Recently, there has been a lot of buzz surrounding the implementation of Section 1071 for Small Business Lending and its impact on the financial services industry. What we do know is that the CFPB is in the process of writing regulations to implement Section 1071 of the Dodd-Frank Act. ComplianceTech will be ready when it is time to report and analyze small business lending.  Our Fair Lending Magic™ customers can import the proposed data structure derived from the regulatory reporting pursuant to Dodd Frank Section 1071. ComplianceTech will host a free webinar on February 9, 2023, at 3:30 PM Eastern. The Section 1071 webinar recording is available online.

As a reminder, in the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress directed the Bureau to adopt regulations governing small business lending data collection. Section 1071 of the Dodd-Frank Act amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to compile, maintain, and submit to the Bureau specific data on applications for credit for women-owned, minority-owned, and small businesses.

From my perspective, you can certainly get ahead with all the information shared to date. The CFPB has already provided a list of proposed data points. Begin with a simple data needs assessment to understand better if your company has the quantity and quality of data to conduct fair lending monitoring. Not sure about doing this on your own? ComplianceTech can scrutinize data and metadata to verify if you can institute monitoring activities. This also answers whether your Compliance Management System (CMS) is reliable.

Next, once you have a handle on the available data, determine if your current fair lending software can conduct a meaningful analysis of small business lending data.  You’ll also want to ensure that the tool can geocode and proxy the data for race and gender with no additional charges.

Here are some other questions that you may want to ask your software vendor (responses in bold apply to ComplianceTech’s software):

  • Can the tool handle data for different types of lending activity? YES
  • Is the tool all-inclusive, and will it allow you to analyze all activity in your portfolio? YES
  • Are non-mortgage data types considered add-ons that come with an additional cost? NO

To get you started, below is the list of proposed small business lending data points:

  1. Unique identifier
  2. Application Date
  3. Application Method (In Person, Telephone, Mail, Online)
  4. Application Recipient
  5. Credit Type
  6. Credit Purpose
  7. Amount Applied For
  8. Amount Approved or Originated
  9. Action Taken
  10. Action Taken Date
  11. Denial Reasons
  12. Pricing Information
  13. Census Tract (Principal Place of Business)
  14. Gross Avenue Income
  15. NAICS Code
  16. Number of Workers
  17. Time in Business
  18. Minority-Owned Status
  19. Women-Owned Status
  20. Ethnicity of principal owners
  21. Race of Principal Owner(s)
  22. Sex of Principals Owner (s)
  23. Number of Principal Owners

The ComplianceTech Suite of popular fair lending software products include:

If you’re unsure which fair lending software suits your organization’s needs best — or whether you need more than one solution — request a demo to experience each option’s features.