purposes . However , the following transactions are not considered covered credit transactions :
• Trade credit , which is a financing arrangement wherein a business acquires goods or services from another business without making immediate payment in full to the business providing the goods or services .
• HMDA-reportable transactions ( a departure from the proposed rule ).
• Insurance premium financing , which generally is a financing arrangement wherein a business agrees to repay a financial institution the proceeds advanced to an insurer for payment of the premium on the business ’ s insurance contract and wherein the business assigns to the financial institution certain rights , obligations and / or considerations in its insurance contract to secure repayment of the advanced proceeds .
• Public utilities credit as defined in Regulation B , 12 CFR 1002.3 ( a )( 1 ).
• Securities credit as defined in Regulation B , 12 CFR 1002.3 ( b )( 1 ).
• Incidental credit as defined in Regulation B , 12 CFR 1002.3 ( c )( 1 ), but without regard to whether the credit is consumer credit , is extended by a creditor , or is extended to a consumer .
Furthermore , factoring , leases , consumer-designated credit used for business or agricultural purposes ; and purchases of a credit transaction , interest in a pool of credit transactions and a partial interest in a credit transaction ( such as through a loan participation agreement ) are not covered credit transactions .
Section 1002.109 ( a )( 3 ) of the final rule requires where it is necessary for more than one financial institution to make a credit decision in order to approve a single covered credit transaction , only the last covered financial institution with authority to set the material terms of the covered credit transaction is required to report the application . Setting the material terms of the covered credit transaction includes , for example , selecting among competing offers , or modifying pricing information , amount approved or originated , or repayment duration .
Note , the final rule finalizes the CFPB ’ s approach to not permit voluntary reporting of non-covered products .
SMALL BUSINESS
A “ small business ” is a small business concern that had $ 5 million or less in gross annual revenue for its preceding fiscal year . Industry trade groups hoped the CFPB would depart from the proposal and set the definition at $ 1 million or less in revenue , but alas it was kept at $ 5 million or less . Note , it will increase with inflation . Every five years after Jan . 1 , 2025 , the gross annual revenue threshold will adjust based on changes to the Consumer Price Index .
The final rule establishes non-profit organizations and governmental entities are not small businesses pursuant to the final rule , and transactions made to such businesses and entities are not covered originations .
Nearly one-third of all businesses are minority-owned and more than one-third are women-owned .
Because more than 99 % of women-owned and minorityowned businesses are small businesses , covering small businesses necessarily means nearly all women-owned and minority-owned businesses will also be covered . - CFPB
A financial institution is permitted to rely on an applicant ’ s representations regarding gross annual revenue for purposes of determining small business status . However , if an institution initially determines an applicant is a small business based on available information , and obtains data required by the final rule , but the financial institution later concludes the applicant is not a small business , they may process and retain the data without violating Regulation B . If a financial institution initially determines the applicant is not a small business , but later concludes the applicant is a small business prior to taking final action on the application , they must report the covered application .
If a financial institution verifies applicant-provided gross annual revenue information or if an applicant provides updated gross annual revenue information , the financial institution must use the verified or updated information to determine small business status .
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