Community bankers urge CFPB to identify consequences before issuing rules

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The Independent Community Bankers of America (ICBA) are calling on the Consumer Financial Protection Bureau (CFPB) to identify potential benefits and burdens before rules are put forth.

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In a letter to CFPB Director Kathleen Kraninger, ICBA officials reiterated their concerns with the negative impact of Section 1071 of the Dodd-Frank Act, which they contend would “commoditize small-business loans and disrupt lending.”

“Imposing any new data collection and reporting requirements under Section 1071 on community bank small business lenders would negatively impact small business lending and lead to unfortunate, unintended consequences for small business owners seeking credit,” ICBA President and CEO Rebeca Romero Rainey wrote to Kraninger. “ICBA stresses the importance of thorough study and analysis before the issuance of a proposed rule that could disincentivize small business lending, thereby impairing small business access to credit.”

Section 1071 requires the CFPB to implement rules for the collection and reporting of data on the small-business lending of financial institutions. They believe it will have a chilling effect on the ability of lenders to price for risk unless the CFPB studies its potential risks and tailors the rule before adoption.

ICBA urged the CFPB to study community banks’ smaller staff sizes, the cost of developing new databases and lending processes, the effect on “high-touch” relationship banking, and the risks to borrower privacy. The CFPB should seek the least disruptive rulemaking possible and use upcoming forums to meet with community banks about the matter.

“After further exploration, ICBA is confident that the Bureau will recognize the inordinate burden that this rule would place on community banks and will use its authority under the Dodd-Frank Act to exempt community banks from data collection and reporting, limit any regulation to data points required by statute, and prioritize protecting customer privacy as it considers new data reporting requirements,” Romero Rainey wrote.

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