks, savings associations, credit unions, 

online lenders, platform lenders, community 

development financial institutions, lenders 

involved in equipment and vehicle financing 

(captive financing companies and 

independent financing companies), 

commercial finance companies, organizations 

exempt from taxation pursuant to 26 U.S.C. 

501(c), and governments or governmental 

subdivisions or agencies. 

2. Motor vehicle dealers. Pursuant to 

§ 1002.101(a), subpart B of this part excludes 

from coverage persons defined by section 

1029 of the Consumer Financial Protection 

Act of 2010, title X of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act, 

Public Law 111–203, 124 Stat. 1376, 2004 

(2010). 

105(b) Covered financial institution. 

1. Preceding calendar year. The definition 

of covered financial institution refers to 

preceding calendar years. For example, in 

2026, the two preceding calendar years are 

2024 and 2025. Accordingly, in 2026, 

Financial Institution A does not meet the 

loan-volume threshold in § 1002.105(b) if did 

not originate at least 25 covered credit 

transactions for small businesses both during 

2024 and during 2025. 

2. Origination threshold. A financial 

institution qualifies as a covered financial 

institution based on total covered credit 

transactions originated for small businesses, 

rather than covered applications received 

from small businesses. For example, if in 

both 2024 and 2025, Financial Institution B 

received 30 covered applications from small 

businesses and originated 20 covered credit 

transactions for small businesses, then for 

2026, Financial Institution B is not a covered 

financial institution. 

3. Annual consideration. Whether a 

financial institution is a covered financial 

institution in a particular year depends on its 

small business lending activity in the 

preceding two calendar years. Therefore, 

whether a financial institution is a covered 

financial institution is an annual 

consideration for each year that data may be 

compiled and maintained for purposes of 

subpart B of this part. A financial institution 

may be a covered financial institution for a 

given year of data collection (and the 

obligations arising from qualifying as a 

covered financial institution shall continue 

into subsequent years, pursuant to 

§§ 1002.110 and 1002.111), but the same 

financial institution may not be a covered 

financial institution for the following year of 

data collection. For example, Financial 

Institution C originated 30 covered 

transactions for small businesses in both 

2024 and 2025. In 2026, Financial Institution 

C is a covered financial institution and 

therefore is obligated to compile and 

maintain applicable 2026 small business 

lending data under § 1002.107(a). During 

2026, Financial Institution C originates 10 

covered transactions for small businesses. In 

2027, Financial Institution C is not a covered 

financial institution with respect to 2027 

small business lending data, and is not 

obligated to compile and maintain 2027 data 

under § 1002.107(a) (although Financial 

Institution C may volunteer to collect and 

maintain 2027 data pursuant to 

§ 1002.5(a)(4)(vii) and as explained in 

comment 105(b)–7). Pursuant to 

§ 1002.109(a), Financial Institution C shall 

submit its small business lending application 

register for 2026 data in the format prescribed 

by the Bureau by June 1, 2027 because 

Financial Institution C is a covered financial 

institution with respect to 2026 data, and the 

data submission deadline of June 1, 2027 

applies to 2026 data. 

4. Merger or acquisition—coverage of 

surviving or newly formed institution. After 

a merger or acquisition, the surviving or 

newly formed financial institution is a 

covered financial institution under 

§ 1002.105(b) if it, considering the combined 

lending activity of the surviving or newly 

formed institution and the merged or 

acquired financial institutions (or acquired 

branches or locations), satisfies the criteria 

included in § 1002.105(b). For example, 

Financial Institutions A and B merge. The 

surviving or newly formed financial 

institution meets the threshold in 

§ 1002.105(b) if the combined previous 

components of the surviving or newly formed 

financial institution (A plus B) would have 

reported at least 25 covered credit 

transactions for small businesses for each of 

the two preceding calendar years. Similarly, 

if the combined previous components and 

the surviving or newly formed financial 

institution would have reported at least 25 

covered transactions for small businesses for 

the year previous to the merger as well as 25 

covered transactions for small businesses for 

the year of the merger, the threshold 

described in § 1002.105(b) would be met and 

the surviving or newly formed financial 

institution would be a covered institution 

under § 1002.105(b) for the year following the 

merger. Comment 105(b)–5 discusses a 

financial institution’s responsibilities with 

respect to compiling and maintaining (and 

subsequently reporting) data during the 

calendar year of a merger. 

5. Merger or acquisition—coverage specific 

to the calendar year of the merger or 

acquisition. The scenarios described below 

illustrate a financial institution’s 

responsibilities specifically for data from the 

calendar year of a merger or acquisition. For 

purposes of these illustrations, an 

‘‘institution that is not covered’’ means either 

an institution that is not a financial 

institution, as defined in § 1002.105(a), or a 

financial institution that is not a covered 

financial institution, as defined in 

§ 1002.105(b). 

i. Two institutions that are not covered 

financial institutions merge. The surviving or 

newly formed institution meets all of the 

requirements necessary to be a covered 

financial institution. No data are required to 

be compiled, maintained, or reported for the 

calendar year of the merger (even though the 

merger creates an institution that meets all of 

the requirements necessary to be a covered 

financial institution). 

ii. A covered financial institution and an 

institution that is not covered merge. The 

covered financial institution is the surviving 

institution, or a new covered financial 

institution is formed. For the calendar year 

of the merger, data are required to be 

compiled, maintained, and reported for 

covered applications from the covered 

financial institution and is optional for 

covered applications from the financial 

institution that was previously not covered. 

iii. A covered financial institution and an 

institution that is not covered merge. The 

institution that is not covered is the surviving 

institution and remains not covered after the 

merger, or a new institution that is not 

covered is formed. For the calendar year of 

the merger, data are required to be compiled 

and maintained (and subsequently reported) 

for covered applications from the previously 

covered financial institution that took place 

prior to the merger. After the merger date, 

compiling, maintaining, and reporting data is 

optional for applications from the institution 

that was previously covered. 

iv. Two covered financial institutions 

merge. The surviving or newly formed 

financial institution is a covered financial 

institution. Data are required to be compiled 

and maintained (and subsequently reported) 

for the entire calendar year of the merger. 

The surviving or newly formed financial 

institution files either a consolidated 

submission or separate submissions for that 

calendar year. 

6. Foreign applicability. As discussed in 

comment 1(a)–2, Regulation B (including 

subpart B) generally does not apply to 

lending activities that occur outside the 

United States. 

7. Voluntary collection and reporting. 

Section 1002.5(a)(4)(vii) through (ix) permits 

a creditor that is not a covered financial 

institution under § 1002.105(b) to voluntarily 

collect and report information regarding 

covered applications in certain 

circumstances. If a creditor is voluntarily 

collecting information for covered 

applications regarding whether the applicant 

is a minority-owned business under 

§ 1002.107(a)(18) or a women-owned 

business under § 1002.107(a)(19), and 

regarding the ethnicity, race, and sex of the 

applicant’s principal owners under 

§ 1002.107(20), it shall do so in compliance 

with §§ 1002.107, 1002.108, 1002.111, 

1002.112, and 1002.114 as though it were a 

covered financial institution. See also 

comment 5(a)(4)–1. If a creditor is voluntarily 

reporting those covered applications to the 

Bureau, it shall do so in compliance with 

§§ 1002.109 and 1002.110 as though it were 

a covered financial institution. 

Section 1002.106—Business and Small 

Business 

106(b) Small business. 


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1. Change in determination of small 

business status—business is ultimately not a 

small business. If a financial institution 

initially determines an applicant is a small 

business as defined in § 1002.106 based on 

available information and collects data 

required by § 1002.107(a)(18) through (20) 

but later concludes that the applicant is not 

a small business, the financial institution 

may process and retain the data without 

violating the Act or this regulation if it meets 

the requirements of § 1002.112(c)(3). The 

financial institution shall not report the 

application on its small business lending 

application register pursuant to § 1002.109. 

2. Change in determination of small 

business status—business is ultimately a 

small business. Consistent with 

§ 1002.107(a)(14), a financial institution need 

not independently verify gross annual 

revenue. If a financial institution initially 

determines that the applicant is not a small 

business as defined in § 1002.106, but later 

concludes the applicant is a small business, 

the financial institution shall endeavor to 

compile, maintain, and report the data 

required under § 1002.107(a) in a manner 

that is reasonable under the circumstances. 

For example, if the applicant initially 

provides a gross annual revenue of $5.5 

million (that is, above the threshold for a 

small business as defined in § 1002.106(b)), 

but during the course of underwriting the 

financial institution discovers the applicant’s 

gross annual revenue was in fact $4.75 

million (meaning that the applicant is within 

the definition of a small business under 

§ 1002.106(b)), the financial institution is 

required to report the covered application 

pursuant to § 1002.109. In this situation, the 

financial institution shall take reasonable 

steps upon discovery to compile, maintain, 

and report the data necessary under 

§ 1002.107(a) to comply with subpart B of 

this part for that covered application. Thus, 

in this example, even if the financial 

institution’s procedure is typically to request 

applicant-provided data together with the 

application form, in this circumstance, the 

financial institution shall seek to collect the 

data during the application process necessary 

to comply with subpart B in a manner that 

is reasonable under the circumstances. The 

financial institution remains subject to 

§ 1002.107(c)(1) related to the time and 

manner of collecting applicant-provided 

data. 

3. Affiliate revenue. As explained in 

comment 107(a)(14)–3, a financial institution 

is permitted, but not required, to report the 

gross annual revenue for the applicant that 

includes the revenue of affiliates as well. As 

explained in comment 107(a)(14)–1, pursuant 

to § 1002.107(b), if the financial institution 

verifies the gross annual revenue provided by 

the applicant, it must report the verified 

information. Likewise, a financial institution 

is permitted to rely on an applicant’s 

representations regarding gross annual 

revenue (which may or may not include the 

affiliate’s revenue) for purposes of 

determining small business status under 

§ 1002.106(b). However, if the applicant 

provides updated gross annual revenue 

information (see comment 107(c)(1)–7), or 

the financial institution verifies the gross 

annual revenue information, the financial 

institution must use the updated or verified 

information in determining small business 

status. 

Section 1002.107—Compilation of 

Reportable Data 

107(a) Data format and itemization. 

1. General. Section 1002.107(a) describes a 

covered financial institution’s obligation to 

compile and maintain data regarding the 

covered applications it receives from small 

businesses. 

i. A covered financial institution reports 

these data even if the credit originated 

pursuant to the reported application was 

subsequently sold by the institution. 

ii. A covered financial institution annually 

reports data for covered applications for 

which final action was taken in the previous 

calendar year. 

iii. A financial institution reports data for 

a covered application on its small business 

lending application register for the calendar 

year during which final action was taken on 

the application, even if the institution 

received the application in a previous 

calendar year. 

2. Filing Instructions Guide. Additional 

details and procedures for compiling data 

pursuant to § 1002.107 are included in the 

Filing Instructions Guide, which is available 

at [a designated Bureau website]. 

107(a)(1) Unique identifier. 

1. Unique within the financial institution. 

A financial institution complies with 

§ 1002.107(a)(1) by compiling and reporting 

an alphanumeric application or loan 

identifier unique within the financial 

institution to the specific application. The 

identifier must not exceed 45 characters, and 

must begin with the financial institution’s 

Legal Entity Identifier (LEI), as defined in 

comment 109(b)(6)–1. Separate applications 

for the same applicant must have separate 

identifiers. The identifier may only include 

standard numerical and/or alphabetical 

characters and cannot include dashes, other 

special characters, or characters with 

diacritics. The financial institution may 

assign the unique identifier at any time prior 

to reporting the application. Refinancings or 

applications for refinancing must be assigned 

a different identifier than the transaction that 

is being refinanced. A financial institution 

with multiple branches must ensure that its 

branches do not use the same identifiers to 

refer to multiple applications. 

2. Does not include directly identifying 

information. The unique identifier must not 

include any directly identifying information 

about the applicant or persons (natural or 

legal) associated with the applicant. See also 

§ 1002.111(c) and related commentary. 

107(a)(2) Application date. 

1. Consistency. Section 1002.107(a)(2) 

requires that, in reporting the date of covered 

application, a financial institution shall 

report the date it received the covered 

application, as defined under § 1002.103, or 

the date shown on a paper or electronic 

application form. Although a financial 

institution need not choose the same 

approach for its entire small business lending 

application register, it should generally be 

consistent in its approach by, for example, 

establishing procedures for how to report this 

date within particular scenarios, products, or 

divisions. If the financial institution chooses 

to report the date shown on an application 

form and the institution retains multiple 

versions of the application form, the 

institution reports the date shown on the first 

application form satisfying the application 

definition provided under § 1002.103. 

2. Indirect applications. For an application 

that was not submitted directly to the 

financial institution or its affiliate (as 

described in § 1002.107(a)(4)), the institution 

may report the date the application was 

received by the party that initially received 

the application, the date the application was 

received by the financial institution, or the 

date shown on the application form. 

Although a financial institution need not 

choose the same approach for its entire small 

business lending application register, it 

should generally be consistent in its 

approach by, for example, establishing 

procedures for how to report this date within 

particular scenarios, products, or divisions. 

107(a)(3) Application method. 

1. General. A financial institution complies 

with § 1002.107(a)(3) by reporting the means 

by which the applicant submitted the 

application from one of the following 

options: In-person, telephone, online, or 

mail. 

i. In-person. A financial institution reports 

the application method as ‘‘in-person’’ if the 

financial institution, or another party acting 

on the financial institution’s behalf, meets 

with the applicant in person (for example, in 

a branch office, at the applicant’s place of 

business, or via electronic media with a 

video component). 

ii. Telephone. A financial institution 

reports the application method as 

‘‘telephone’’ if the financial institution, or 

another party acting on the financial 

institution’s behalf, did not meet with the 

applicant in person as described in comment 

1002.107(a)(3)–1.i but communicated with 

the applicant by telephone or via audio-based 

electronic media without a video component. 

iii. Online. A financial institution reports 

the application method as ‘‘online’’ if the 

financial institution, or another party acting 

on the financial institution’s behalf, did not 

meet with the applicant in person and did 

not communicate with the applicant by 

telephone as described in comments 

1002.107(a)(3)–1.i and ii, but communicated 

with the applicant through an online 

application, electronic mail, text message, 

and/or some other form of online 

communication. 

iv. Mail. A financial institution reports the 

application method as ‘‘mail’’ if the financial 

institution, or another party acting on the 

financial institution’s behalf, did not meet 

with the applicant in person and did not 

communicate with the applicant by 

telephone, as described in comments 

1002.107(a)(3)–1.i and ii, but communicated 

with the applicant in writing via United 

States mail, courier or overnight service, or 

hand-delivery (including hand-delivery of 

documents via an overnight drop box or at 

a teller window). 

2. Reporting for interactions with 

applicants involving both mail and online. If 


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a financial institution, or another party acting 

on the financial institution’s behalf, 

communicated with the applicant both 

online as described in comment 

1002.107(a)(3)–1.iii and by mail as described 

in 1002.107(a)(3)–1.iv, the financial 

institution reports the application method 

based on the method by which it, or another 

party acting on its behalf, requested the 

ethnicity, race, and sex of the applicant’s 

principal owners pursuant to 

§ 1002.107(a)(20). For example, if a financial 

institution requests the ethnicity, race, and 

sex information through an online form, it 

reports the application method as ‘‘online.’’ 

If the financial institution requests the 

ethnicity, race, and sex information via a 

paper form sent to the applicant by mail, it 

reports the application method as ‘‘mail.’’ If 

the financial institution requests the 

ethnicity, race, and sex information 

electronically online or via an electronic 

document that is emailed to the applicant, 

that the applicant then prints and returns to 

the financial institution by mail, the financial 

institution reports the application method as 

‘‘online’’ (because that is the method by 

which the financial institution requested the 

ethnicity, race, and sex information). 

107(a)(4) Application recipient. 

