Blocking of Small Business Loan Rule is a Setback for Small Business Borrowers

“Small Business Majority is disappointed in a ruling issued yesterday by Texas U.S. District Court Judge Randy Crane that will block efforts to bring greater transparency to small business lending. 

We strongly supported the Consumer Financial Protection Bureau's (CFPB) finalization of Section 1071 of the Dodd-Frank Act, which requires lenders to collect small business demographic and financial information. This critical rule will help stakeholders and policymakers better understand how successful financial institutions are in lending to communities of color, farms and underserved businesses, thus fulfilling the original promise of the Community Reinvestment Act. This data collection will help root out discrimination that has historically plagued marginalized small businesses. It will also increase transparency in terms and conditions for small business loan applications. Data collected through Section 1071 will likely curb excessive pricing and increase access to credit for traditionally underserved small businesses.

However, this decision blocking the implementation of Section 1071 will undermine government agencies' ability to use this data to identify opportunities to create new or tailor existing programs to address disparities in small business lending practices and promote equitable access to capital. 

We have been eagerly awaiting the implementation of Section 1071 so that we can better understand the small business lending landscape. We hope this ruling is successfully appealed so policymakers can better address the credit and funding gaps of under-resourced small business borrowers.”  

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