H.R. 941
Small LENDER Act
Official summary
Written by the Congressional Research Service.
Small Lenders Exempt from New Data and Excessive Reporting Act or the Small LENDER Act
This bill modifies the requirements for financial institutions to report certain information about small business credit applications to the Consumer Financial Protection Bureau (CFPB) and extends the timeline for compliance with the CFPB rule with respect to such reporting (i.e., Section 1071 final rule). (For background about the CFPB rule and subsequent litigation see CRS Report R47788.)
Under the bill, the reporting requirements apply only to financial institutions that originate at least 500 credit transactions to small businesses in each of the preceding two years. The bill further defines small businesses as those with gross annual revenue of $1 million or less.
The rule currently establishes a phase-in period that ultimately requires institutions that originate over 100 credit transactions to small businesses to comply with the reporting requirements. The rule also defines small businesses as those with gross annual revenue of $5 million or less.
Further, beginning on the date the final CFPB rule was issued (May 31, 2023), the bill provides three years for applicable financial institutions to comply with the rule followed by a two-year safe harbor period during which such institutions are not subject to any penalties for failure to comply with the rule.
Text of the bill
This Act may be cited as the Small Lenders Exempt from New Data and Excessive Reporting Act or the Small LENDER Act.
Section 704B of the Equal Credit Opportunity Act (15 U.S.C. 1691c–2) is amended—
(1) in subsection (c)—
(A) by striking Any applicant and inserting the following:
(1) In general. Any applicant
; and
(B) by striking the period at the end and inserting the following:
, and the financial institution may, when requesting such information, inform the applicant in writing that—
(A) the Bureau of Consumer Financial Protection requires the financial institution to ask, collect, and report such information to the Federal Government annually pursuant to this section;
(B) the applicant is not required to provide such information; and
(C) the applicant’s response will not affect the financial institution’s evaluation of the request for credit.
(2) Model form. The Director of the Bureau of Consumer Financial Protection shall establish a model form to be used in providing the information required to be provided to an applicant under paragraph (1). Such form shall—
(A) be in plain English; and
(B) to the extent practicable, be no longer than a single page.
(2) by striking subsection (d);
(3) by redesignating subsections (e), (f), (g), and (h) as subsections (d), (e), (f), and (g), respectively; and
(4) in subsection (d), as so redesignated—
(A) in paragraph (2)—
(i) by striking subparagraphs (C), (G), and (H);
(ii) by redesignating subparagraphs (D), (E), and (F) as subparagraphs (C), (D), and (E), respectively;
(iii) in subparagraph (D), as so redesignated, by adding and at the end; and
(iv) in subparagraph (E), as so redesignated, by striking the semicolon and inserting a period;
(B) in paragraph (3), by striking paragraph (1)(E) and inserting paragraph (1)(D); and
(C) by adding at the end the following:
(5) Prohibition on information not reported by an applicant. A financial institution may not compile and maintain information described under subsection (b) that was determined by the financial institution using visual observation or any other manner other than being provided by an applicant.
(5) in subsection (f), as so redesignated, by adding at the end the following:
(4) Initial compliance date
(A) In general. The Bureau may not require a financial institution to comply with this section, or any rule issued under this section, until June 1, 2031.
(B) Safe harbor. The Bureau may not enforce compliance with the requirements of this section during the 2-year period beginning on the date described in subparagraph (A).
(5) Exemption for small financial institutions. A financial institution is exempt from the requirements of this section if the financial institution—
(A) in each of the 2 previous calendar years, originated less than 2,500 credit transactions for small businesses; or
(B) has less than $10,000,000,000 in assets.
(6) Treatment of response rate. The percentage of applicants providing a financial institution with the information described under subsection (b) may not be used as a factor in determining whether a financial institution is in compliance with the requirements under this section.
; and
(6) in subsection (g), as so redesignated, by striking paragraph (2) and inserting the following:
(2) Small business. The term small business means any entity with gross annual revenues of $1,000,000 or less in the most recently completed fiscal year.