1. Agents. If a financial institution is 

reporting actions taken by its agent consistent 

with comment 109(a)(3)–3, the agent is 

considered the financial institution for the 

purposes of § 1002.107(a)(4). For example, 

assume that an applicant submitted an 

application to Financial Institution A, and 

Financial Institution A made the credit 

decision acting as Financial Institution B’s 

agent under State law. Financial Institution 

B reports the origination and indicates that 

the application was submitted directly to 

Financial Institution B. 

107(a)(5) Credit type. 

1. Reporting credit product—in general. A 

financial institution complies with 

§ 1002.107(a)(5)(i) by selecting the credit 

product requested from the list below. If an 

applicant requests more than one credit 

product, the financial institution reports each 

credit product requested as a separate 

application. If the credit product requested or 

originated is not included on this list, the 

financial institution selects ‘‘other,’’ and 

reports the credit specific product as freeform text. 

i. Term loan—unsecured. 

ii. Term loan—secured. 

iii. Line of credit—unsecured. 

iv. Line of credit—secured. 

v. Credit card. 

vi. Merchant cash advance. 

vii. Other sales-based financing 

transaction. 

viii. Other. 

ix. Not provided by applicant and 

otherwise undetermined. 

2. Credit product not provided by the 

applicant and otherwise undetermined. 

Pursuant to § 1002.107(c)(1), a financial 

institution is required to maintain procedures 

reasonably designed to collect applicantprovided data, which includes credit 

product. However, if a financial institution is 

nonetheless unable to collect or otherwise 

determine credit product information 

because the applicant does not indicate what 

credit product it seeks and the application is 

denied, withdrawn, or closed for 

incompleteness before a credit product is 

identified, the financial institution reports 

that the credit product is ‘‘not provided by 

applicant and otherwise undetermined.’’ 

3. Reporting credit product involving 

counteroffers. If a financial institution 

presents a counteroffer for a different credit 

product than the product the applicant had 

initially requested, and the applicant does 

not agree to proceed with the counteroffer, 

the financial institution reports the 

application for the original credit product as 

denied pursuant to § 1002.107(a)(9). If the 

applicant agrees to proceed with 

consideration of the financial institution’s 

counteroffer, the financial institution reports 

the disposition of the application based on 

the credit product that was offered and does 

not report the original credit product applied 

for. See comment 107(a)(9)–2. 

4. Guarantees. A financial institution 

complies with § 1002.107(a)(5)(ii) by 

selecting the type or types of guarantees that 

were obtained for an originated covered 

credit transaction, or that would have been 

obtained if the covered credit transaction was 

originated, from the list below. The financial 

institution selects, if applicable, up to a 

maximum of five guarantees for a single 

application or transaction. If the type of 

guarantee does not appear on the list, the 

financial institution selects ‘‘other guarantee’’ 

and reports the type of guarantee as free-form 

text. If no guarantee is obtained or would 

have been obtained if the covered credit 

transaction was originated, the financial 

institution selects ‘‘no guarantee.’’ 

i. Personal guarantee—owner(s). 

ii. Personal guarantee—non-owner(s). 

iii. SBA guarantee—7(a) program. 

iv. SBA guarantee—504 program. 

v. SBA guarantee—other. 

vi. USDA guarantee. 

vii. FHA insurance. 

viii. Bureau of Indian Affairs guarantee 

ix. Other Federal guarantee. 

x. State or local government guarantee. 

xi. Other guarantee. 

xii. No guarantee. 

5. Loan term. A financial institution 

complies with § 1002.107(a)(5)(iii) by 

reporting the number of months in the loan 

term for the covered credit transaction. The 

loan term is the number of months after 

which the legal obligation will mature or 

terminate. The financial institution does not 

include in the loan term the time that 

elapses, if any, between the settlement of the 

transaction and the first payment period. For 

example, if a loan closes on April 12, but the 

first payment is not due until June 1 and 

includes the interest accrued in May (but not 

April), the financial institution does not 

include the month of April in the loan term. 

The financial institution may round the loan 

term to the nearest full month or may count 

only full months and ignore partial months, 

as it so chooses. If a credit product, such as 

a credit card, does not have a loan term, the 

financial institution reports that the loan 

term is ‘‘not applicable.’’ The financial 

institution also reports ‘‘not applicable’’ if 

the application is denied, withdrawn, or 

determined to be incomplete before a loan 

term has been identified. 

6. Other sales-based financing transaction. 

For an extension of business credit incident 

to a factoring arrangement that is otherwise 

a covered credit transaction, a financial 

institution selects ‘‘other sales-based 

financing transaction’’ as the credit product. 

See comment 104(b)–1. 

107(a)(6) Credit purpose. 

1. General. A financial institution complies 

with § 1002.107(a)(6) by selecting the 

purpose or purposes of the covered credit 

transaction applied for or originated from the 

list below. 

i. Purchase, construction/improvement, or 

refinance of owner-occupied dwelling(s). 

ii. Purchase, construction/improvement, or 

refinance of non-owner-occupied dwelling(s). 

iii. Purchase, construction/improvement, 

or refinance of non-owner-occupied, nondwelling real estate. 

iv. Purchase, construction/improvement, or 

refinance of owner-occupied, non-dwelling 

real estate. 

v. Purchase, refinance, or rehabilitation/ 

repair of motor vehicle(s) (including light 

and heavy trucks). 

vi. Purchase, refinance, or rehabilitation/ 

repair of equipment. 

vii. Working capital (includes inventory or 

floor planning). 

viii. Business start-up. 

ix. Business expansion. 

x. Business acquisition. 

xi. Refinance existing debt (other than 

refinancings listed above). 

xii. Line increase. 

xiii. Other. 

xiv. Not provided by applicant and 

otherwise undetermined. 

xv. Not applicable. 

2. More than one purpose. If the applicant 

indicates or the financial institution is 

otherwise aware of more than one purpose 

for the credit applied for or originated, the 

financial institution reports those purposes, 

up to a maximum of three, using the list 

provided, in any order it chooses. For 

example, if an applicant refinances a nondwelling commercial building it owns and 

uses the funds to purchase a motor vehicle 

and expand the business it runs in a part of 

that building, the financial institution reports 

that the three purposes of the credit are 

purchase, construction/improvement, or 

refinance of owner-occupied, non-dwelling 

real estate; purchase, refinance, or 

rehabilitation/repair of motor vehicle(s) 

(including light and heavy trucks); and 

business expansion. If an application has 

more than three purposes, the financial 

institution reports any three of those 

purposes. In the example above, if the funds 

were also used to purchase equipment, the 

financial institution would select only three 

of the relevant purposes to report. 

3. ‘‘Other’’ credit purpose. If a purpose of 

an application does not appear on the list of 

purposes provided, the financial institution 

reports ‘‘other’’ as the credit purpose and 

reports the credit purpose as free-form text. 

If the application has more than one ‘‘other’’ 

purpose, the financial institution chooses the 

most significant ‘‘other’’ purpose, in its 

discretion, and reports that ‘‘other’’ purpose. 


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The financial institution reports a maximum 

of three credit purposes, including any 

‘‘other’’ purpose reported. 

4. Credit purpose not provided by 

applicant and otherwise undetermined. 

Pursuant to § 1002.107(c)(1), a financial 

institution shall maintain procedures 

reasonably designed to collect applicantprovided information, which includes credit 

purpose. However, if a financial institution is 

nonetheless unable to collect or determine 

credit purpose information, the financial 

institution reports that the credit purpose is 

‘‘not provided by applicant and otherwise 

undetermined.’’ 

5. Not applicable. If the application is for 

a credit product that generally has 

indeterminate or numerous potential 

purposes, such as a credit card, the financial 

institution may report credit purpose as ‘‘not 

applicable.’’ 

6. Excluded dwellings. As explained in 

comment 104(b)–4, subpart B of this part 

does not apply to an extension of credit that 

is secured by 1–4 individual dwelling units 

that the applicant or one or more of the 

applicant’s principal owners does not, or will 

not, occupy. 

7. Collecting credit purpose. Pursuant to 

§ 1002.107(c)(1), a financial institution shall 

maintain procedures reasonably designed to 

collect applicant-provided information, 

including credit purpose. The financial 

institution is permitted, but not required, to 

present the list of credit purposes provided 

in comment 107(a)(6)–1 to the applicant. The 

financial institution is also permitted to ask 

about purposes not included on the list 

provided in comment 107(a)(6)–1. If the 

applicant chooses a purpose or purposes not 

included on the provided list, the financial 

institution follows the instructions in 

comment 107(a)(6)–3 regarding reporting of 

‘‘other’’ as the credit purpose. If an applicant 

chooses a purpose or purposes that are 

similar to purposes on the list provided, but 

uses different language, the financial 

institution reports the purpose or purposes 

from the list provided. 

107(a)(7) Amount applied for. 

1. Initial amount requested. A financial 

institution complies with § 1002.107(a)(7) by 

reporting the initial amount of credit or the 

credit limit initially requested by the 

applicant. The financial institution is not 

required to report credit amounts or limits 

discussed before an application is made, but 

must capture the amount initially requested 

at the application stage or later. If the 

applicant does not request a specific amount, 

but the financial institution underwrites the 

application for a specific amount, the 

financial institution reports the amount 

considered for underwriting as the amount 

applied for. If the applicant requests an 

amount as a range of numbers, the financial 

institution reports the midpoint of that range. 

2. No amount requested. Pursuant to 

§ 1002.107(c)(1), a financial institution shall 

maintain procedures reasonably designed to 

collect applicant-provided information, 

which includes the credit amount initially 

requested by the applicant. However, if a 

financial institution is nonetheless unable to 

collect or otherwise determine the amount 

initially requested, the financial institution 

reports that the amount applied for is ‘‘not 

provided by applicant and otherwise 

undetermined.’’ If the particular product 

applied for does not involve a specific 

amount requested or underwritten, the 

financial institution reports that the 

requirement is ‘‘not applicable.’’ 

3. Firm offers. When an applicant responds 

to a ‘‘firm offer’’ that specifies an amount or 

limit, which may occur in conjunction with 

a pre-approved credit solicitation, the 

financial institution reports the amount 

applied for as the amount of the firm offer, 

unless the applicant requests a different 

amount. If the firm offer does not specify an 

amount or limit and the applicant does not 

request a specific amount, the amount 

applied for is the amount underwritten by 

the financial institution. 

4. Additional amounts on an existing 

account. When reporting a covered 

application that seeks additional credit 

amounts on an existing account, the financial 

institution reports only the additional credit 

amount sought, and not any previous 

amounts extended. See comment 103(b)–3. 

107(a)(8) Amount approved or originated. 

1. General. A financial institution complies 

with § 1002.107(a)(8) by reporting the 

amount approved or originated for credit that 

is originated or approved but not accepted. 

For applications that the financial institution, 

pursuant to § 1002.107(a)(9), reports as 

denied, withdrawn by the applicant, or 

incomplete, the financial institution reports 

that the amount approved or originated is 

‘‘not applicable.’’ 

2. Multiple approval amounts. A financial 

institution may sometimes approve an 

applicant for more than one credit amount, 

allowing the applicant to choose which 

amount the applicant prefers for the 

extension or line of credit. When multiple 

approval amounts are offered for a closedend credit transaction for which the action 

taken is approved but not accepted, and the 

applicant does not accept the approved offer 

of credit in any amount, the financial 

institution reports the highest amount 

approved. If the applicant accepts the offer of 

closed-end credit, the financial institution 

reports the amount originated. When 

multiple approval amounts are offered for an 

open-end credit transaction for which the 

action taken is approved but not accepted, 

and the applicant does not accept the 

approved offer of credit in any amount, the 

financial institution reports the highest 

amount approved. If the applicant accepts 

the offer of open-end credit, the financial 

institution reports the actual credit limit 

established. 

3. Amount approved or originated—closedend credit transaction. For an originated 

closed-end credit transaction, the financial 

institution reports the principal amount to be 

repaid. This amount will generally be 

disclosed on the legal obligation. 

4. Amount approved or originated— 

refinancing. For a refinancing, the financial 

institution reports the amount of credit 

approved or originated under the terms of the 

new debt obligation. 

5. Amount approved or originated— 

counteroffer. If an applicant agrees to 

proceed with consideration of a counteroffer 

for an amount or limit different from the 

amount for which the applicant applied, and 

the covered credit transaction is approved 

and originated, the financial institution 

reports the amount granted. If an applicant 

does not agree to proceed with consideration 

of a counteroffer or fails to respond, the 

institution reports the application as denied 

and reports ‘‘not applicable’’ for the amount 

approved or originated. See comment 

107(a)(9)–2. 

107(a)(9) Action taken. 

1. General. A financial institution complies 

with § 1002.107(a)(9) by selecting the action 

taken by the financial institution on the 

application from the following list: 

originated, approved but not accepted, 

denied, withdrawn by the applicant, or 

incomplete. A financial institution identifies 

the applicable action taken code based on 

final action taken on the covered application. 

i. Originated. A financial institution 

reports that the covered credit transaction 

was originated if the financial institution 

made a credit decision approving the 

application and that credit decision results in 

an extension of credit. 

ii. Approved but not accepted. A financial 

institution reports an application as 

approved but not accepted if the financial 

institution made a credit decision approving 

the application, but the applicant or the party 

that initially received the application fails to 

respond to the financial institution’s 

approval within the specified time, or the 

covered credit transaction was not otherwise 

consummated or the account was not 

otherwise opened. 

iii. Denied. A financial institution reports 

that the application was denied if it made a 

credit decision denying the application 

before an applicant withdraws the 

application, before the file is closed for 

incompleteness, or before the application is 

denied for incompleteness. 

iv. Withdrawn by the applicant. A financial 

institution reports that the application was 

withdrawn if the application is expressly 

withdrawn by the applicant before the 

financial institution makes a credit decision 

approving or denying the application, before 

the file is closed for incompleteness, or 

before the application is denied for 

incompleteness. 

v. Incomplete. A financial institution 

reports incomplete if the financial institution 

took adverse action on the basis of 

incompleteness under § 1002.9(c)(1)(i) or 

provided a written notice of incompleteness 

under § 1002.9(c)(2), and the applicant did 

not respond to the request for additional 

information within the period of time 

specified in the notice. 

2. Treatment of counteroffers. If a financial 

institution makes a counteroffer to grant 

credit on terms other than those originally 

requested by the applicant (for example, for 

a shorter loan maturity, with a different 

interest rate, or in a different amount) and the 

applicant declines the counteroffer or fails to 

respond, the institution reports the action 

taken as a denial on the original terms 

requested by the applicant. If the applicant 

agrees to proceed with consideration of the 

financial institution’s counteroffer, the 

financial institution reports the action taken 


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as the disposition of the application based on 

the terms of the counteroffer. For example, 

assume an applicant applies for a term loan 

and the financial institution makes a 

counteroffer to proceed with consideration of 

a line of credit. If the applicant declines to 

be considered for a line of credit, the 

financial institution reports the application 

as a denied request for a term loan. If, on the 

other hand, the applicant agrees to be 

considered for a line of credit, then the 

financial institution reports the action taken 

as the disposition of the application for the 

line of credit. For instance, using the same 

example, if the financial institution makes a 

credit decision approving the line of credit, 

but the applicant fails to respond to the 

financial institution’s approval within the 

specified time by accepting the credit offer, 

the financial institution reports the 

application on the line of credit as approved 

but not accepted. 

3. Treatment of rescinded transactions. If 

a borrower successfully rescinds a 

transaction after closing but before a financial 

institution is required to submit its small 

business lending application register 

containing the information for the 

application under § 1002.109, the institution 

reports the application as approved but not 

accepted. 

4. Treatment of pending applications. A 

financial institution does not report any 

application still pending at the end of the 

calendar year; it reports such applications on 

its small business lending application 

register for the year in which final action is 

taken. 

5. Treatment of conditional approvals. If a 

financial institution issues an approval that 

is subject to the applicant meeting certain 

conditions, the financial institution reports 

the action taken as provided below 

dependent on whether the conditions are 

solely customary commitment or closing 

conditions or if the conditions include any 

underwriting or creditworthiness conditions. 

