AFSA Comments on Small Business Lending Rulemaking
“Small businesses are crucial to the American economy and to the millions of Americans who run them, are employed by them, and who patronize them,” AFSA wrote to the CFPB this week, adding, “Credit availability, in turn, is critical to the well-being of small businesses. Without credit, many small businesses would close.” AFSA’s comments were in response to a small business lending data collection and reporting rulemaking the CFPB is engaged in as required by Section 1071 of the Dodd-Frank Act.
AFSA commended the CFPB on the thoughtful, deliberate approach it is taking with this rulemaking. Striking the right balance between meeting the requirements of Section 1071, the needs of small businesses, and the compliance challenges faced by financial institutions (FIs) is crucial.
“Requirements in this rulemaking that increase the complexity and cost are likely to decrease the number of small business loans. If each loan takes longer to make and is more expensive, fewer loans may be made. FIs will have to make cost-effective decisions about the size of loans to fund based on profitability (potentially leading to only larger loans that generate more revenue being made.) In a worst-case scenario, FIs may decide to exit the market if the regulations make it too difficult and costly for them to continue to make small business loans. Of course, this is exactly the opposite of the goal of Section 1071, but it could be the result nonetheless,” AFSA wrote.
The next step in the rulemaking will be a proposed rule, which we expect to see in 2021. AFSA will continue to be engaged with the CFPB as this rulemaking progresses.
December 15th, 2020
