Recently, there has been a lot of buzz surrounding the implementation of Section 1071 for Small Business Lending and the impact it will have 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.

As a reminder, in the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress directed the Bureau to adopt regulations governing the collection of small business lending data. 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 certain data on applications for credit for women-owned, minority-owned, and small businesses.

From my perspective, you can certainly get ahead on this one with all the information that has been shared to date. The CFPB has already provided a list of proposed data points. Begin with a simple data needs assessment to better understand 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 are ready to institute monitoring activities. This also answers the question of 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 has the capabilities to 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 so you can experience the features of each option.