Customary commitment or closing conditions 

include, for example, a clear-title 

requirement, proof of insurance policies, a 

subordination agreement from another 

lienholder, or property titling of associated 

accounts. Underwriting or creditworthiness 

conditions include, for example, conditions 

that constitute a counteroffer (such as a 

demand for a higher down-payment), 

satisfactory loan-to-value ratios, or 

verification or confirmation, in whatever 

form the institution requires, that the 

applicant meets underwriting conditions 

concerning applicant creditworthiness, 

including documentation or verification of 

revenue, income or assets. 

i. Conditional approval—denial. If the 

approval is conditioned on satisfying 

underwriting or creditworthiness conditions, 

those conditions are not met, and the 

financial institution takes adverse action on 

some basis other than incompleteness, the 

financial institution reports the action taken 

as denied. 

ii. Conditional approval—incompleteness. 

If the approval is conditioned on satisfying 

underwriting or creditworthiness conditions 

that the financial institution needs to make 

the credit decision, and the financial 

institution takes adverse action on the basis 

of incompleteness under § 1002.9(c)(1)(i), or 

has sent a written notice of incompleteness 

under § 1002.9(c)(2) and the applicant did 

not respond within the period of time 

specified in the notice, the financial 

institution reports the action taken as 

incomplete. 

iii. Conditional approval—approved but 

not accepted. If the approval is conditioned 

on satisfying conditions that are solely 

customary commitment or closing conditions 

and the conditions are not met, the financial 

institution reports the action taken as 

approved but not accepted. If all the 

conditions (underwriting, creditworthiness, 

or customary commitment or closing 

conditions) are satisfied and the financial 

institution agrees to extend credit but the 

covered credit transaction is not originated 

(for example, because the applicant 

withdraws), the financial institution reports 

the action taken as approved but not 

accepted. 

iv. Conditional approval—withdrawn by 

the applicant. If the applicant expressly 

withdraws before satisfying all underwriting 

or creditworthiness conditions and before the 

institution denies the application or before 

the institution closes the file for 

incompleteness, the financial institution 

reports the action taken as withdrawn. 

107(a)(10) Action taken date. 

1. Reporting action taken date for denied 

applications. For applications that are 

denied, a financial institution reports either 

the date the application was denied or the 

date the denial notice was sent to the 

applicant. 

2. Reporting action taken date for 

applications withdrawn by applicant. For 

applications that are withdrawn by the 

applicant, the financial institution reports the 

date the express withdrawal was received, or 

the date shown on the notification form in 

the case of a written withdrawal. 

3. Reporting action taken date for 

applications that are approved but not 

accepted. For applications approved by a 

financial institution but not accepted by the 

applicant, the financial institution reports 

any reasonable date, such as the approval 

date, the deadline for accepting the offer, or 

the date the file was closed. A financial 

institution should generally be consistent in 

its approach to reporting by, for example, 

establishing procedures for how to report this 

date for particular scenarios, products, or 

divisions. 

4. Reporting action taken date for 

originated covered credit transactions. For 

covered credit transactions that are 

originated, a financial institution generally 

reports the closing or account opening date. 

If the disbursement of funds takes place on 

a date later than the closing or account 

opening date, the institution may, 

alternatively, use the date of initial 

disbursement. A financial institution should 

generally be consistent in its approach to 

reporting by, for example, establishing 

procedures for how to report this date in 

different scenarios, products, or divisions. 

5. Reporting action taken date for 

incomplete applications. For files closed for 

incompleteness or denied for 

incompleteness, the financial institution 

reports either the date the action was taken 

or the date the denial or incompleteness 

notice was sent to the applicant. 

107(a)(11) Denial reasons. 

1. Reason for denial—in general. A 

financial institution complies with 

§ 1002.107(a)(11) by reporting the principal 

reason or reasons it denied the application, 

indicating up to four reasons. The financial 

institution reports only the principal reason 

or reasons it denied the application, even if 

there are fewer than four reasons. For 

example, if a financial institution denies an 

application due to insufficient cashflow, 

unacceptable collateral, and unverifiable 

business information, the financial 

institution is required to report these three 

reasons. The reasons reported must 

accurately describe the principal reason or 

reasons the financial institution denied the 

application. A financial institution reports 

denial reasons by selecting its principal 

reason or reasons for denying the application 

from the following list: 

i. Credit characteristics of the business. A 

financial institution reports the denial reason 

as ‘‘credit characteristics of the business’’ if 

it denies the application based on an 

assessment of the business’s ability to meet 

its current or future credit obligations. 

Examples include business credit score, 

history of business bankruptcy or 

delinquency, and/or a high number of recent 

business credit inquiries. 

ii. Credit characteristics of the principal 

owner(s) or guarantor(s). A financial 

institution reports the denial reason as 

‘‘credit characteristics of the principal 

owner(s) or guarantor(s)’’ if it denies the 

application based on an assessment of the 

principal owner(s) or guarantor(s)’s ability to 

meet its current or future credit obligations. 

Examples include principal owner(s) or 

guarantor(s)’s credit score, history of charge 

offs, bankruptcy or delinquency, low net 

worth, limited or insufficient credit history, 

or history of excessive overdraft. 

iii. Use of loan proceeds. A financial 

institution reports the denial reason as ‘‘use 

of loan proceeds’’ if it denies an application 

because, as a matter of policy or practice, it 

limits lending to certain kinds of businesses, 

particular product lines within a business 

class, or certain industries it has identified as 

high risk. For example, if an application for 

credit to establish a cannabis dispensary is 

denied by a financial institution because it 

has classified all cannabis-related business as 

‘‘high risk,’’ the financial institution reports 

the reason for denial as ‘‘use of loan 

proceeds.’’ 

iv. Cashflow. A financial institution reports 

the denial reason as ‘‘cashflow’’ when it 

denies an application due to insufficient or 

inconsistent cashflow. 

v. Collateral. A financial institution reports 

the denial reason as ‘‘collateral’’ when it 

denies an application due to insufficient, 

inappropriate, or unacceptable collateral. 

vi. Time in business. A financial institution 

reports the denial reason as ‘‘time in 

business’’ when it denies an application due 

to insufficient time or experience in a line of 

business. For example, a credit applicant 

establishes a business and applies for credit 


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Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56595 

five months later. The financial institution 

may determine that the applicant has 

insufficient experience in the business under 

the institution’s underwriting standards and 

deny the application. 

vii. Government criteria. Certain loan 

programs are backed by government agencies 

that have specific eligibility requirements. 

When those requirements are not met by an 

applicant, and the financial institution 

denies the application, the financial 

institution reports the denial reason as 

‘‘government criteria.’’ For example, if an 

applicant cannot meet a governmentguaranteed loan program’s requirement to 

provide a guarantor or proof of insurance, the 

financial institution reports the reason for the 

denial as ‘‘government criteria.’’ 

viii. Aggregate exposure. Aggregate 

exposure is a measure of the total exposure 

or level of indebtedness of the business and 

its principal owner(s) associated with an 

application. A financial institution reports 

the denial reason as ‘‘aggregate exposure’’ 

where the total debt associated with the 

application is deemed high or exceeds 

certain debt thresholds set by the financial 

institution. For example, if an application for 

unsecured credit exceeds the maximum 

amount a financial institution is permitted to 

approve per applicant, as stated in its credit 

guidelines, and the financial institution 

denies the application for this reason, the 

financial institution reports the reason for 

denial as ‘‘aggregate exposure.’’ 

ix. Unverifiable information. A financial 

institution reports the denial reason as 

‘‘unverifiable information’’ when it is unable 

to verify information on an application, and 

denies the application for that reason. The 

unverifiable information must be necessary 

for the financial institution to make a credit 

decision based on its procedures for the type 

of credit requested. Examples include 

unverifiable assets or collateral, unavailable 

business credit report, and unverifiable 

business ownership composition. 

x. Other. A financial institution reports the 

denial reason as ‘‘other’’ where none of the 

enumerated denial reasons adequately 

describe the principal reason or reasons it 

denied the application, and the institution 

reports the denial reason or reasons as freeform text. 

2. Reason for denial—not applicable. A 

financial institution complies with 

§ 1002.107(a)(11) by reporting that the 

requirement is not applicable if the action 

taken on the application, pursuant to 

§ 1002.107(a)(9), is not a denial. For example, 

if the application resulted in an originated 

covered credit transaction, or the application 

was approved but not accepted, the financial 

institution complies with § 1002.107(a)(11) 

by reporting not applicable. 

107(a)(12) Pricing information. 

1. General. For applications that a financial 

institution, pursuant to § 1002.107(a)(9), 

reports as denied, withdrawn by the 

applicant, or incomplete, the financial 

institution reports that pricing information is 

‘‘not applicable.’’ 

107(a)(12)(i) Interest rate. 

1. Interest rate—introductory period. If a 

covered credit transaction includes an initial 

period with an introductory interest rate, 

after which the interest rate adjusts upwards 

or shifts from a fixed to variable rate, a 

financial institution complies with 

§ 1002.107(a)(12)(i) by reporting information 

about the interest rate applicable after the 

introductory period. For example, if a 

financial institution originates a covered 

credit transaction with a fixed, initial interest 

rate of 0 percent for six months following 

origination, after which the interest rate will 

adjust according to a Prime index rate plus 

a 3 percent margin, the financial institution 

reports the 3 percent margin, Prime’s value, 

and Prime as the name of the index used to 

adjust the interest rate. 

2. Multiple interest rates. If a covered 

credit transaction includes multiple interest 

rates applicable to different credit features, a 

financial institution complies with 

§ 1002.107(a)(12)(i) by reporting the interest 

rate applicable to the amount of credit 

approved or originated reported in 

§ 1002.107(a)(8). For example, if a financial 

institution originates a credit card with 

different interest rates for purchases, balance 

transfers, cash advances, and overdraft 

advances, the financial institution reports the 

interest rate applicable for purchases. 

3. Index names. A financial institution 

complies with § 1002.107(a)(12)(i) by 

selecting the index used from the following 

list: Wall Street Journal Prime, 6-month CD 

rate, 1-year T-Bill, 3-year T-Bill, 5-year TNote, 12-month average of 10-year T-Bill, 

Cost of Funds Index (COFI)-National, Cost of 

Funds Index (COFI)-11th District. If the index 

used does not appear on the list of indices 

provided, the financial institution reports 

‘‘other’’ and provides the name of the index 

via free-form text. 

4. Index value. For covered transactions 

with an adjustable interest rate, a financial 

institution complies with 

§ 1002.107(a)(12)(i)(B) by reporting the index 

value that is applicable at the time the 

application was approved by the financial 

institution. For covered credit transactions 

that include an initial period with an 

introductory interest rate, after which the 

interest rate adjusts upwards or shifts from a 

fixed to variable rate, a financial institution 

complies with § 1002.107(a)(12)(i)(B) by 

reporting the index value applicable at the 

time the application was approved by the 

financial institution of the rate in effect after 

the introductory interest rate is complete. 

107(a)(12)(ii) Total origination charges. 

1. Charges in comparable cash 

transactions. Charges imposed uniformly in 

cash and credit transactions are not 

reportable under § 1002.107(a)(12)(ii). In 

determining whether an item is part of the 

total origination charges, a financial 

institution should compare the covered 

credit transaction in question with a similar 

cash transaction. A financial institution 

financing the sale of property or services may 

compare charges with those payable in a 

similar cash transaction by the seller of the 

property or service. 

2. Charges by third parties. A financial 

institution includes fees and amounts 

charged by someone other than the financial 

institution in the total charges reported if the 

financial institution: 

i. Requires the use of a third party as a 

condition of or an incident to the extension 

of credit, even if the applicant can choose the 

third party; or 

ii. Retains a portion of the third-party 

charge, to the extent of the portion retained. 

3. Special rule; broker fees. A financial 

institution complies with 

§ 1002.107(a)(12)(ii) by including fees 

charged by a broker (including fees paid by 

the applicant directly to the broker or to the 

financial institution for delivery to the 

broker) in the total origination charges 

reported even if the financial institution does 

not require the applicant to use a broker and 

even if the financial institution does not 

retain any portion of the charge. For more 

information on broker fees, see commentary 

for § 1002.107(a)(12)(iii). 

4. Bundled services. Total origination 

charges include all charges imposed directly 

or indirectly by the financial institution at or 

before origination as an incident to or a 

condition of the extension of credit. 

Accordingly, a financial institution complies 

with § 1002.107(a)(12)(ii) by including 

charges for other products or services paid at 

or before origination in the total origination 

charges reported if the financial institution 

requires the purchase of such other product 

or service as a condition of or an incident to 

the extension of credit. 

5. Origination charges—examples. 

Examples of origination charges may include 

application fees, credit report fees, points, 

appraisal fees, and other similar charges. 

107(a)(12)(iii) Broker fees. 

1. Amount. A financial institution 

complies with § 1002.107(a)(12)(iii) by 

including the fees reported in 

§ 1002.107(a)(12)(ii) that are fees paid by the 

applicant directly to the broker or to the 

financial institution for delivery to the 

broker. For example, a covered transaction 

has $3000 of total origination charges. Of that 

$3000, $250 are fees paid by the applicant 

directly to a broker and an additional $300 

are fees paid to the financial institution for 

delivery to the broker. The financial 

institution complies with 

§ 1002.107(a)(12)(iii) by reporting $550 in the 

broker fees reported. 

2. Fees paid directly to a broker by an 

applicant. A financial institution complies 

with § 1002.107(a)(12)(iii) by relying on the 

best information readily available to the 

financial institution at the time final action 

is taken. Information readily available could 

include, for example, information provided 

by an applicant or broker that the financial 

institution reasonably believes regarding the 

amount of fees paid by the applicant directly 

to the broker. 

107(a)(12)(iv) Initial annual charges. 

1. Charges during the initial annual period. 

The total initial annual charges include all 

charges scheduled to be imposed during the 

initial annual period following origination. 

For example, if a financial institution 

originates a covered credit transaction with a 

$50 monthly fee and a $100 annual fee, the 

financial institution complies with 

§ 1002.107(a)(12)(iv) by reporting $700 in the 

initial annual charges reported. 

2. Interest excluded. A financial institution 

complies with § 1002.107(a)(12)(iv) by 

excluding any interest expense from the 

initial annual charges reported. 


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56596 Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 

3. Avoidable charges. A financial 

institution complies with 

§ 1002.107(a)(12)(iv) by only including 

scheduled charges and excluding any charges 

for events that are avoidable by the applicant 

from the initial annual charges reported. 

Examples of avoidable charges include 

charges for late payment, for exceeding a 

credit limit, for delinquency or default, or for 

paying items that overdraw an account. 

4. Initial annual charges—examples. 

Examples of charges scheduled to be 

imposed during the initial annual period may 

include monthly fees, annual fees, and other 

similar charges. 

5. Scheduled charges with variable 

amounts. A financial institution complies 

with § 1002.107(a)(12)(iv) by reporting as the 

default the highest amount for a charge 

scheduled to be imposed. For example, if a 

covered credit transaction has a $75 monthly 

fee, but the fee is reduced to $0 if the 

applicant maintains an account at the 

financial institution originating the covered 

credit transaction, the financial institution 

complies with § 1002.107(a)(12)(iv) by 

reporting $900 ($75×12) in the initial annual 

charges reported. 

107(a)(12)(v) Additional cost for merchant 

cash advances or other sales-based financing. 

1. Merchant cash advances. Section 

1002.107(a)(12)(v) requires a financial 

institution to report the difference between 

the amount advanced and the amount to be 

repaid for a merchant cash advance or other 

sales-based financing transaction. For 

example, in a merchant cash advance, a 

financial institution reports the difference 

between the purchase price and the amount 

to be repaid, using the amounts provided in 

the contract between the financial institution 

and the applicant. 

107(a)(12)(vi) Prepayment penalties. 

