Implementation Concerns of Section 1071 of the Dodd‐​Frank Act

November 7, 2019 • Public Comments

Thank you for the opportunity to comment on the Consumer Financial Protection Bureau’s implementation of Section 1071 of the Wall Street Reform and Consumer Protection (Dodd‐​Frank) Act of 2010. I applaud Director Kraninger and the Bureau for their leadership on the subject of how to improve access to credit by small businesses, particularly those owned by minorities and women.

The Cato Institute is a public policy research organization dedicated to the principles of individual liberty, limited government, free markets, and peace. Cato’s Center for Monetary and Financial Alternatives, at which I am a policy analyst, is dedicated to building a better tomorrow through monetary and financial alternatives—exploring policy reforms that capture the power of markets to provide for people’s welfare and developing ideas for a robust, resilient, innovative, and inclusive monetary and financial system worthy of a free and prosperous society.

Section 1071 amended the Equal Credit Opportunity Act (ECOA) to require lenders to collect and maintain data on loan applications by small businesses. Lenders must ask small‐​business applicants whether they are women‐ or minority‐​owned business, defined respectively as a business where more than 50 percent of ownership or control, and of net profit or loss, accrues to one or more women or minority individuals. Section 1071 also requires lenders to collect the following information from small‐​business loan applicants:

  • the number and date of the application;
  • the type and purpose of the credit being applied for;
  • the amount of credit or credit limit applied for;
  • the lender’s decision on the application, and the date of that decision;
  • the census tract of the applicant’s principal place of business;
  • the gross annual revenue of the business in the last fiscal year;
  • the race, sex, and ethnicity of the principal owners of the business;
  • and any additional data the Bureau deems appropriate.

My comments refer mainly to small‐​business loan data for banks and thrift institutions. However, my recommendations apply to banks, thrifts, credit unions, and non‐​banks, to the extent they undertake the same activities and originate or hold a similar amount of small‐​business loans.

About the Author
Diego Zuluaga
Former Associate Director of Financial Regulation Studies, Center for Monetary and Financial Alternatives