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In a letter in response to the CFPB’s Request for Information concerning small business loan data collection, the Small Business Administration Office of Advocacy raised several concerns about a rulemaking in this area’s potential impact on small businesses and small financial institutions.
In its letter, the SBA Office of Advocacy stated, “Advocacy encourages the CFPB to develop a workable size standard, conduct additional small entity outreach and publish an Advance Notice of Proposed Rulemaking (ANPRM) prior to going forward with a Small Business Regulatory Enforcement Fairness Act panel.”
It further noted, “At Advocacy's roundtable, the participants stated that the SBA size standards are complex and confusing. Advocacy encourages the CFPB to perform outreach with small entities and to work with Advocacy and SBA's Office of Size Standards to develop a workable solution.”
Other notable parts of the letter included the following recommendations:
Advocacy appreciates the fact that the CFPB published a Notice and Request for Information for section 1071 and that the CFPB extended the comment deadline by sixty days. However, this is a complicated issue that will be costly for small entities.
At Advocacy's roundtables, the participants stated that it will be costly to develop a computer system to collect the information that is required. According to the participants, it will be far more costly then the Home Mortgage Disclosure Act (HMDA) rulemaking. In HMDA, small entities added to an existing system. To comply with the requirements of section 1071, small entities will need to build an entirely new system.
The CFPB convened a SBREFA panel for the HMDA rulemaking because of the anticipated economic impact. Advocacy encourages the CFPB to convene a SBREFA panel for the rulemaking on section 1071. Prior to convening the SBREFA panel, Advocacy encourages the CFPB to have several pre-panel meetings/conference calls with the small entity representatives (SERs) in order to obtain information about the possible economic impact. Prior outreach will help make the SERs' input at the SBREFA panel more meaningful.
In addition. Advocacy asserts that an Advanced Notice of Proposed Rulemaking (ANPRM) may be helpful. At Advocacy's August 4 roundtable, the small business representatives alluded to the differences between consumer and commercial lending. Moreover, when asked about less costly alternatives, they stated that they were not ready to have a meaningful discussion on alternatives. The consideration of meaningful alternatives is a crucial part of the RFA. An ANPRM could assist the CFPB in learning more about the challenges associated with commercial lending and in ascertaining less costly alternatives.
The SBA Office of Advocacy letter highlights a number of the same concerns raised by CUNA and credit unions. CUNA participated in several SBA Office of Advocacy roundtables on this issue and will continue to engage with them about concerns of how a rule in this area could harm small credit unions and limit access to credit for members.
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