CFPB Takes In-Depth Look at Small Business Lending

CFPB  •  Fair Lending / Fair Servicing

On May 10, 2017, the Consumer Financial Protection Bureau (CFPB) began gathering information regarding small business financing needs in an effort to encourage small businesses—especially ones owned by minorities and women.  The Bureau began this process by issuing a Request for Information (RFI) seeking information from the public on a variety of topics to better understand small business lending.  The RFI indicates that the Bureau is considering implementing a small business data collection rule that would aid the bureau in evaluating fair lending trends and in better supporting the needs of the small-business community.

While the CFPB estimates that the small-business financing market is about $1.4 trillion in size, exactly how small businesses access credit, and what financial products they need or are currently able to access, is less well-established.  The CFPB is especially interested in how small-business access to credit differs based on the type of business or location.  Also important to the Bureau is whether small businesses are financing through banks or other sources, and whether the effects of the recession continue to affect the small business credit market.

The RFI requests feedback on several areas of interest, including:

  • How do lenders define a small business?  The Bureau acknowledges that current definitions of “small business” set out by the Small Business Administration are generally industry-specific, and it seeks more information on how the term is defined (e.g., is it based on the number of employees, annual receipts, or something else?) and how those definitions would affect the number of businesses covered by a potential data collection rule.
  • Who lends to small businesses, and how?  For example, from what institutions do small businesses seek credit, and what financial products do they seek?  The CFPB also expresses interest in comment on whether it should exempt certain types of lenders from a future small-business-lending data collection rule.
  • How is small business lending information protected?  For example, if small business lending data contains private or confidential information, how is that information protected from public release?

The CFPB is seeking responses to its RFI from businesses, consumer groups, community development organizations, banks and other lenders, and regulators, among others.  This study is a crucial step in understanding the financing needs of small businesses, and provides stakeholders the opportunity to help shape a future data collection rule that will affect their regulatory environment.  The deadline to respond to the RFI is July 14, 2017.

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