1. Policies and procedures applicable to 

the covered credit transaction. The policies 

and procedures applicable to the covered 

credit transaction include the practices that 

the financial institution follows when 

evaluating applications for the specific credit 

type and credit purpose requested. For 

example, assume that a financial institution’s 

written procedures permit it to include 

prepayment penalties in the loan agreement 

for its term loans secured by non-owner 

occupied commercial real estate. For such 

transactions, the financial institution 

includes prepayment penalties in some loan 

agreements but not others. For an application 

for, or origination of, a term loan secured by 

non-owner occupied commercial real estate, 

the financial institution reports under 

§ 1002.107(12)(vi)(A) that a prepayment 

penalty could have been included under the 

policies and procedures applicable to the 

transaction, regardless of whether the term 

loan secured by non-owner occupied 

commercial real estate actually includes a 

prepayment penalty. 

107(a)(13) Census tract. 

1. General. A financial institution complies 

with § 1002.107(a)(13) by reporting a census 

tract number as defined by the U.S. Census 

Bureau, which includes State and county 

numerical codes. A financial institution 

complies with § 1002.107(a)(13) if it uses the 

boundaries and codes in effect on January 1 

of the calendar year covered by the small 

business lending application register that it is 

reporting. The financial institution reports 

census tract based on the following: 

i. Proceeds address. A financial institution 

complies with § 1002.107(a)(13) by reporting 

a census tract based on the address or 

location where the proceeds of the credit 

applied for or originated will be or would 

have been principally applied, if known. For 

example, a financial institution would report 

a census tract based on the address or 

location of the site where the proceeds of a 

construction loan will be applied. 

ii. Main office or headquarters address. If 

the address or location where the proceeds of 

the credit applied for or originated is 

unknown, a financial institution complies 

with § 1002.107(a)(13) by reporting a census 

tract number based on the address or location 

of the main office or headquarters of the 

applicant, if known. For example, the 

address or location of the main office or 

headquarters of the applicant may be the 

home address of a sole proprietor or the 

office address of a sole proprietor or other 

applicant. 

iii. Another address or location. If neither 

the address or location where the proceeds of 

the credit applied for or originated will be or 

would have been principally applied nor the 

address or location of the main office or 

headquarters of the applicant are known, a 

financial institution complies with 

§ 1002.107(a)(13) by reporting a census tract 

number based on another address or location 

associated with the applicant. 

iv. Type of address used. In addition to 

reporting the census tract, pursuant to 

§ 1002.107(a)(13)(iv) a financial institution 

must report which one of the three types of 

addresses or locations listed in 

§ 1002.107(a)(13)(i) through (iii) and 

described in comments 107(a)(13)–1.i 

through iii that the census tract is determined 

from. 

2. Financial institution discretion. A 

financial institution complies with 

§ 1002.107(a)(13) by identifying the 

appropriate address or location and the type 

of that address or location in good faith, 

using appropriate information from the 

applicant’s credit file or otherwise known by 

the financial institution. A financial 

institution is not required to make inquiries 

beyond its standard procedures as to the 

nature of the addresses or locations it 

collects. 

3. Address or location not provided by 

applicant and otherwise undetermined. 

Pursuant to § 1002.107(c)(1), a financial 

institution shall maintain procedures 

reasonably designed to collect applicantprovided information, which includes at 

least one address or location for an applicant 

for census tract reporting. However, if a 

financial institution is nonetheless unable to 

collect or otherwise determine any address or 

location for an application, the financial 

institution reports that the census tract 

information is ‘‘not provided by applicant 

and otherwise undetermined.’’ 

4. Safe harbor. As described in 

§ 1002.112(c)(1) and comment 112(c)(1)–1, a 

financial institution that obtains an incorrect 

census tract by correctly using a geocoding 

tool provided by the FFIEC or the Bureau 

does not violate the Act or subpart B of this 

part. 

107(a)(14) Gross annual revenue. 

1. Collecting gross annual revenue. A 

financial institution may rely on statements 

of or information provided by the applicant 

in collecting and reporting gross annual 

revenue. However, pursuant to § 1002.107(b), 

if the financial institution verifies the gross 

annual revenue provided by the applicant, it 

must report the verified information. The 

financial institution may use the following 

language to ask about gross annual revenue, 

if it does not collect gross annual revenue by 

another method, and may rely on the 

applicant’s answer: 

What was the gross annual revenue of the 

business applying for credit in its last full 

fiscal year? Gross annual revenue is the 

amount of money the business earned before 

subtracting taxes and other expenses. You 

may provide gross annual revenue calculated 

using any reasonable method. 

2. Gross annual revenue not provided by 

applicant and otherwise undetermined. 

Pursuant to § 1002.107(c)(1), a financial 

institution shall maintain procedures 

reasonably designed to collect applicantprovided information, which includes the 

gross annual revenue of the applicant. 

However, if a financial institution is 

nonetheless unable to collect or determine 

the gross annual revenue of the applicant, the 

financial institution reports that the gross 

annual revenue is ‘‘not provided by applicant 

and otherwise undetermined.’’ 

3. Affiliate revenue. A financial institution 

is permitted, but not required, to report the 

gross annual revenue for the applicant that 

includes the revenue of affiliates as well. For 

example, if the financial institution does not 

normally collect information on affiliate 

revenue, the financial institution reports only 

the applicant’s revenue and does not include 

the revenue of any affiliates when it has not 

collected that information. Similarly, in 

determining whether the applicant is a small 

business under § 1002.106(b), a financial 

institution may rely on an applicant’s 

representations regarding gross annual 

revenue, which may or may not include the 

affiliate’s revenue. 

107(a)(15) NAICS code. 

1. General. NAICS stands for North 

American Industry Classification System. 

The Office of Management and Budget has 

charged the Economic Classification Policy 

Committee with the maintenance and review 

of NAICS. A financial institution complies 

with § 1002.107(a)(15) if it uses the NAICS 

codes in effect on January 1 of the calendar 

year covered by the small business lending 

application register that it is reporting. 

2. NAICS not provided by applicant and 

otherwise undetermined. Pursuant to 

§ 1002.107(c)(1), a financial institution shall 

maintain procedures reasonably designed to 

collect applicant-provided information, 

which includes NAICS code. However, if a 

financial institution is nonetheless unable to 

collect or otherwise determine the 

applicant’s NAICS code, the financial 

institution reports that the NAICS code is 

‘‘not provided by applicant and otherwise 

undetermined.’’ 


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Federal Register / Vol. 86, No. 193 / Friday, October 8, 2021 / Proposed Rules 56597 

3. Reliance on statements by applicant. 

Consistent with § 1002.107(b), a financial 

institution may rely on statements of or 

information provided by the applicant in 

collecting and reporting the NAICS code. For 

example, a financial institution may rely on 

the NAICS code on an applicant’s tax return 

that the applicant has otherwise provided to 

the financial institution. 

4. Reliance on other information. A 

financial institution may rely on a NAICS 

code obtained through the financial 

institution’s use of business information 

products, such as company profiles or 

business credit reports, which provide the 

applicant’s NAICS code. 

5. Safe harbor. A financial institution that 

identifies an incorrect NAICS code does not 

violate the Act or subpart B of this part under 

the circumstances described in 

§ 1002.112(c)(2). 

107(a)(16) Number of workers. 

1. Collecting number of workers. In 

collecting the number of workers from an 

applicant, a financial institution shall 

explain that full-time, part-time and seasonal 

employees, as well as contractors who work 

primarily for the applicant, would be 

counted as workers, but principal owners of 

the business would not. If asked, the 

financial institution shall explain that 

volunteers would not be counted as workers, 

and workers for affiliates of the applicant 

would only be counted if the financial 

institution were also collecting the affiliates’ 

gross annual revenue. The financial 

institution may rely on statements of or 

information provided by the applicant in 

collecting and reporting number of workers. 

However, pursuant to § 1002.107(b), if the 

financial institution verifies the number of 

workers provided by the applicant, it must 

report the verified information. The financial 

institution may use the following language to 

ask about the number of workers, if it does 

not collect the number of workers by another 

method, and may rely on the applicant’s 

answer: 

Counting full-time, part-time and seasonal 

workers, as well as contractors who work 

primarily for the business applying for credit, 

but not counting principal owners of the 

business, how many people work for the 

business applying for credit? 

2. Number of workers not provided by 

applicant and otherwise undetermined. 

Pursuant to § 1002.107(c)(1), a financial 

institution shall maintain procedures 

reasonably designed to collect applicantprovided information, which includes the 

number of workers of the applicant. 

However, if a financial institution is 

nonetheless unable to collect or determine 

the number of workers of the applicant, the 

financial institution reports that the number 

of workers is ‘‘not provided by applicant and 

otherwise undetermined.’’ 

107(a)(17) Time in business. 

1. As relied on or collected. A financial 

institution complies with § 1002.107(a)(17) 

by reporting the time the applicant has been 

in business as relied on in making the credit 

decision or collected by the financial 

institution. The financial institution must 

report the time in business in whole years 

and indicate if a business has not begun 

operating yet or has been in operation for less 

than a year. When the financial institution 

relies on an applicant’s time in business as 

part of a credit decision, it reports the time 

in business relied on in making the credit 

decision. (See comments 107(a)(17)–2 and –3 

below regarding reporting of the time in 

business relied on.) However, 

§ 1002.107(a)(17) does not require the 

financial institution to rely on an applicant’s 

time in business in making a credit decision. 

The financial institution may rely on 

statements of or information provided by the 

applicant in collecting and reporting time in 

business. However, pursuant to 

§ 1002.107(b), if the financial institution 

verifies the time in business provided by the 

applicant, it must report the verified 

information. 

2. Time in business relied on. When a 

financial institution evaluates an applicant’s 

time in business as part of a credit decision, 

it reports the time in business relied on in 

making the credit decision. For example, if 

the financial institution relies on the number 

of years of experience the applicant’s owners 

have in the current line of business, the 

financial institution reports that number of 

years as the time in business. Similarly, if the 

financial institution relies on the number of 

years that the applicant has existed, the 

financial institution reports the number of 

years that the applicant has existed as the 

time in business. The financial institution 

reports the length of business existence or 

experience duration that it relies on in 

making its credit decision, and is not 

required to adopt any particular definition of 

time in business. 

3. Multiple factors considered. A financial 

institution relies on an applicant’s time in 

business in making a credit decision if the 

time in business was a factor in the credit 

decision, even if it was not a dispositive 

factor. For example, if the time in business 

is one of multiple factors in the financial 

institution’s credit decision, the financial 

institution has relied on the time in business 

even if the financial institution denies the 

application because one or more 

underwriting requirements other than the 

time in business are not satisfied. 

4. Collecting time in business. If the 

financial institution does not rely on time in 

business in considering an application, 

pursuant to § 1002.107(c)(1) it shall still 

maintain procedures reasonably designed to 

collect applicant-provided information, 

which includes the applicant’s time in 

business. In collecting time in business from 

an applicant, the financial institution 

complies with § 1002.107(a)(17) by asking for 

the number of years that the applicant has 

been operating the business it operates now. 

When the applicant has multiple owners 

with different numbers of years operating 

that business, the financial institution 

collects and reports the greatest number of 

years of any owner. (However, the financial 

institution does not need to comply with this 

instruction if it collects and relies on the time 

in business by another method in making the 

credit decision.) 

5. Time in business not provided by 

applicant and otherwise undetermined. 

Pursuant to § 1002.107(c)(1), a financial 

institution shall maintain procedures 

reasonably designed to collect applicantprovided information, which includes the 

time in business of the applicant. However, 

if a financial institution is nonetheless 

unable to collect or determine the time in 

business of the applicant, the financial 

institution reports that the time in business 

is ‘‘not provided by applicant and otherwise 

undetermined.’’ 

107(a)(18) Minority-owned business status. 

1. General. Unless a financial institution is 

permitted to report minority-owned business 

status based on previously collected data 

pursuant to § 1002.107(c)(2), a financial 

institution must ask an applicant whether it 

is a minority-owned business for each 

covered application. The financial institution 

must permit an applicant to refuse to answer 

the financial institution’s inquiry and must 

inform the applicant that the applicant is not 

required to provide the information. The 

financial institution must report the 

applicant’s response, its refusal to answer the 

inquiry (such as when the applicant indicates 

that it does not wish to provide the requested 

information), or its failure to respond to the 

inquiry (such as when the applicant fails to 

submit a data collection form). See appendix 

F for additional instructions on collecting 

and reporting minority-owned business 

status. 

2. Notice of non-discrimination. When 

requesting minority-owned business status 

from an applicant, a financial institution 

must inform the applicant that the financial 

institution cannot discriminate on the basis 

of the applicant’s minority-owned business 

status, or on whether the applicant provides 

its minority-owned business status. A 

financial institution may combine this nondiscrimination notice regarding minorityowned business status with the similar nondiscrimination notices that a financial 

institution is required to provide when 

requesting women-owned business status 

and a principal owner’s ethnicity, race, and 

sex if a financial institution requests 

minority-owned business status, womenowned business status, and/or a principal 

owner’s ethnicity, race, and sex in the same 

data collection form or at the same time. 

3. Recording an applicant’s response 

regarding minority-owned business status 

separate from the application. A financial 

institution must record an applicant’s 

response to the financial institution’s inquiry 

pursuant to § 1002.107(a)(18) separate from 

the application and accompanying 

information. See comment 111(b)–1. If the 

financial institution provides a paper or 

electronic data collection form, the data 

collection form must not be part of the 

application form or any other document that 

the financial institution uses to provide or 

collect any information other than womenowned business status, minority-owned 

business status, principal owners’ ethnicity, 

race, and sex, and the number of the 

applicant’s principal owners. See the sample 

data collection form in appendix E. For 

example, if the financial institution sends the 

data collection form via email, the data 

collection form should be a separate 

attachment to the email or accessed through 

a separate link in the email. If the financial 


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institution uses a web-based data collection 

form, the form should be on its own page. 

4. Minority-owned business status not 

provided by applicant. Pursuant to 

§ 1002.107(c)(1), a financial institution shall 

maintain procedures reasonably designed to 

collect applicant-provided information, 

which includes the applicant’s minorityowned business status. However, if a 

financial institution does not receive a 

response to the financial institution’s inquiry 

for purposes of § 1002.107(a)(18), the 

financial institution reports that the 

applicant’s minority-owned business status is 

‘‘not provided by applicant.’’ 

5. No verification. Notwithstanding 

§ 1002.107(b), a financial institution must 

report the applicant’s response, the 

applicant’s refusal to answer the inquiry, or 

the applicant’s failure to respond to the 

inquiry pursuant to § 1002.107(a)(18), even if 

the financial institution verifies or otherwise 

obtains an applicant’s minority-owned 

business status for other purposes. 

6. No reporting based on visual observation 

or surname. A financial institution does not 

report minority-owned business status based 

on visual observation, surname, or any basis 

other than the applicant’s response to the 

inquiry that the financial institution makes to 

satisfy § 1002.107(a)(18) or, if the financial 

institution is permitted to report based on 

previously collected data, on the basis of the 

applicant’s response to the inquiry that the 

financial institution previously made to 

satisfy § 1002.107(a)(18). 

7. Previously collected data. A financial 

institution may report minority-owned 

business status based on previously collected 

data if the financial institution is permitted 

to do so pursuant to § 1002.107(c)(2) and its 

commentary. 

107(a)(19) Women-owned business status. 

1. General. Unless a financial institution is 

permitted to report women-owned business 

status based on previously collected data 

pursuant to § 1002.107(c)(2), a financial 

institution must ask an applicant whether it 

is a women-owned business for each covered 

application. The financial institution must 

permit an applicant to refuse to answer the 

financial institution’s inquiry and must 

inform the applicant that the applicant is not 

required to provide the information. The 

financial institution must report the 

applicant’s response, its refusal to answer the 

inquiry (such as when the applicant indicates 

that it does not wish to provide the requested 

information), or its failure to respond to the 

inquiry (such as when the applicant fails to 

submit a data collection form). See appendix 

F for additional instructions on collecting 

and reporting women-owned business status. 

