Small Business Research and Section 1071

Transcript:Small Business Research and Section 1071:
Small Business Research and Section 1071 Rulemaking Overview CFPB Academic Research Council | November 20, 2020 30.2 million employer and non-businesses (99.9% of businesses) 24.3 million are non-employer firms 5.9 million are employer firms; of which 5.3 million have 1 – 20 employees 8.0 million are minority-owned businesses; 11 million are women-owned Small business overview Source: CFPB, Key dimensions of the small business lending landscape (May 2017) A $1.4 trillion market Financing Marketplace Section 1071—general background Section 1071 of the Dodd-Frank Act amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to compile, report, and maintain data regarding applications for credit for women-owned, minority-owned, and small businesses. Its statutory purposes are to: “[F]acilitate enforcement of fair lending laws” and “[E]nable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses” Would constitute the first systematic collection of small business lending application data Similar to HMDA, but small business lending is more varied in both products and underwriting approaches 3 Application number and date received Type and purpose of the loan or credit Race, sex and ethnicity of the principal owners Amount of credit or credit limit applied for Statutory data points 4 Action taken by the institution and date of such action Gross annual revenue in last fiscal year Principal place of business (census tract) Amount of credit transaction or credit limit approved Also provides for “any additional data elements that the Bureau determines would aid in fulfilling the purposes of [section 1071].” Current status Progress in understanding small business lending market: White Paper: Key Dimensions of the Small Business Lending Landscape— May 2017 Request for Information—May 2017 Symposium on section 1071—Nov. 2019 Data point: Small Business Lending and the Great Recession—Jan. 2020 One-time implementation cost survey—response period ended Oct. 16, 2020 SBREFA outline—released Sept. 15, 2020 SBREFA panel—convened Oct. 15, 2020 and meetings with small entity representatives complete Next steps in the section 1071 rulemaking: SBREFA panel report—to be completed in Dec. 2020 Notice of proposed rulemaking—TBD Final rule—TBD 5 Existing research questions about small businesses In 2013, an interagency meeting identified multiple outstanding research questions about small businesses Example research questions: What are the sources of credit for small businesses and startups? What is the quality of credit for small businesses and startups? How do government programs affect access to credit? How do business owner characteristics