Banks Raise Concerns Over CFPB Small Biz Loan Data Collection

The Consumer Financial Protection Bureau is preparing to collect data on how lenders work with women-owned, minority-owned and small businesses (SMBs), but the American Bankers Association (ABA) has expressed concerns over the initiative.

Thursday (Sept. 14) was the last day for the CFPB to receive comments on its data collection process, an initiative outlined in the Dodd-Frank Act that requires lenders to report on their SMB lending activity for regulators to promote fair lending.

The legislation requires the CFPB to collect information on 13 particular data points, news reports from Forbes explained, as well as on any additional data as seen fit by the Bureau.

The American Bankers Association sent a letter to the CFPB, reports in Banking Journal said, voicing concerns that data collection efforts will not be able to achieve the CFPB’s objectives.

“Small business lending at banks is highly individualized, and underwriting and loan pricing depend on many heterogeneous variables that are inherently unsuitable for mass-data fair lending analysis,” the ABA said in its letter, adding that there are “great variations and unique attributes of individual small business loans” that “will make legitimate comparisons excessively difficult, if not impossible.”

The ABA also expressed concerns that, once data is collected and organized, manipulation in how that data is categorized and analyzed could lead to “contrive[d] assertions of discrimination in small business lending.”

The ABA also wanted the CFPB to confirm that it does not plan to collect data on SMB complaints filed with lenders, as doing so, the ABA argued, would be outside the jurisdiction of the Bureau.

The bankers’ group is urging the CFPB to work with the Small Business Administration to develop a plan for how the data will be used to promote fair SMB lending.

Reports in Forbes noted that many of the more than 400 comments sent to the CFPB in response to its request for comments address concerns that community banks have, with many comments from employees or officers of such banks asking for either these FIs to be exempt from the data collection, or for the Dodd-Frank Act provision to be altogether appealed.

Reports said the comments may suggest that many industry players feel the CFPB has already insinuated lenders are not treating small business borrowers fairly.