Small Business Lending - Understanding the Impacts of the Final Regulation B Rule | Page 12

COVERED APPLICATIONS

A covered application is an oral or written request for a covered credit transaction made in accordance with procedures used by the financial institution for the type of credit requested . While this definition is largely consistent with the existing Regulation B definition , certain circumstances do not constitute covered applications under the final rule , even if they are otherwise considered applications under existing Regulation B .

Specifically , the following do not constitute covered applications and are not reported pursuant to the final rule :

• Reevaluation requests , extension requests or renewal requests on an existing business credit account , unless the request seeks additional credit amounts or a line increase ;

• Inquiries and prequalification requests ; and

• Solicitations , firm offers of credit and other evaluations ( including evaluations for additional credit amounts or line increases ) the financial institution initiates , unless they invite the business to apply for the credit and the small business does so .

A request from a small business for refinancing is a reportable application , regardless of whether the business requests additional credit amounts or a line increase , if the request is for an extension of business credit not otherwise excluded from coverage under the final rule and is made in accordance with the procedures the covered financial institution uses for the type of credit requested .

CFPB OUTLOOK ON REPORTING

COVERED CREDIT UNIONS

0 % will report in Tier 1

13 % will report in Tier 2

87 % will report in Tier 3

COVERED BANKS

6 % will report in Tier 1

18 % will report in Tier 2

76 % will report in Tier 3

The definition of applicant in Section 1002.102 ( b ) does not include other persons who are , or may become , contractually liable regarding an extension of business credit such as guarantors , sureties , endorsers and similar parties .

Note , some industry commenters , including several credit union trade associations , requested an exemption for credit transactions under $ 50,000 . The CFPB decided against adopting an exemption for credit transactions below a certain dollar threshold . The agency does not believe adopting a minimum transaction amount threshold would further the purposes of Section 1071 because it would exclude substantial portions of small business lending .

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