2. Notice of non-discrimination. When 

requesting women-owned business status 

from an applicant, a financial institution 

must inform the applicant that the financial 

institution cannot discriminate on the basis 

of the applicant’s women-owned business 

status, or on whether the applicant provides 

its women-owned business status. A 

financial institution may combine this nondiscrimination notice regarding womenowned business status with the similar nondiscrimination notices that a financial 

institution is required to provide when 

requesting minority-owned business status 

and a principal owner’s ethnicity, race, and 

sex if a financial institution requests 

minority-owned business status, womenowned business status, and/or a principal 

owner’s ethnicity, race, and sex in the same 

data collection form or at the same time. 

3. Recording an applicant’s response 

regarding women-owned business status 

separate from the application. A financial 

institution must record an applicant’s 

response to the financial institution’s inquiry 

pursuant to § 1002.107(a)(19) separate from 

the application and accompanying 

information. See comment 111(b)–1. If the 

financial institution provides a paper or 

electronic data collection form, the data 

collection form must not be part of the 

application form or any other document that 

the financial institution uses to provide or 

collect any information other than womenowned business status, minority-owned 

business status, principal owners’ ethnicity, 

race, and sex, and the number of the 

applicant’s principal owners. See the sample 

data collection form in appendix E. For 

example, if the financial institution sends the 

data collection form via email, the data 

collection form should be a separate 

attachment to the email or accessed through 

a separate link in the email. If the financial 

institution uses a web-based data collection 

form, the form should be on its own page. 

4. Women-owned business status not 

provided by applicant. Pursuant to 

§ 1002.107(c)(1), a financial institution shall 

maintain procedures reasonably designed to 

collect applicant-provided information, 

which includes the applicant’s womenowned business status. However, if a 

financial institution does not receive a 

response to the financial institution’s inquiry 

for purposes of § 1002.107(a)(19), the 

financial institution reports that the 

applicant’s women-owned business status is 

‘‘not provided by applicant.’’ 

5. No verification. Notwithstanding 

§ 1002.107(b), a financial institution must 

report the applicant’s response, the 

applicant’s refusal to answer the inquiry, or 

the applicant’s failure to respond to the 

inquiry pursuant to § 1002.107(a)(19), even if 

the financial institution verifies or otherwise 

obtains an applicant’s women-owned 

business status for other purposes. 

6. No reporting based on visual observation 

or surname. A financial institution does not 

report women-owned business status based 

on visual observation, surname, any basis 

other than the applicant’s response to the 

inquiry that the financial institution makes to 

satisfy § 1002.107(a)(19) or, if the financial 

institution is permitted to report based on 

previously collected data, on the basis of the 

applicant’s response to the inquiry that the 

financial institution previously made to 

satisfy § 1002.107(a)(19). 

7. Previously collected data. A financial 

institution may report women-owned 

business status based on previously collected 

data if the financial institution is permitted 

to do so pursuant to § 1002.107(c)(2) and its 

commentary. 

107(a)(20) Ethnicity, race, and sex of 

principal owners. 

1. General. Unless a financial institution is 

permitted to report ethnicity, race, and sex 

information based on previously collected 

data pursuant to § 1002.107(c)(2), a financial 

institution must ask an applicant to report its 

principal owners’ ethnicity, race, and sex for 

each covered application. The financial 

institution must permit an applicant to refuse 

to answer the financial institution’s inquiries 

and must inform the applicant that it is not 

required to provide the information. The 

financial institution must report the 

applicant’s responses, its refusal to answer 

the inquiries, or its failure to respond to the 

inquiries. In certain situations, discussed in 

comments 107(a)(20)–9 and –10 and in 

appendix G, a financial institution may also 

be required to report one or more principal 

owners’ ethnicity and race based on visual 

observation and/or surname. However, a 

financial institution shall not report a 

principal owner’s sex based on visual 

observation, surname, or any basis other than 

the applicant-provided information 

(including previously collected data if 

permitted pursuant to § 1002.107(c)(2)). See 

appendix G for additional instructions on 

collecting and reporting the ethnicity, race, 

and sex of principal owners. 

2. Notice of non-discrimination. When 

requesting a principal owner’s ethnicity, 

race, and sex from an applicant, a financial 

institution must inform the applicant that the 

financial institution cannot discriminate on 

the basis of a principal owner’s ethnicity, 

race, or sex, or on whether the applicant 

provides the information. A financial 

institution may combine this nondiscrimination notice with the similar nondiscrimination notices that a financial 

institution is required to provide when 

requesting minority-owned business status 

and women-owned business status if a 

financial institution requests minority-owned 

business status, women-owned business 

status, and/or a principal owner’s ethnicity, 

race, and sex in the same data collection form 

or at the same time. 

3. Recording an applicant’s responses 

regarding principal owners’ ethnicity, race, 

and sex separate from the application. A 

financial institution must record an 

applicant’s response to the financial 

institution’s inquiries pursuant to 

§ 1002.107(a)(20) separate from the 

application and accompanying information. 

See comment 111(b)–1. If the financial 

institution provides a paper or electronic 

data collection form, the data collection form 

must not be part of the application form or 

any other document that the financial 

institution uses to provide or collect any 

information other than women-owned 

business status, minority-owned business 

status, principal owners’ ethnicity, race, and 

sex, and the number of the applicant’s 

principal owners. See the sample data 

collection form in appendix E. For example, 

if the financial institution sends the data 

collection form via email, the data collection 

form should be a separate attachment to the 

email or accessed through a separate link in 

the email. If the financial institution uses a 

web-based data collection form, the form 

should be on its own page. 

4. Ethnicity, race, or sex of principal 

owners not provided by applicant. Pursuant 

to § 1002.107(c)(1), a financial institution 


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shall maintain procedures reasonably 

designed to collect applicant-provided 

information, which includes the ethnicity, 

race, and sex of an applicant’s principal 

owners. However, if a financial institution is 

nonetheless unable to collect the principal 

owners’ ethnicity, race, or sex from the 

applicant, and if the financial institution is 

not required to report based on visual 

observation or surname, the financial 

institution reports that the principal owner’s 

ethnicity, race, or sex (as applicable) is ‘‘not 

provided by applicant.’’ 

5. Determining who is a principal owner. 

Generally, an applicant determines its 

principal owners and decides whether to 

provide information about those principal 

owners. However, as discussed in comments 

107(a)(20)–9 and –10 and appendix G, a 

financial institution may be required to 

report ethnicity and race information based 

on visual observation and/or surname if the 

applicant does not provide ethnicity, race, or 

sex information for at least one principal 

owner and the financial institution meets in 

person with one or more principal owners. 

Thus, a financial institution may need to 

determine if a natural person that it meets 

with in person is a principal owner. In that 

case, the financial institution may either ask 

the natural person who is acting on behalf of 

an applicant whether that natural person is 

a principal owner, or it may independently 

determine if the natural person is a principal 

owner. For example, if a financial institution 

has collected information regarding an 

applicant’s ownership structure and obtained 

the name or identity of the natural person for 

other purposes, it may use this information 

to independently determine whether the 

natural person who meets in person with the 

financial institution is a principal owner. If 

a financial institution asks if a natural person 

is a principal owner, the financial institution 

can rely on an applicant’s or natural person’s 

response, unless the financial institution has 

knowledge to the contrary. The financial 

institution is not required to verify any 

responses regarding whether a natural person 

is a principal owner. 

6. Ethnicity. i. Aggregate categories. A 

financial institution must permit an 

applicant to provide a principal owner’s 

ethnicity for purposes § 1002.107(a)(20) using 

one or more of the following aggregate 

categories: 

A. Hispanic or Latino. 

B. Not Hispanic or Latino. 

ii. Disaggregated subcategories. A financial 

institution must permit an applicant to 

provide a principal owner’s ethnicity for 

purposes of § 1002.107(a)(20) using one or 

more the following disaggregated 

subcategories, regardless of whether the 

applicant has indicated that the relevant 

principal owner is Hispanic or Latino and 

regardless of whether the applicant selects 

any aggregate categories: Cuban; Mexican; 

Puerto Rican; or Other Hispanic or Latino. If 

an applicant indicates that a principal owner 

is Other Hispanic or Latino, the financial 

institution must permit the applicant to 

provide additional information regarding the 

principal owner’s ethnicity, such as 

indicating, for example, that the principal 

owner is Argentinean, Colombian, 

Dominican, Nicaraguan, Salvadoran, or 

Spaniard. If an applicant chooses to provide 

additional information regarding a principal 

owner’s ethnicity, such as indicating that a 

principal owner is Argentinean, a financial 

institution must report that additional 

information as free-form text in the 

appropriate data reporting field. 

iii. Selecting multiple categories. The 

financial institution must permit the 

applicant to select one, both, or none of the 

aggregate categories and as many 

disaggregated subcategories as the applicant 

chooses. A financial institution must permit 

an applicant to select a disaggregated 

subcategory even if the applicant does not 

select the corresponding aggregate category. 

A financial institution must also permit the 

applicant to refuse to provide ethnicity 

information for one or more principal 

owners. If an applicant provides ethnicity 

information for a principal owner, the 

financial institution reports all of the 

aggregate categories and disaggregated 

subcategories provided by the applicant. For 

example, if an applicant selects both 

aggregate categories and four disaggregated 

subcategories for a principal owner, the 

financial institution reports the two aggregate 

categories that the applicant selected and all 

four of the disaggregated subcategories that 

the applicant selected. 

iv. Information not provided by applicant. 

Unless a financial institution is required to 

report based on visual observation and/or 

surname (see comments 107(a)(20)–9 and –10 

and appendix G), if an applicant refuses or 

fails to provide ethnicity information for a 

principal owner, the financial institution 

reports that the applicant declined to provide 

the information or failed to respond, as 

applicable. Because there are data reporting 

fields for four principal owners, when 

submitting data to the Bureau, a financial 

institution will need to report that the 

requirement to report ethnicity is not 

applicable for some principal owners if the 

applicant has fewer than four principal 

owners. For example, if an applicant has only 

one principal owner, the financial institution 

reports that the requirement to report 

ethnicity is not applicable in the data fields 

for principal owners two through four. 

7. Race. i. Aggregate categories. A financial 

institution must permit an applicant to 

provide a principal owner’s race for purposes 

of § 1002.107(a)(20) using one or more of the 

following aggregate categories: 

A. American Indian or Alaska Native. 

B. Asian. 

C. Black or African American. 

D. Native Hawaiian or Other Pacific 

Islander. 

E. White. 

ii. Disaggregated subcategories. The 

financial institution must permit an 

applicant to provide a principal owner’s race 

for purposes of § 1002.107(a)(20) using one or 

more of the disaggregated subcategories as 

listed in this comment 107(a)(20)–7.ii and set 

forth in the sample data collection form in 

appendix E, regardless of whether the 

applicant has selected the corresponding 

aggregate category. 

A. The Asian aggregate category includes 

the following disaggregated subcategories: 

Asian Indian; Chinese; Filipino; Japanese; 

Korean; Vietnamese; and Other Asian. An 

applicant must also be permitted to provide 

the principal owner’s race using one or more 

of these disaggregated subcategories 

regardless of whether the applicant indicates 

that the principal owner is Asian and 

regardless of whether the applicant selects 

any aggregate categories. Additionally, if an 

applicant indicates that a principal owner is 

Other Asian, the financial institution must 

permit the applicant to provide additional 

information about the principal owner’s race, 

such as providing information, for example, 

that the principal owner is Cambodian, 

Hmong, Laotian, Pakistani, or Thai. 

B. The Black or African American category 

includes the following disaggregated 

subcategories: African American; Ethiopian; 

Haitian; Jamaican; Nigerian; Somali; or Other 

Black or African American. An applicant 

must also be permitted to provide the 

principal owner’s race using one or more of 

these disaggregated subcategories regardless 

of whether the applicant indicates that the 

principal owner is Black or African American 

and regardless of whether the applicant 

selects any aggregate categories. 

Additionally, if an applicant indicates that a 

principal owner is Other Black or African 

American, the financial institution must 

permit the applicant to provide additional 

information about the principal owner’s race, 

such as providing information, for example, 

that the principal owner is Barbadian, 

Ghanaian, or South African. 

C. The Native Hawaiian or Other Pacific 

Islander includes the following disaggregated 

subcategories: Guamanian or Chamorro; 

Native Hawaiian; Samoan; and Other Pacific 

Islander. An applicant must also be 

permitted to provide the principal owner’s 

race using one or more of these disaggregated 

subcategories regardless of whether the 

applicant indicates that the principal owner 

is Native Hawaiian or Other Pacific Islander 

and regardless of whether the applicant 

selects any aggregate categories. 

Additionally, if an applicant indicates that a 

principal owner is Other Pacific Islander, the 

financial institution must permit the 

applicant to provide additional information 

about the principal owner’s race, such as 

providing information, for example, that the 

principal owner is Fijian or Tongan. 

D. If an applicant chooses to provide 

additional information regarding a principal 

owner’s race, such as indicating that a 

principal owner is Cambodian, Barbadian, or 

Fijian, a financial institution must report that 

additional information as free-form text in 

the appropriate data reporting field. 

E. In addition to permitting an applicant to 

indicate that a principal owner is American 

Indian or Alaska Native, a financial 

institution must permit an applicant to 

provide the name of an enrolled or principal 

tribe. An applicant must be permitted to 

provide the name of an enrolled or principal 

tribe regardless of whether the applicant 

indicates that the principal owner is 

American Indian or Alaska Native. If an 

applicant chooses to provide the name of an 

enrolled or principal tribe, a financial 

institution must report that information as 

free-form text in the appropriate data 

reporting field. 


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iii. Selecting multiple categories. The 

financial institution must permit the 

applicant to select as many aggregate 

categories and disaggregated subcategories as 

the applicant chooses. A financial institution 

must permit an applicant to select one or 

more disaggregated subcategories even if the 

applicant does not select an aggregate 

category. A financial institution must also 

permit the applicant to refuse to provide this 

information for one or more principal 

owners. If an applicant provides race 

information for a principal owner, the 

financial institution reports all of the 

aggregate categories and disaggregated 

subcategories provided by the applicant. For 

example, if an applicant selects two aggregate 

categories and five disaggregated 

subcategories for a principal owner, the 

financial institution reports the two aggregate 

categories that the applicant selected and the 

five disaggregated subcategories that the 

applicant selected. 

iv. Information not provided by applicant. 

Unless the financial institution is required to 

report based on visual observation and/or 

surname (see comments 107(a)(20)–9 and –10 

and appendix G), if an applicant refuses or 

fails to provide race information for a 

principal owner, the financial institution 

reports that the applicant declined to provide 

the information or failed to respond, as 

applicable. Because there are data reporting 

fields for four principal owners, when 

submitting data to the Bureau, a financial 

institution must report that the requirement 

to report race is not applicable for some 

principal owners if the applicant has fewer 

than four principal owners. For example, if 

an applicant has only one principal owner 

(i.e., only one natural person directly owns 

25 percent or more of the applicant’s equity 

interests), the financial institution reports 

that the requirement to report race is not 

applicable in the data reporting fields for 

principal owners two through four. 

8. Sex. A financial institution must permit 

an applicant to provide a principal owner’s 

sex for purposes of § 1002.107(a)(20) using 

one or more of the following categories: Male, 

Female, and/or that the principal owner 

prefers to self-describe their sex. 

Additionally, if an applicant indicates that a 

principal owner prefers to self-describe their 

sex, the financial institution must permit the 

applicant to provide additional information 

about the principal owner’s sex. A financial 

institution must permit an applicant to select 

as many categories as the applicant chooses. 

A financial institution reports the category or 

categories selected by the applicant, any 

additional information provided by the 

applicant (reported as free-form text in the 

appropriate data reporting field), or reports 

that the applicant refused to provide the 

information or failed to respond. A financial 

institution is not permitted to report sex 

based on visual observation, surname, or any 

basis other than the applicant-provided 

information. Because there are data reporting 

fields for four principal owners, when 

submitting data to the Bureau a financial 

institution must report that the requirement 

to report sex is not applicable for some 

principal owners if the applicant has fewer 

than four principal owners. For example, if 

an applicant has only one principal owner, 

the financial institution reports that the 

requirement to report sex is not applicable in 

the data fields for principal owners two 

through four. See appendix G for additional 

information on collecting and reporting a 

principal owner’s sex. 

