SMALL BUSINESS LENDING : UNDERSTANDING THE IMPACTS OF THE REGULATION B FINAL RULE ON SMALL BUSINESS DATA COLLECTION
A covered financial institution can include :
• Depository institutions
• Online lenders
• Platform lenders
• Community development financial institutions
• Lenders involved in equipment and vehicle financing
• Farm credit system lenders
• Commercial finance companies
• Merchant cash advance providers
• Governmental lending entities
• Non-profit lenders
WILL IT WORK ?
According to groups like the NCRC , the new rule is likely to result in increased lending to underserved businesses , as lenders will now have to annually report on their lending broken down by race , ethnicity , gender and sexual orientation of the business owners . The NCRC believes improvements to Home Mortgage Disclosure Act ( HMDA ) data in 1990 and 1993 corresponded with a 70 % increase in conventional home purchase lending to African Americans , and an 8 % increase in lending to Latino borrowers , from 1993 to 1995 . A study by Citigroup estimates fair access to lending for African American-owned small businesses alone would have resulted in $ 650 billion in additional business revenue per year , as well as created an additional 6.1 million jobs per year .
Others , including financial institution trade associations , are more skeptical . They worry the burden of collecting and reporting this information will either push lenders out of the small business lending space or make small business lending more expensive and hurt small businesses seeking financing .
The CFPB ’ s decision to include many different types of lenders is in keeping with the philosophy that the same activities should have the same regulations , regardless of the type of institution conducting those activities . This helps the CFPB make comparisons between different types of lenders .
A financial institution that is not a covered financial institution may voluntarily collect data in certain circumstances , such as if it recently reported data as a covered financial institution , is about to become a covered financial institution , or is not covered but commits to report data it voluntarily collects .
COVERED ORIGINATIONS
For purposes of determining institutional coverage ( i . e ., whether a financial institution is a covered financial institution ) and compliance date tier , financial institutions count covered originations . A covered origination is a covered credit transaction the financial institution originated to a small business . Refinancings can be covered originations when an existing obligation is satisfied and replaced by a new obligation undertaken by the same borrower . Extensions , renewals and other amendments of existing transactions are not considered covered originations , even if they increase the credit line or credit amount of the existing transaction .
COVERED CREDIT TRANSACTIONS
A covered financial institution is required to collect and report data from covered applications for covered credit transactions from small businesses . Generally , a covered credit transaction is an extension of business credit under Regulation B . Thus , covered credit transactions can include loans , lines of credit , credit cards , merchant cash advances and credit products used for agricultural
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