Senate fails to override veto of small business data collection rules

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The Senate could not overturn it. President Biden’s Veto Regarding the proposed resolution to invalidate the Consumer Financial Protection Bureau resolution. Small business data collection rules

The Senate voted Wednesday 54-45fell short of the two-thirds majority needed to override the president’s veto last month of a Republican-led resolution watering down small business data collection rules under the Congressional Review Act.

This rule is known as 1071 as part of the Dodd-Frank Act and is currently On hold Pending the outcome of the Supreme Court case challenge the constitutionality of Part of CFPB funds.Bureau The rules were finalized last year. A lawsuit was soon filed by a banking industry group.

After Wednesday’s vote, Senate committee chairman Sen. Sherrod Brown (D-Ohio) praised lawmakers for “affirming the 1071 rule,” which promotes access to credit and reduces discrimination in small businesses. He said that the aim is to combat. lending.

“Today’s vote is a victory for the small businesses, corporations, and entrepreneurs who are the powerhouse of our nation’s economy,” Brown said in a press release.

The vote to override the rule was largely symbolic, as lawmakers knew early on that Biden would veto the resolution. Still, challenges to the Congressional Review Act rarely pass both the House and Senate, especially those that can garner bipartisan support.

Consumer advocacy groups lobbied lawmakers to support the rule. The rule would allow for the release of data that could show how many small business loans are made and denied to women and minorities.Banks, credit unions and fintechs face possibilities reputational risk Excluded from such disclosure if cited by the CFPB or the Department of Justice. fair lending violation.

“This issue has received a lot of strong support from the civil rights movement and small business advocates, and there has been a significant amount of advocacy work on this issue,” said David Ferreira, senior government relations manager at the Center for Responsible Lending. “I’ve been suffering,” he said.

He said the rule is popular among about 100 civil rights and consumer groups, including the Consumer Federation of America, the Center for Responsible Lending, Farm Aid, the National League of Cities, the NAACP, the U.S. Hispanic Chamber of Commerce, and the Union of Concerned Scientists. I mentioned that it is supported.

The CFPB dragged its feet for more than a decade and was ultimately forced to finalize the rule. sued by consumer advocacy groups in 2019. The 1071 rule was one of his last remaining mandates in the Dodd-Frank Act.

The rule requires small business lenders to collect racial, gender, and demographic data from small business loan applicants.The rules are like this Mortgage Disclosure Act Requirements This law came into effect in 1975 for mortgage lenders.

CFPB Director Rohit Chopra framed the rule as necessary to provide regulators with data on small business loans that was missing when the pandemic hit and the government created the Paycheck Protection Program.

“This Small Business Lending Survey provides public key data about this market to ensure banks and non-banks are serving small businesses fairly.” Chopra said Last March.

Still, the banking industry opposes data collection on small business applicants, saying the rule’s requirements are burdensome and limit lending to small businesses while increasing costs. Banks argue that implementing the rule, which takes effect in October, is a complex endeavor that includes: Multiple data collection platforms Changes to existing technology.

Data collection rules for small and medium enterprises Canceled in October A federal judge issued the ruling after the Texas Bankers Association, the American Bankers Association and Rio Bank, an $814.7 million private bank in McAllen, Texas, sued the CFPB in April. They argued that they did not need to follow the rule because the Fifth Circuit Court of Appeals held that: Ruled in 2022 CFPB funding is unconstitutional. The injunction against the rule, which initially applied only to industry group members and Rio Bank, was expanded nationwide in October.

The compliance deadline for the 1071 rule begins in October for lenders who originated 2,500 small business loans in 2022 and 2033. Lenders with between 500 and 2,500 transactions in the past two years have until April 1, 2025 to comply, while smaller lenders with fewer than 500 transactions have until April 1, 2025 to comply. be. Loan reporting begins January 1, 2026. Lenders who originate fewer than 25 small business loans are exempt from compliance.