9. Reporting based on visual observation 

and/or surname. If a financial institution 

meets in person with one or more of an 

applicant’s principal owners and the 

applicant does not provide ethnicity, race, or 

sex information for at least one principal 

owner, the financial institution must report 

at least one principal owner’s ethnicity and 

race (but not sex) based on visual 

observation, surname, or a combination of 

both visual observation and surname. (See 

comment 107(a)(20)-10 for additional 

information regarding what constitutes an inperson meeting with an applicant’s principal 

owners.) However, a financial institution is 

not required to report based on visual 

observation and/or surname if the principal 

owner only meets in person with a third 

party through whom it is submitting an 

application to the financial institution. For 

example, a financial institution is not 

required to report based on visual 

observation and/or surname when an 

employee or officer of an equipment dealer 

or retailer that is not an affiliate of the 

financial institution meets in person with a 

principal owner. 

10. Meeting in person with a principal 

owner. i. In-person meetings. A financial 

institution meets in person with a principal 

owner if an employee or officer of the 

financial institution or one of its affiliates has 

a meeting or discussion with the applicant’s 

principal owner about an application and can 

visually observe the principal owner. The 

following provides a non-exhaustive list of 

examples to illustrate when a financial 

institution meets in person with a principal 

owner for purposes of the requirement to 

collect principal owners’ race and ethnicity 

information based on visual observation and/ 

or surname if not provided by the applicant: 

A. A principal owner comes to a financial 

institution’s branch or office and meets with 

the financial institution’s loan officer to 

discuss the status of a pending application. 

B. A principal owner comes to a financial 

institution’s branch or office and meets in 

person with one or more employees or 

officers of a financial institution in order to 

complete an application and related 

paperwork. 

C. A principal owner contacts a financial 

institution’s loan officer using an electronic 

communication method with a video 

component and, using the video component, 

meets with the loan officer to discuss 

outstanding documentation needed for a 

pending application. 

ii. Not in-person meetings. The following 

provides a non-exhaustive list of examples to 

illustrate when a financial institution does 

not meet in person with a principal owner for 

purposes of the requirement to collect 

principal owners’ race and ethnicity 

information via visual observation and/or 

surname if not provided by the applicant: 

A. A principal owner drops off documents 

at a financial institution’s branch or office or 

provides the applicant’s name and drops off 

documents without engaging in any 

discussion regarding a covered application. 

B. A principal owner meets in person with 

an employee or officer of the financial 

institution to discuss something other than a 

covered application, such as another 

financial product. 

C. The financial institution meets with a 

principal owner after the application process 

is complete, such as at account opening or 

loan closing. 

D. A financial institution meets with a 

principal owner before the applicant submits 

an application. 

11. Use of aggregate categories when 

reporting based on visual observation or 

surname. When reporting ethnicity and race 

based on visual observation and/or surname, 

the financial institution uses only the 

aggregate ethnicity and race categories. See 

appendix G for additional information on 

collecting and reporting based on visual 

observation and/or surname. 

12. No verification of ethnicity, race, and 

sex of principal owner. Notwithstanding 

§ 1002.107(b), a financial institution is 

neither required nor permitted to verify the 

ethnicity, race, or sex information that the 

applicant provides for purposes of 

§ 1002.107(a)(20), even if the financial 

institution verifies or otherwise obtains the 

ethnicity, race, or sex of the applicant’s 

principal owners for other purposes. 

Additionally, if an applicant refuses to 

respond to the inquiry pursuant to 

§ 1002.107(a)(20) or fails to respond to this 

inquiry, the financial institution reports that 

the applicant declined to provide the 

information or did not respond to the request 

to provide the information (as applicable), 

unless the financial institution is required to 

report ethnicity and race based on visual 

observation and/or surname. The financial 

institution does not report ethnicity, race, or 

sex based on information that the financial 

institution collects for other purposes. 

107(a)(21) Number of principal owners. 

1. General. A financial institution may 

request an applicant’s number of principal 

owners from the applicant or may determine 

the number of principal owners from 

information provided by the applicant or that 

the financial institution otherwise obtains. If 

the financial institution asks the applicant to 

provide the number of its principal owners 

pursuant to § 1002.107(a)(21), a financial 

institution must provide the definition of 

principal owner set forth in § 1002.102(o). If 

permitted pursuant to § 1002.107(c)(2), a 

financial institution may also report an 

applicant’s number of principal owners 

based on previously collected data. 

2. Number of principal owners provided by 

applicant; verification of number of principal 

owners. The financial institution may rely on 

statements or information provided by the 

applicant in collecting and reporting the 

number of the applicant’s principal owners. 

However, pursuant to § 1002.107(b), if the 

financial institution verifies the number of 

principal owners provided by the applicant, 

it must report the verified information. The 

financial institution is not required to verify 

the number of principal owners, but if the 

financial institution verifies the number of 


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principal owners in making the credit 

decision, then the financial institution 

reports the verified number of principal 

owners. 

3. Number of principal owners not 

provided by applicant and otherwise 

undetermined. Pursuant to § 1002.107(c)(1), a 

financial institution shall maintain 

procedures reasonably designed to collect 

applicant-provided information, which 

includes the number of principal owners of 

the applicant. However, if a financial 

institution is nonetheless unable to collect or 

otherwise determine the applicant’s number 

of principal owners, the financial institution 

reports that the number of principal owners 

is ‘‘not provided by applicant and otherwise 

undetermined.’’ 

107(b) Verification of applicant-provided 

information. 

1. Reliance on statements or information 

provided by an applicant. A financial 

institution may rely on statements made by 

an applicant (whether made in writing or 

orally) or information provided by an 

applicant when compiling and reporting data 

pursuant to subpart B of this part for 

applicant-provided data; the financial 

institution is not required to verify those 

statements. However, if the financial 

institution does verify applicant statements 

for its own business purposes, such as 

statements relating to gross annual revenue 

or time in business, the financial institution 

reports the verified information. Depending 

on the circumstances and the financial 

institution’s procedures, certain applicantprovided data can be collected without a 

specific request from the applicant. For 

example, gross annual revenue may be 

collected from tax return documents. 

Applicant-provided data are the data 

required that are or could be provided by the 

applicant, including § 1002.107(a)(5) through 

(7) and (13) through (21). See comment 

107(c)(2)–3. 

107(c) Time and manner of collection. 

107(c)(1) In general. 

1. Procedures. The term ‘‘procedures’’ 

refers to the actual practices followed by a 

financial institution as well as its stated 

policies or procedures. For example, if a 

financial institution’s stated policy is to 

collect applicant-provided data on or with a 

paper application form, but the financial 

institution’s employees encourage applicants 

to skip the page that asks whether the 

applicant is a minority-owned business or a 

women-owned business under 

§ 1002.107(a)(18) and (19), the financial 

institution’s procedures are not reasonably 

designed to obtain a response. 

2. Latitude to design procedures. A 

financial institution has flexibility to 

establish procedures concerning the timing 

and manner that it collects applicantprovided data that work best for its particular 

lending model and product offerings, 

provided that those procedures are 

reasonably designed to collect the applicantprovided data in § 1002.107(a). 

3. Applicant-provided data. Applicantprovided data are the data required that are 

or could be provided by the applicant, 

including § 1002.107(a)(5) (credit type), 

§ 1002.107(a)(6) (credit purpose), 

§ 1002.107(a)(7) (amount applied for), 

§ 1002.107(a)(13) (address or location for 

purposes of determining census tract), 

§ 1002.107(a)(14) (gross annual revenue), 

§ 1002.107(a)(15) (NAICS code, or 

information about the business such that the 

financial institution can determine the 

applicant’s NAICS code), § 1002.107(a)(16) 

(number of workers), § 1002.107(a)(17) (time 

in business), § 1002.107(a)(18) (minorityowned business status), § 1002.107(a)(19) 

(women-owned business status), 

§ 1002.107(a)(20) (ethnicity, race, and sex of 

the applicant’s principal owners), and 

§ 1002.107(a)(21) (number of principal 

owners). Applicant-provided data does not 

include data that are generated or supplied 

only by the financial institution, including 

§ 1002.107(a)(1) (unique identifier), 

§ 1002.107(a)(2) (application date), 

§ 1002.107(a)(3) (application method), 

§ 1002.107(a)(4) (application recipient), 

§ 1002.107(a)(8) (amount approved or 

originated), § 1002.107(a)(9) (action taken), 

§ 1002.107(a)(10) (action taken date), 

§ 1002.107(a)(11) (denial reasons), 

§ 1002.107(a)(12) (pricing data), and 

§ 1002.107(a)(13) (census tract, based on 

address or location provided by the 

applicant). Depending on the circumstances 

and the financial institution’s procedures, 

certain applicant-provided data can be 

collected without a specific request from the 

applicant. For example, credit type may be 

collected based on the type of product 

chosen by the applicant or NAICS code may 

be collected from an applicant’s tax return 

that the applicant has otherwise provided to 

the financial institution. 

4. Reasonably designed—generally. 

Whether a financial institution’s procedures 

are reasonably designed to collect applicantprovided data depends on the financial 

institution’s particular lending model and 

product offerings. A financial institution 

shall reassess on a periodic basis, based on 

available data, whether its procedures are 

reasonably designed to obtain a response. For 

example, a financial institution may be able 

to assess whether its procedures are 

reasonably designed by comparing its 

response rate with similarly situated 

financial institutions (for instance, those that 

offer similar products, use a similar lending 

model, or are of a similar size). A financial 

institution is permitted, but not required, to 

develop different procedures for different 

applicant-provided data, so long as the 

procedures used are reasonably designed to 

obtain a response. A financial institution is 

permitted, but not required, to make more 

than one attempt to obtain applicantprovided data if the applicant does not 

respond to an initial request. 

5. Examples of procedures that are 

generally reasonably designed to obtain a 

response. Although a fact-based 

determination, the following procedures 

reflect practices concerning the time or 

manner of collection that are generally 

reasonably designed to obtain a response: 

i. Timing of collection. A financial 

institution requests applicant-provided data 

early in the application process; for example, 

at the time of a covered application, as 

defined in § 1002.103. The earlier in the 

application process, the more likely the 

timing of collection is reasonably designed to 

obtain a response. 

ii. Manner of collection. A financial 

institution requests applicant-provided data 

on the same form or in connection with other 

required information. For example, a 

financial institution requests applicantprovided data as part of a written application 

form or on a separate data collection form 

provided with the written application form. 

See also comments 107(a)(18)–3, 107(a)(19)– 

3, and 107(a)(20)–3, which discuss the use of 

a separate data collection form for collecting 

minority-owned business status, womenowned business status, and the ethnicity, 

race, and sex of an applicant’s principal 

owners. 

6. Examples of procedures that are 

generally not reasonably designed to obtain 

a response. The following procedures reflect 

practices concerning the time or manner of 

collection that are generally not reasonably 

designed to obtain a response. Depending on 

the particular facts, however, these 

procedures may be reasonably designed to 

obtain a response; for example, if the 

financial institution has evidence or a reason 

to believe that under its procedures the 

response rate would be similar to or better 

than other alternatives. 

i. Timing of collection. A financial 

institution requests applicant-provided data 

simultaneous with or after notifying an 

applicant of its action taken on a covered 

application. 

ii. Manner of collection. A financial 

institution requests applicant-provided data 

in a manner that imposes unnecessary 

applicant burden or is inconsistent with the 

rest of its application process. For example, 

collecting application information related to 

the creditworthiness determination in 

electronic form, but mailing a paper form to 

the applicant seeking the data required under 

§ 1002.107(a) that the financial institution 

does not otherwise need for its 

creditworthiness determination and requiring 

the applicant to mail it back. 

7. Updated applicant-provided data. A 

financial institution reports updated 

applicant-provided data if it obtains more 

current data during the application process. 

For example, if an applicant states it has 100 

non-owners working for the business, but 

then the applicant notifies the financial 

institution that the number is actually 75, the 

financial institution reports 75 non-owners 

working for the business. For reporting of 

verified applicant-provided information, see 

§ 1002.107(b) and comment 107(b)–1. 

8. Change in determination of small 

business status. If a financial institution 

changes its determination regarding an 

applicant’s status as a small business under 

§ 1002.106(b), it must follow the procedures 

described in comments 106(b)–1 and –2. 

107(c)(2) Previously collected data. 

1. In general. A financial institution may 

reuse certain previously collected data if the 

requirements of § 1002.107(c)(2) are met. In 

that circumstance, a financial institution 

need not seek to collect the data anew in 

connection with a subsequent covered 

application. For example, if an applicant 

applies for and is granted a term loan, and 


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then subsequently applies for a credit card in 

the same calendar year, the financial 

institution need not request again the data set 

forth in § 1002.107(c)(2). Similarly, if an 

applicant applies for more than one covered 

credit transaction at one time, a financial 

institution need only ask once for the data set 

forth in § 1002.107(c)(2). 

2. Data that can be reused. Subject to the 

requirements of § 1002.107(c)(2) and 

comment 107(c)(2)–3, a financial institution 

may reuse the following data: 

§ 1002.107(a)(13) (census tract), 

§ 1002.107(a)(14) (gross annual revenue), 

§ 1002.107(a)(15) (NAICS code), 

§ 1002.107(a)(16) (number of workers), 

§ 1002.107(a)(17) (time in business), 

§ 1002.107(a)(18) (minority-owned business 

status), § 1002.107(a)(19) (women-owned 

business status), § 1002.107(a)(20) (ethnicity, 

race, and sex of principal owners), and 

§ 1002.107(a)(21) (number of principal 

owners). A financial institution is not, 

however, permitted to reuse other data, such 

as § 1002.107(a)(6) (credit purpose). 

3. Previously reported data without a 

substantive response. Section 1002.107(c)(2) 

permits a financial institution to reuse 

certain previously collected data to satisfy 

§ 1002.107(a)(13) through (21), if certain 

conditions are met. Data have not been 

‘‘previously collected’’ within the meaning of 

this provision if the applicant did not 

provide a substantive response to the 

financial institution’s request for that data 

and the financial institution was not 

otherwise able to obtain the requested data 

(for example, from the applicant’s credit 

report, tax returns, or through visual 

observation or surname collection for race 

and ethnicity information). 

4. Collection in the same calendar year. 

Pursuant to § 1002.107(c)(2)(i), data can be 

reused if they are collected in the same 

calendar year. For applications that span 

more than one calendar year, the following 

applies: 

i. If the data are collected in connection 

with a covered application in one calendar 

year, but then final action was taken on the 

application in the following calendar year, 

the financial institution may consider the 

data as collected in the year that final action 

was taken on the application. 

ii. If data are collected in connection with 

a covered application in one calendar year, 

a financial institution may reuse that data 

pursuant to § 1002.107(c)(2) in a subsequent 

application initiated in the same calendar 

year, even if final action was taken on the 

subsequent application in the following 

calendar year. 

5. Reason to believe data are inaccurate. 

Whether a financial institution has reason to 

believe data are inaccurate pursuant to 

§ 1002.107(c)(2)(ii) depends on the particular 

facts and circumstances. For example, a 

financial institution may have reason to 

believe data on the applicant’s womenowned business status, minority-owned 

business status, and ethnicity, race, and sex 

of principal owners may be inaccurate if it 

knows that the applicant has had a change 

in ownership. 

