Pub. 14 2019-2020 Issue 6

WWW.NEBANKERS.ORG 14 COUNSELOR’S CORNER Unfinished Business: CFPB Small Business Lending Rule Jeff Makovicka, Kutak Rock LLP S INCE PASSAGE OF THE DODD-FRANK ACT IN 2010, BANKERS and community groups have been waiting for the so- called “small business lending rule.” Section 1071 of the Dodd-Frank Act, 15 U.S.C. § 1691c-2 (“Section 1071”), amended the Equal Credit Opportunity Act to require banks to collect, maintain and report data about loan applications by women-owned, minority-owned and small businesses, and requires the Consumer Financial Protection Bureau (“CFPB”) to collect and publish this data annually. Such data includes the race, sex, and ethnicity of the principal owners of the business. 1 Even though the law was passed in 2010, banks are not cur- rently required to comply with Section 1071 reporting obligations because the CFPB has yet to issue implementing regulations. The CFPB has on occasion engaged in Section 1071 “pre-rule activities”, 2 but it has not started the rule-making process. When the official rulemaking process would begin was anyone’s guess, until now. On February 25, 2020, the CFPB settled a lawsuit by com- munity groups 3 seeking to compel it to undertake the rulemaking required by Section 1071. The settlement sets forth a specific date by which the CFPBmust begin the rulemaking process and establishes a framework for determining, along with plaintiffs or subject to court order, a final timeline for promulgation of the required rule. According to the settlement, a final rule should arrive in 2022 (which would be a dozen years after Congress first required the CFPB to act). The settlement lays out the following timeline for the CFPB to initiate a rulemaking: • By September 15, 2020, the CFPBwill release an outline of proposals under consideration (and alternatives con- sidered), as required by the Small Business Regulatory Enforcement Fairness Act (“SBREFA”); • By October 15, 2020 (or as soon as practicable thereafter if panel members are not available to convene), the CFPB will convene a Small Business Advocacy Review panel (“SBAR panel”), as required by SBREFA. The plaintiffs must make any recommendations of panel members by May 31, 2020. • Pursuant to the SBREFA, the SBAR panel must complete its report within 60 days, at which point the CFPB will notify plaintiffs. After that, the settlement no longer requires concrete actions by specific dates, but instead sets up a mechanism by which the CFPB and the plaintiffs can seek to negotiate a timeline for action, and if they can’t agree they can go to the court. First, the parties will seek to reach agreement on a deadline for the