CFPB Small Business Lending Data Collection Rule Released

The CFPB’s Final Rule on Small Business Lending Data Collection has been released for public inspection, with publication expected on May 1. This rule implements Section 1071 of the Dodd-Frank Act, which required the CFPB to collect information about owners of small business applying for credit in order to guide fair lending enforcement and related purposes.

AFSA has been engaged at every stage of this process, providing written comments and speaking with policy makers regarding areas of concern.

Perhaps the most significant question surrounded the collection of data for small business credit applicants in indirect vehicle finance purchase transactions. In these transactions, an auto dealer is the original creditor on a retail installment sales contract that is later assigned to a vehicle finance company for servicing. However, federal law makes it impossible for the CFPB to regulate or impose rules on auto dealers. This led to questions and confusion about the scope of the data collection obligation.

AFSA asked for clear language from the CFPB explaining that indirect vehicle finance transactions were outside the scope of this rule. And the final rule provides the following (emphasis added):

In response to the request to clarify, through examples in commentary, that the compliance obligation for indirect auto transactions lies with the auto dealer, not the indirect lender, the Bureau notes that comment 105(a)-1 already clarifies the exclusion of auto dealers from coverage under this rule. Regarding the request that the Bureau work with the Federal Reserve Board (Board) to exempt auto dealers from future rulemaking, the Bureau notes that application of section 1071 requirements to entities excluded from the Bureau’s jurisdiction by section 1029 of the Consumer Financial Protection Act is a matter for the Board to determine, and requests regarding the Board’s potential future actions are outside the scope of this rulemaking. Additionally, comments 109(a)(3)-1 and -2 provide several scenarios and ten specific examples identifying various indirect lending scenarios, including those in which no data on a transaction would be submitted to the Bureau because an auto dealer would have been ultimately responsible for reporting it. The Bureau recognizes, however, that the inclusion of the word “covered” in § 1002.109(a)(3) in the 2023 final rule was an error that contributed to confusion regarding these obligations in the auto lending context. Because auto dealers are statutorily excluded from the Bureau’s rulemaking authority, they are not “covered” financial institutions under this rule. As a result, the phrase “last covered financial institution” inadvertently implied that the reporting obligation defaults to the indirect auto lender even when an auto dealer has the final authority to set material terms. This was not the Bureau’s intent. To correct this error and clarify reporting obligations, this final rule removes the word “covered” from § 1002.109(a)(3). Thus, if the last financial institution with authority to set material terms is not a covered financial institution, the application is not reported.[Emphasis added] Finally, with respect to comments concerning the purchase of auto loans after origination, the Bureau notes that comment 104(b)-4 makes clear that the term “covered credit transaction” does not cover the purchase of an originated credit transaction.

The rule and its associated commentary are lengthy, so we will continue to review it in consultation with our members.

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