6. Minority-owned business status and 

women-owned business status. If the 

financial institution asked the applicant to 

provide its minority-owned business status 

or women-owned business status for 

purposes of § 1002.107(a)(18) and (19) and 

the applicant refused to provide the 

information (such as by selecting ‘‘I do not 

wish to provide this information’’ on a data 

collection form or by telling the financial 

institution that it did not wish to provide the 

information), the financial institution may 

use that response when reporting data for a 

subsequent application pursuant to 

§ 1002.107(c)(2). However, if the applicant 

failed to respond (such as by leaving the 

response to the question blank or by failing 

to return a data collection form), the financial 

institution must inquire about the applicant’s 

minority-owned business status or womenowned business status, as applicable, because 

the data were not previously obtained. 

7. Principal owners’ ethnicity, race, and 

sex. If the financial institution asked the 

applicant to provide its principal owners’ 

ethnicity, race, or sex for purposes 

§ 1002.107(a)(20) and the applicant refused to 

provide the information (such as by selecting 

‘‘I do not wish to provide this information’’ 

on a data collection form or by telling the 

financial institution that it did not wish to 

provide the information) or if the financial 

institution reported ethnicity and race based 

on visual observation and/or surname, the 

financial institution may use these data when 

reporting information for a subsequent 

application under § 1002.107(c)(2). However, 

if the applicant failed to respond (such as by 

leaving the response to the question blank or 

by failing to return a data collection form) 

and the financial institution did not report 

ethnicity and race based on visual 

observation and/or surname, the financial 

institution must inquire about the ethnicity, 

race, and sex of the applicant’s principal 

owners, as applicable, because the data were 

not previously obtained. 

Section 1002.108—Firewall 

108(a) Definitions. 

1. Involved in making any determination 

concerning a covered application. An 

employee or officer is involved in making a 

determination concerning a covered 

application if the employee or officer makes, 

or otherwise participates in, a decision 

regarding the evaluation of a covered 

application or the creditworthiness of an 

applicant for a covered credit transaction. 

This includes, but is not limited to, 

employees and officers serving as 

underwriters. The decision that an employee 

or officer makes or participates in must be 

about a specific covered application. An 

employee or officer is not involved in making 

a determination concerning a covered 

application if the employee or officer is 

involved in making a decision that affects 

covered applications generally, or interacts 

with small businesses prior to them 

becoming applicants or submitting a covered 

application. This group might include 

officers and employees who develop policies 

and procedures, program systems, or conduct 

marketing. Additionally, an employee or 

officer is not involved in making a 

determination concerning a covered 

application if the employee or officer makes 

or participates in a decision after the 

financial institution has taken final action on 

the application, such as a decision about 

servicing or collecting a covered credit 

transaction. Furthermore, an officer or 

employee is not involved in making a 

determination concerning a covered 

application for purposes of § 1002.108 if the 

officer or employee simply uses a check box 

form to confirm whether an applicant has 

submitted all necessary documents or 

handles a minor or clerical matter during the 

application process, such as suggesting or 

selecting a time for an appointment with an 

applicant. 

2. Should have access. i. General. A 

financial institution may determine that an 

employee or officer should have access for 

purposes of § 1002.108 if that employee or 

officer is assigned one or more job duties that 

may require the employee or officer to collect 

(based on visual observation, surname, or 

otherwise), see, consider, refer to, or use 

information otherwise subject to the 

prohibition in § 1002.108(b). The employee 

or officer does not have to be required to 

collect, see, consider, refer to or use such 

information or to actually collect, see, 

consider, refer to or use such information. It 

is sufficient if the employee or officer might 

need to do so to perform the employee’s or 

officer’s assigned job duties. For example, if 

a loan officer’s job description states that the 

loan officer may need to collect ethnicity and 

race information based on visual observation 

and/or surname or if the loan officer is 

assigned the task of assisting applicants with 

the completion of data collection forms, the 

financial institution may determine that the 

loan officer should have access. If a financial 

institution determines that an employee or 

officer who is involved in making any 

determination concerning a covered 

application should have access for purposes 

of § 1002.108, the financial institution is 

responsible for ensuring that the employee or 

officer only accesses and uses the protected 

information for lawful purposes. 

ii. When a group of employees or officers 

should have access. A financial institution 

may determine that all employees or officers 

with the same job description or assigned 

duties should have access for purposes of 

§ 1002.108. If a job description assigns one or 

more tasks that may require access to one or 

more applicants’ responses to the financial 

institution’s inquiries under 

§ 1002.107(a)(18) through (20), the financial 

institution may determine that all employees 

and officers who share that job description 

should have access for purposes of 

§ 1002.108. For example, if the job 

description for the position of loan officer 

states that a loan officer may have to 

distribute, collect, and help applicants 

complete a data collection form that asks 

about the applicant’s minority-owned 

business status, women-owned business 

status, and its principal owners’ ethnicity, 

race, and sex, the financial institution may 

determine that all employees and officers 

who have been assigned the position of loan 

officer should have access for purposes of 

§ 1002.108. 

108(b) Prohibition on access to certain 

information. 


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1. Scope of information subject to the 

prohibition. i. When the prohibition applies. 

The prohibition in § 1002.108(b) applies only 

to an applicant’s responses to the inquiries 

that the covered financial institution makes 

to satisfy § 1002.107(a)(18) through (20). For 

example, if a financial institution satisfies 

§ 1002.107(a)(18) through (20) by using a 

paper data collection form to ask an 

applicant if it is a minority-owned business, 

if it is a women-owned business, and for the 

ethnicity, race, and sex of its principal 

owners, the prohibition applies to the 

responses that the applicant provides on the 

paper data collection form and any other 

paper or electronic records that the financial 

institution creates based on the applicant’s 

responses provided on the paper data 

collection form. Similarly, if a financial 

institution satisfies § 1002.107(a)(18) through 

(20) by asking an applicant about its 

minority-owned business status, its womenowned business status, and the ethnicity, 

race, and sex of its principal owners during 

a telephone call, the prohibition applies to 

the responses to those inquiries provided 

during that telephone call and to any records 

created on the basis of those responses. 

ii. When the prohibition does not apply. 

Because the prohibition in § 1002.108(b) only 

applies to the applicant’s responses to the 

inquiries that the financial institution makes 

to satisfy § 1002.107(a)(18) through (20), the 

prohibition does not apply to ethnicity or 

race information about principal owners that 

the financial institution collects via visual 

observation or surname. Additionally, the 

prohibition in § 1002.108(b) does not apply 

to an applicant’s responses to inquiries 

regarding minority-owned or women-owned 

business status, or principal owners’ 

ethnicity, race, or sex, made for other 

purposes. Thus, an employee or officer who 

obtains information to determine if an 

applicant is eligible for a Small Business 

Administration program for women-owned 

businesses may make determinations 

concerning the applicant’s covered 

application without regard to whether the 

exception in § 1002.108(c) is satisfied. 

Additionally, § 1002.108(b) does not prohibit 

an employee or officer from making a 

determination regarding a covered 

application if the employee or officer 

generally knows that an applicant is a 

minority-owned business or women-owned 

business or knows the ethnicity, race, or sex 

of any of the applicant’s principal owners 

due to activities unrelated to the inquiries 

made to satisfy the financial institution’s 

obligations under subpart B of this part. 

Thus, an employee or officer who knows, for 

example, that an applicant is a minorityowned business due to social relationships or 

other professional relationships with the 

applicant or any of its principal owners may 

make determinations concerning the 

applicant’s covered application. 

2. Scope of persons subject to the 

prohibition. The prohibition in § 1002.108(b) 

applies to an employee or officer of a covered 

financial institution or its affiliate if the 

employee or officer is involved in making 

any determination concerning a covered 

application. For example, if a financial 

institution is affiliated with company B and 

an employee of company B is involved in 

making a determination regarding a covered 

application on behalf of the financial 

institution, then the financial institution 

must comply with § 1002.108 with regard to 

company B’s employee. Section 1002.108 

does not require a financial institution to 

limit the access of employees and officers of 

third parties who are not affiliates of the 

financial institution. Section 1002.108 does 

not require a financial institution to limit the 

access of third parties (who are not 

employees or officers of the financial 

institution or its affiliates) through whom the 

financial institution receives covered 

applications. 

108(c) Exception to the prohibition on 

access to certain information. 

1. General. A financial institution is not 

required to limit the access of a particular 

employee or officer who is involved in 

making determinations concerning covered 

applications if the financial institution 

determines that the particular employee or 

officer should have access to the information 

collected pursuant to § 1002.107(a)(18) 

through (20) and the financial institution 

provides the notice required by 

§ 1002.108(d). A financial institution can also 

determine that several employees and 

officers should have access or that all of a 

group of similarly situated employees or 

officers should have access. See comment 

108(a)–2. However, the financial institution 

cannot permit all employees and officers to 

have access simply because it has determined 

that one or more employees or officers 

should have access. For example, a financial 

institution may determine that a single 

compliance officer or all of its compliance 

officers should have access and then permit 

one or all of its compliance officers, 

respectively, to have access. However, the 

financial institution cannot permit other 

employees or officers to have access unless 

it independently determines that they should 

have access. 

108(d) Notice. 

1. General. If a financial institution 

determines that one or more employees or 

officers should have access pursuant to 

§ 1002.108(c), the financial institution must 

provide the required notice to, at a minimum, 

the applicant or applicants whose responses 

will be accessed by an employee or officer 

involved in making determinations regarding 

the applicant’s or applicants’ covered 

applications. Alternatively, the financial 

institution may also provide the required 

notice to larger group of applicants, 

including all applicants, if it determines that 

one or more officers or employees should 

have access. 

2. Content of the required notice. The 

notice must inform the applicant that one or 

more employees and officers involved in 

making determinations regarding the 

applicant’s covered application may have 

access to the applicant’s responses regarding 

the applicant’s minority-owned business 

status, women-owned business status, and its 

principal owners’ ethnicity, race, and sex. 

The financial institution may, but is not 

required to, provide the notice on its data 

collection form. If the financial institution 

provides the notice on an electronic or paper 

data collection form, the notice must use 

language substantially similar to the 

following: ‘‘Employees and officers making 

determinations concerning an application, 

such as loan officers and underwriters, may 

have access to the information provided on 

this form.’’ If the financial institution 

provides the notice orally, it must use 

language substantially similar to the 

following: ‘‘Employees and officers making 

determinations concerning your application, 

such as loan officers and underwriters, may 

have access to your responses regarding your 

minority-owned business status, your 

women-owned business status, and your 

principal owners’ ethnicity, race, or sex.’’ 

3. Timing for providing the notice. If the 

financial institution is providing the notice 

orally, it must provide the notice required by 

§ 1002.108(d) prior to asking the applicant if 

it is a minority-owned business or womenowned business and prior to asking for a 

principal owner’s ethnicity, race, or sex. If 

the notice is provided on the same paper or 

electronic data collection form as the 

inquiries about minority-owned business 

status, women-owned business status, and 

the principal owners’ ethnicity, race, or sex, 

the notice must appear at the top of the form. 

If the notice is provided in an electronic or 

paper document that is separate from the 

data collection form, the notice must be 

provided at the same time as the data 

collection form or prior to providing data 

collection form. Additionally, the notice 

must be provided with the nondiscrimination notices required pursuant to 

§ 1002.107(a)(18) through (20). See appendix 

E. 

Section 1002.109—Reporting of Data to the 

Bureau 

109(a) Reporting to the Bureau. 

109(a)(2) Reporting by subsidiaries. 

1. Subsidiaries. A covered financial 

institution is considered a subsidiary of 

another covered financial institution for 

purposes of reporting data pursuant to 

§ 1002.109 if more than 50 percent of the 

ownership or control of the first covered 

financial institution is held by the second 

covered financial institution. 

109(a)(3) Reporting obligations where 

multiple financial institutions are involved in 

a covered credit transaction. 

1. General. The following provides 

guidance on how to report originations and 

applications involving more than one 

institution. The discussion below assumes 

that all of the parties are covered financial 

institutions. However, the same principles 

apply if any of the parties is not a covered 

financial institution. See also comment 

109(a)(3)–2 (providing examples of 

transactions involving more than one 

financial institution) and comment 109(a)(3)– 

3 (discussing how to report actions taken by 

agents). 

i. Only one financial institution reports 

each originated covered credit transaction as 

an origination. If more than one financial 

institution was involved in the origination of 

a covered credit transaction, the financial 

institution that made the final credit decision 

approving the application reports the covered 


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credit transaction as an origination. It is not 

relevant whether the covered credit 

transaction closed or, in the case of an 

application, would have closed in the 

financial institution’s name. If more than one 

financial institution approved an application 

prior to closing or account opening and one 

of those financial institutions purchased the 

covered credit transaction after closing, the 

financial institution that purchased the 

covered credit transaction after closing 

reports the covered credit transaction as an 

origination. If a financial institution reports 

a transaction as an origination, it reports all 

of the information required for originations, 

even if the covered credit transaction was not 

initially payable to the financial institution 

that is reporting the covered credit 

transaction as an origination. 

ii. In the case of an application for a 

covered credit transaction that did not result 

in an origination, a financial institution 

reports the action it took on that application 

if it made a credit decision on the application 

or was reviewing the application when the 

application was withdrawn or closed for 

incompleteness. It is not relevant whether the 

financial institution received the application 

directly from the applicant or indirectly 

through another party, such as a broker, or 

whether another financial institution also 

reviewed and reported an action taken on the 

same application. 

2. Examples. The following scenarios 

illustrate how a financial institution reports 

a particular application or originated covered 

credit transaction. The illustrations assume 

that all of the parties are covered financial 

institutions. However, the same principles 

apply if any of the parties is not a covered 

financial institution. 

i. Financial Institution A received a 

covered application from an applicant and 

forwarded that application to Financial 

Institution B. Financial Institution B 

reviewed the application and approved the 

covered credit transaction prior to closing. 

The covered credit transaction closed in 

Financial Institution A’s name. Financial 

Institution B purchased the covered credit 

transaction from Financial Institution A after 

closing. Financial Institution B was not 

acting as Financial Institution A’s agent. 

Since Financial Institution B made the final 

credit decision prior to closing, Financial 

Institution B reports the application as an 

origination. Financial Institution A does not 

report the application. 

ii. Financial Institution A received a 

covered application from an applicant and 

forwarded that application to Financial 

Institution B. Financial Institution B 

reviewed the application before the covered 

credit transaction would have closed, but the 

application did not result in an origination 

because Financial Institution B denied the 

application. Financial Institution B was not 

acting as Financial Institution A’s agent. 

Since Financial Institution B made the credit 

decision, Financial Institution B reports the 

application as a denial. Financial Institution 

A does not report the application. If, under 

the same facts, the application was 

withdrawn before Financial Institution B 

made a credit decision, Financial Institution 

B would report the application as withdrawn 

and Financial Institution A would not report 

the application. 

iii. Financial Institution A received a 

covered application from an applicant and 

approved the application before closing the 

loan in its name. Financial Institution A was 

not acting as Financial Institution B’s agent. 

Financial Institution B later purchased the 

covered credit transaction from Financial 

Institution A. Financial Institution B did not 

review the application before closing. 

Financial Institution A reports the 

application as an origination. Financial 

Institution B has no reporting obligation for 

this transaction. 

iv. Financial Institution A received a 

covered application from an applicant. If 

approved, the covered credit transaction 

would have closed in Financial Institution 

B’s name. Financial Institution A denied the 

application without sending it to Financial 

Institution B for approval. Financial 

Institution A was not acting as Financial 

Institution B’s agent. Since Financial 

Institution A made the credit decision before 

the loan would have closed, Financial 

Institution A reports the application. 

Financial Institution B does not report the 

application. 

v. Financial Institution A reviewed a 

covered application and made the credit 

decision to approve a covered credit 

transaction using the underwriting criteria 

provided by a third party (e.g., another 

financial institution or party). The third party 

did not review the application and did not 

make a credit decision prior to closing. 

Financial Institution A was not acting as the 

third party’s agent. Financial Institution A 

reports the application. The third party has 

no reporting obligation for this application. 

Assume the same facts, except that Financial 

Institution A made a credit decision to 

approve the application, and the applicant 

chose not to accept the covered credit 

transaction from Financial Institution A. 

