CFPB seeks input on small business lending

With calls for its restructuring or demise on the part of some members of Congress, the Consumer Financial Protection Bureau nevertheless continues to take actions in accordance with its stated mission to “make markets for consumer financial products and services work for Americans – whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.”

On May 10, 2017, the CFPB said it had “launched an inquiry into ways to gather and use new and existing information to identify the financing needs of small businesses, especially those owned by women and minorities.” The 2010 Dodd-Frank Act, which established the CFPB, requires the bureau to collect data about small business lending to help identify needs and opportunities in the market and to facilitate enforcement of fair lending laws.

"Small businesses fuel America’s economic engine, create jobs, and nurture communities,” said CFPB Director Richard Cordray. “Yet little is known about how well the lending market serves their financing needs. This inquiry will help us learn how we can best fulfill our duty to collect and report information on small business lending."

In a Request for Information, the CFPB seeks comments “from individual businesses, consumer groups, community development organizations, bank and nonbank lenders, regulators, and all other interested parties,” the bureau stated.

The important role of small businesses

In a press release about this new inquiry, it pointed out the following facts about small businesses. They:

• Typically need access to credit to take advantage of growth opportunities, yet public information on this lending market is inconsistent and incomplete.
• Foster community development and fuel economic growth both nationally and locally, and access to financing is crucial to their success.
• Provide jobs for almost half of all private sector employees, and have created two out of every three jobs since 1993.
• Lead to higher local income and employment rates, as well as lower poverty when a higher percentage of a community’s workforce is employed by small, local businesses (Federal Reserve Bank of America).

In conjunction with launching the inquiry, the CFPB also released a white paper on the current small business lending landscape. Available at files.consumerfinance.gov/f/documents/201705_cfpb_Key-Dimensions-Small-Business-Lending-Landscape.pdf , the paper noted that small businesses access an estimated $1.4 trillion in financing. “However, current information on how small businesses engage with credit markets is incomplete or dated and does not paint a full picture of access to financing, particularly for small business owned by women and minorities,” the bureau said.

Some of the questions the CFPB’s Request for Information addresses are:

• What defines a small business?
• What institutions lend to small businesses and what products are offered?
• What types of business lending information are used by financial institutions?
• How would public release of small business lending data affect privacy?

Text of the Request for Information can be found at: files.consumerfinance.gov/f/documents/201705_cfpb_RFI_Small-Business-Lending-Market.pdf . The public inquiry comment period will end 60 days after the Request for Information is officially published in the Federal Register. The bureau did not say when publication will take place.

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