Financial Institution A reports the 

application as approved but not accepted and 

the third party does not report the 

application. 

vi. Financial Institution A reviewed and 

made the credit decision on a covered 

application based on the criteria of a thirdparty insurer or guarantor (for example, a 

government or private insurer or guarantor). 

Financial Institution A reports the action 

taken on the application. 

vii. Financial Institution A received a 

covered application and forwarded it to 

Financial Institutions B and C. Financial 

Institution A made a credit decision, acting 

as Financial Institution D’s agent, and 

approved the application. Financial 

Institution B made a credit decision 

approving the application, and Financial 

Institution C made a credit decision denying 

the application. The applicant did not accept 

the covered credit transaction from Financial 

Institution D. Financial Institution D reports 

the application as approved but not accepted. 

Financial Institution A does not report the 

application. The applicant accepted the offer 

of credit from Financial Institution B, and 

credit was extended. Financial Institution B 

reports the origination. Financial Institution 

C reports the application as denied. 

3. Agents. If a covered financial institution 

made a credit decision on a covered 

application through the actions of an agent, 

the financial institution reports the 

application. For example, acting as Financial 

Institution A’s agent, Financial Institution B 

approved an application prior to closing and 

a covered credit product was originated. 

Financial Institution A reports the covered 

credit product as an origination. State law 

determines whether one party is the agent of 

another. 

109(b) Financial institution identifying 

information. 

Paragraph 109(b)(4). 

1. Federal prudential regulator. For 

purposes of § 1002.109(b)(4), Federal 

prudential regulator means, if applicable, the 

Federal prudential regulator for a financial 

institution that is a depository institution as 

determined pursuant to section 3q of the 

Federal Deposit Insurance Act (12 U.S.C. 

1813(q)), including the Office of the 

Comptroller of the Currency, the Federal 

Deposit Insurance Corporation, or the Board 

of Governors of the Federal Reserve System; 

or the National Credit Union Administration 

Board for financial institutions that are 

Federal credit unions. 

2. Change in Federal prudential regulator. 

If the Federal prudential regulator for a 

financial institution changes (as a 

consequence of a merger or a change in the 

institution’s charter, for example), the 

institution must identify its new Federal 

prudential regulator in its data submission 

under § 1002.109 for the calendar year of the 

change. For example, if a financial 

institution’s Federal prudential regulator 

changes in February 2026, it must identify its 

new Federal prudential regulator in the 

annual submission for its 2026 data (which 

is due by June 1, 2027) pursuant to 

§ 1002.109(b)(4). 

Paragraph 109(b)(5). 

1. Federal Taxpayer Identification Number. 

If a financial institution obtains a new 

Federal Taxpayer Identification Number 

(TIN), it should provide the new number in 

its subsequent data submission. For example, 

if two financial institutions that previously 

reported data under subpart B of this part 

merge and the surviving institution retained 

its Legal Entity Identifier but obtained a new 

TIN, then the surviving institution should 

report the new TIN with its data submission. 

For example, if a financial institution’s TIN 

changes in February 2026, it must identify its 

new TIN in the annual submission for its 

2026 data (which is due by June 1, 2027) 

pursuant to § 1002.109(b)(5). 

Paragraph 109(b)(6). 

1. Legal Entity Identifier (LEI). A Legal 

Entity Identifier is a utility endorsed by the 

LEI Regulatory oversight committee, or a 

utility endorsed or otherwise governed by the 

Global LEI Foundation (GLEIF) (or any 

successor of the GLEIF) after the GLEIF 

assumes operational governance of the global 

LEI system. A financial institution complies 

with § 1002.109(b)(6) by reporting its current 

LEI number. A financial institution that does 

not currently possess an LEI number must 

obtain an LEI number, and has an ongoing 

obligation to maintain the LEI number. The 

GLEIF website provides a list of LEI issuing 


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organizations. A financial institution may 

obtain an LEI, for purposes of complying 

with § 1002.109(b)(6), from any one of the 

issuing organizations listed on the GLEIF 

website. 

Paragraph 109(b)(7). 

1. RSSD ID number. The RSSD ID is a 

unique identifying number assigned to 

institutions, including main offices and 

branches, by the Board of Governors of the 

Federal Reserve System. A financial 

institution’s RSSD ID may be found on the 

website of the National Information Center, 

which provides comprehensive financial and 

structure information on banks and other 

institutions for which the Federal Reserve 

Board has a supervisory, regulatory, or 

research interest including both domestic 

and foreign banking organizations that 

operate in the United States. If a financial 

institution does not have an RSSD ID, it 

reports that this information is not 

applicable. 

Paragraph 109(b)(8). 

1. Immediate parent entity. An entity is the 

immediate parent of a financial institution 

for purposes of § 1002.109(b)(8)(i) through 

(iii) if it is a separate entity that directly owns 

more than 50 percent of the financial 

institution. 

2. Top-holding parent entity. An entity is 

the top-holding parent of a financial 

institution for purposes of 

§ 1002.109(b)(8)(iv) through (vi) if it 

ultimately owns more than 50 percent of the 

financial institution, and the entity itself is 

not controlled by any other entity. If the 

immediate parent entity and the top-holding 

parent entity are the same, the financial 

institution reports that § 1002.109(b)(8)(iv) 

through (vii) are not applicable. 

3. LEI. For purposes of § 1002.109(b)(8)(ii) 

and (v), a financial institution shall report the 

LEI of a parent entity if the parent entity has 

an LEI number. If a financial institution’s 

parent entity does not have an LEI, the 

financial institution reports that this 

information is not applicable. 

4. RSSD ID numbers. For purposes of 

§ 1002.109(b)(8)(iii) and § 1002.109(b)(8)(vi), 

a financial institution shall report the RSSD 

ID number of a parent entity if the entity has 

an RSSD ID number. If a financial 

institution’s parent entity does not have an 

RSSD ID, the financial institution reports that 

this information is not applicable. 

Paragraph 109(b)(9). 

1. Type of financial institution. A financial 

institution complies with § 1002.109(b)(9) by 

selecting the applicable type or types of 

financial institution from the list below. A 

financial institution shall select all 

applicable types. 

i. Bank or savings association. 

ii. Minority depository institution. 

iii. Credit union. 

iv. Nondepository institution. 

v. Community development financial 

institution (CDFI). 

vi. Other nonprofit financial institution. 

vii. Farm Credit System institution. 

viii. Government lender. 

ix. Commercial finance company. 

x. Equipment finance company. 

xi. Industrial loan company. 

xii. Fintech. 

xiii. Other. 

2. Use of ‘‘other’’ for type of financial 

institution. A financial institution reports 

type of financial institution as ‘‘other’’ where 

none of the enumerated types of financial 

institution appropriately describe the 

applicable type of financial institution, and 

the institution reports the type of financial 

institution as free-form text. A financial 

institution that selects at least one type from 

the list is permitted, but not required, to also 

report ‘‘other’’ (with appropriate free-form 

text) if there is an additional aspect of its 

business that is not one of the enumerated 

types set out in comment 109(b)(9)–1. 

Paragraph 109(b)(10). 

1. Financial institutions that voluntarily 

report covered applications under subpart B 

of this part. A financial institution that is not 

a covered financial institution pursuant to 

§ 1002.105(b) but that elects to voluntarily 

compile, maintain, and report data under 

§§ 1002.107 through 1002.109 (see comment 

1002.105(b)–6) complies with 

§ 1002.109(b)(10) by selecting ‘‘voluntary 

reporter.’’ 

109(c) Procedures for the submission of 

data to the Bureau. 

1. Filing Instructions Guide. The Bureau 

includes in the Filing Instructions Guide 

additional details and procedures for the 

submission of data to the Bureau pursuant to 

§ 1002.109, as well as any related materials, 

which are available at [a designated Bureau 

website]. 

Section 1002.110—Publication of Data 

110(c) Statement of financial institution’s 

small business lending data available on the 

Bureau’s website. 

1. Statement. A financial institution shall 

provide the statement required by 

§ 1002.110(c) using the following, or 

substantially similar, language: 

Small Business Lending Data Notice 

Data about our small business lending are 

available online for review at the Consumer 

Financial Protection Bureau’s website at [a 

designated Bureau website]. The data show 

the geographic distribution of our small 

business lending applications; information 

about our loan approvals and denials; and 

demographic information about the principal 

owners of our small business applicants. The 

Bureau may delete or modify portions of our 

data prior to posting it if the Bureau 

determines that doing so would advance a 

privacy interest. Small business lending data 

for many other financial institutions are also 

available at this website. 

2. website. A financial institution without 

a website complies with § 1002.110(c) by 

making a written statement using the 

language in comment 110(c)–1, or 

substantially similar language, available 

upon request. 

Section 1002.111—Recordkeeping 

111(a) Record retention. 

1. Evidence of compliance. Section 

1002.111(a) requires a financial institution to 

retain evidence of compliance with subpart 

B of this part for at least three years after its 

small business lending application register is 

required to be submitted to the Bureau 

pursuant to § 1002.109. In addition to the 

financial institution’s small business lending 

application register, such evidence of 

compliance is likely to include, but is not 

limited to, the applications for credit from 

which information in the register is drawn, 

as well as the files or documents that, under 

§ 1002.111(b), are kept separate from the 

applications for credit. 

2. Record retention for creditors under 

§ 1002.5(a)(4)(vii) and (viii). A creditor that is 

voluntarily, under § 1002.5(a)(4)(vii) and 

(viii), collecting information pursuant to 

subpart B of this part complies with 

§ 1002.111(a) by retaining evidence of 

compliance with subpart B for at least three 

years after June 1 of the year following the 

year that data was collected. 

111(b) Certain information kept separate 

from the rest of the application. 

1. Separate from the application. A 

financial institution may satisfy the 

requirement in § 1002.111(b) by keeping an 

applicant’s responses to the financial 

institution’s request pursuant to 

§ 1002.107(a)(18) through (20) in a file or 

document that is discrete or distinct from the 

application and its accompanying 

information. For example, such information 

could be collected on a piece of paper that 

is separate from the rest of the application 

form. In order to satisfy the requirement in 

§ 1002.111(b), an applicant’s responses to the 

financial institution’s request pursuant to 

§ 1002.107(a)(18) through (20) need not be 

maintained in a separate electronic system, 

nor need they be removed from the physical 

files containing the application. However, the 

financial institution may nonetheless need to 

keep this information in a different electronic 

or physical file in order to satisfy the 

requirements of § 1002.108. 

111(c) Limitation on personally identifiable 

information in records retained under this 

section. 

1. Small business lending application 

register. The prohibition in § 1002.111(c) 

applies to data compiled and maintained 

pursuant to § 1002.107, data in the small 

business lending application register 

submitted by the financial institution to the 

Bureau under § 1002.109, the version of the 

register that the financial institution 

maintains under § 1002.111(a), and the 

separate record of certain information created 

pursuant to § 1002.111(b). 

2. Examples. Section 1002.111(c) prohibits 

a financial institution from including any 

name, specific address (other than the census 

tract required under § 1002.107(a)(13)), 

telephone number, or email address in the 

data it compiles and maintains pursuant to 

§ 1002.107, in its records under 

§ 1002.111(b), or in data reported to the 

Bureau under § 1002.109. It likewise 

prohibits a financial institution from 

including any personally identifiable 

information concerning any individual who 

is, or is connected with, an applicant, except 

as required pursuant to § 1002.107 or 

§ 1002.111(b). Examples of such personally 

identifiable information that a financial 

institution may not include in its small 

business lending application register include, 

but are not limited to, the following: Date of 

birth, Social Security number, official 

government-issued driver’s license or 


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identification number, alien registration 

number, government passport number, or 

employer or taxpayer identification number. 

3. Other records. The prohibition in 

§ 1002.111(c) does not extend to the 

application or any other records that the 

financial institution maintains. 

4. Name and business contact information 

for submission. The prohibition in 

§ 1002.111(c) does not bar financial 

institutions from providing to the Bureau, 

pursuant to § 1002.109(b)(3), the name and 

business contact information of the person 

who may be contacted with questions about 

the financial institution’s submission under 

§ 1002.109. 

Section 1002.112—Enforcement 

112(b) Bona fide errors. 

1. Tolerances for bona fide errors. Section 

1002.112(b) provides that a financial 

institution is presumed to maintain 

procedures reasonably adapted to avoid 

errors with respect to a given data field if the 

number of errors found in a random sample 

of the financial institution’s data submission 

for the data field does not equal or exceed a 

threshold specified by the Bureau for this 

purpose. The Bureau’s thresholds appear in 

column C of the table in appendix H. The 

size of the random sample, set out in column 

B, shall depend on the size of the financial 

institution’s small business lending 

application register, as shown in column A 

of the table in appendix H. A financial 

institution has not maintained procedures 

reasonably adapted to avoid errors if either 

there is a reasonable basis to believe the error 

was intentional or there is other evidence 

that the financial institution has not 

maintained procedures reasonably adapted to 

avoid errors. To illustrate, assume that a 

financial institution has incorrectly coded 

withdrawn applications as denials to such an 

extent that it likely prevents reliable fair 

lending analysis of underwriting disparities. 

If so, the errors would not be deemed bona 

fide errors under § 1002.112(b) and would 

violate the Act and this Regulation. 

2. Tolerances and data fields. For purposes 

of determining whether an error is bona fide 

under § 1002.112(b), the term ‘‘data field’’ 

generally refers to individual fields. 

However, with respect to information on the 

ethnicity and race of an applicant’s principal 

owner, a data field group consists of more 

than one field. If one or more of the fields 

within an ethnicity or race field group have 

errors, they count as one (and only one) error 

for that data field group. For instance, in the 

ethnicity data field group, if an applicant 

indicates that one of its principal owners is 

Cuban, but the financial institution reports 

that the principal owner is Mexican and 

Puerto Rican, the financial institution has 

made errors in two fields within the ethnicity 

data field group for that principal owner. For 

purposes of the error threshold table in 

appendix H, the financial institution is 

deemed to have made one error. However, a 

financial institution that makes, for example, 

one error in the race data field group and one 

error in the ethnicity field group regarding a 

particular principal owner has made two 

errors for purposes of the error threshold 

table in appendix H. 

3. Tolerances and safe harbors. An error 

that meets the criteria for one of the four safe 

harbor provisions in § 1002.112(c) is not 

counted as an error for purposes of 

determining whether a financial institution 

has exceeded the relevant error threshold in 

appendix H for a given data field. 

112(c) Safe harbors. 

1. Information from a Federal agency— 

census tract. Section 1002.112(c)(1) provides 

that an incorrect entry for census tract is not 

a violation of the Act or subpart B of this 

part, if the financial institution obtained the 

census tract using a geocoding tool provided 

by the FFIEC or the Bureau. However, this 

safe harbor provision does not extend to a 

financial institution’s failure to provide the 

correct census tract number for a covered 

application on its small business lending 

application register, as required by 

§ 1002.107(a)(13), because the FFIEC or 

Bureau geocoding tool did not return a 

census tract for the address provided by the 

financial institution. In addition, this safe 

harbor provision does not extend to a census 

tract error that results from a financial 

institution entering an inaccurate address 

into the FFIEC or Bureau geocoding tool. 

2. Applicability of NAICS code safe harbor. 

A financial institution is permitted to rely on 

an applicant’s representations or on other 

information regarding the NAICS code as 

described in comments 107(a)(15)–3 and –4. 

The safe harbor in § 1002.112(c)(2) applies 

when a financial institution does not rely on 

such information, but instead the financial 

institution identifies the NAICS code for an 

applicant and the NAICS code is incorrect. 

Where the incorrect NAICS code entry is due 

to an unintentional error, the safe harbor in 

§ 1002.112(c)(2) may apply in addition to the 

bona fide error provision in § 1002.112(b), 

provided its requirements are met. 

* * * * * 

Dated: August 31, 2021. 

David Uejio, 

Acting Director, Bureau of Consumer 

Financial Protection. 

[FR Doc. 2021–19274 Filed 9–30–21; 4:15 pm] 

BILLING CODE 4810–25–P 


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