cfpb 1071 requirements

Prompt
cfpb 1071 requirements
DeepSeekDeepSeek
cfpb 1071 requirements

Of course. Here is a detailed explanation of the CFPB's Section 1071 requirements, broken down for clarity.

Executive Summary

The CFPB's Section 1071 Rule implements a mandate from the Dodd-Frank Act. It requires financial institutions to collect and report data on credit applications from small businesses, including women-owned and minority-owned businesses. The primary goals are to:

  • Promote Fair Lending: Shine a light on potential discrimination in small business lending.

  • Increase Transparency: Help the public and policymakers understand the market for small business credit.

  • Support Community Development: Enable targeted economic development efforts.


Legal Basis: What is Section 1071?

Section 1071 is an amendment to the Equal Credit Opportunity Act (ECOA). It was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The CFPB was tasked with writing the specific rules to implement it, which were finalized in March 2023.

Key Requirements: What Must Lenders Do?

Covered financial institutions must collect data at the time of a credit application and then report it annually to the CFPB.

1. Who is Covered?


The rule applies to a wide range of "financial institutions," including:
  • Banks

  • Credit Unions

  • Online Lenders

  • Platform Lenders

  • Non-bank lenders

  • Community development financial institutions (CDFIs)


There is an initial small business lending exemption threshold. The rule is being phased in based on the volume of a lender's small business originations:
  • Tier 1 (October 1, 2024): Lenders with at least 2,500 small business originations in both 2022 and 2023 must begin collecting data.

  • Tier 2 (April 1, 2025): Lenders with at least 500 originations in both 2022 and 2023 must begin collecting data.

  • Tier 3 (January 1, 2026): Lenders with at least 100 originations in both 2024 and 2025 must begin collecting data.


Lenders with fewer than 100 originations in both of the prior two years are exempt.

2. What is a "Small Business"?


The rule defines a small business using the SBA's size standards, which vary by industry. Generally, a business is "small" if it had $5 million or less in gross annual revenue for the preceding fiscal year. This is a significant simplification from earlier proposals.

3. What Data Must Be Collected and Reported?


Lenders must collect and report over 80 data points, which fall into several categories:

A. Data About the Application & Lender

  • Unique identifier for the application

  • Application date

  • Application method (in-person, online, etc.)

  • Action taken (approved, denied, originated, etc.) and the date

  • Credit type, amount, and purpose

  • Amount approved or originated

  • Pricing information (interest rate, total costs, prepayment penalties, etc.)

  • Census tract where the main business activity occurs


B. Data About the Business & Its Demographics (The Core of 1071)
  • Gross annual revenue for the preceding fiscal year

  • Race, ethnicity, and sex of the business's principal owners (this is a self-reported, voluntary disclosure from the applicant).

  • Number of principal owners

  • Business name, "doing business as" (dba) name, and Tax Identification Number (TIN)

  • Business structure (LLC, corporation, partnership, etc.)

  • North American Industry Classification System (NAICS) code


C. Data Used in the Credit Decision
  • The number of workers employed by the business


The "Firewall" Provision

To address concerns that loan officers might misuse demographic data, the rule includes a "firewall" provision. For most lenders, the demographic information (race, ethnicity, sex) collected from the applicant must be kept separate from the loan underwriters and decision-makers. It can only be used for the purpose of reporting to the CFPB, except in very limited circumstances.

Timeline and Compliance Deadlines

The rule is being implemented in stages. As of mid-2024, the compliance deadlines are as follows:

  • Data Collection Begins:

  • Tier 1 Lenders: October 1, 2024

  • Tier 2 Lenders: April 1, 2025

  • Tier 3 Lenders: January 1, 2026

  • First Data Reporting to CFPB:

  • The first reports are due to the CFPB by June 1 of the year following the year a lender begins collecting data. For example, a Tier 1 lender starting collection in October 2024 will file its first report by June 1, 2025, covering data from Oct-Dec 2024.


Legal Challenges and Status

The implementation of the 1071 rule has been subject to legal challenges. A federal court in Texas issued a stay (pause) that initially applied to all lenders. However, in May 2024, the U.S. Supreme Court lifted the nationwide stay.

Current Status: The Supreme Court's action allows the CFPB to enforce the rule while the legal challenges continue. The compliance deadlines listed above are now in effect, and covered lenders are expected to proceed with implementation.

Why This Matters


  • For Lenders: This is a major compliance undertaking requiring updates to application systems, staff training, and data management processes. The cost of compliance is significant.

  • For Small Businesses: The rule is intended to create a fairer lending landscape. While providing demographic data is voluntary, businesses are encouraged to do so to help achieve the rule's goals of detecting and preventing discrimination.

  • For the Public & Researchers: Once the data is collected and made public (with appropriate privacy safeguards), it will provide an unprecedented view of small business lending in America, revealing patterns in who gets credit and on what terms.


Official Resources

For the most authoritative and up-to-date information, always refer to the CFPB's official resources:


Disclaimer: This is a summary for informational purposes and does not constitute legal advice. Lenders should consult with legal counsel and the CFPB's final rule text to ensure full compliance.

13:29
GeminiGoogle
cfpb 1071 requirements

The CFPB Section 1071 requirements mandate that financial institutions collect and report data about their small business lending activities. Here's a breakdown of the key aspects:

What is Section 1071?

  • Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act directs the CFPB to create rules requiring financial institutions to collect and report data on credit applications from small businesses, including those owned by women and minorities.


Who is Affected?
  • Covered Financial Institutions: The rule applies to financial institutions that originate at least 100 covered credit transactions for small businesses in each of the two preceding calendar years.

  • A financial institution includes banks, credit unions, online lenders, community development financial institutions (CDFIs), and other entities involved in small business lending.


Key Requirements
  • Data Collection: Financial institutions must collect data on each covered small business credit application, even if the application is denied or withdrawn.

  • Data Points: The rule specifies over 20 data points that must be collected, including:

  • Applicant Information:

  • Minority-owned business status

  • Women-owned business status

  • Applicant revenue

  • Type of business

  • Number of employees

  • Time in business

  • NAICS code

  • Principal owners demographic information

  • Applicant's credit score

  • Street address

  • Credit Transaction Information:

  • Credit type (e.g., loan, line of credit, credit card)

  • Amount applied for

  • Amount approved

  • Pricing information (e.g., interest rate)

  • Loan term

  • Whether the obligation is to purchase or refinance

  • Purpose of the loan (e.g., working capital, equipment purchase)

  • Action taken on the application (e.g., approved, denied, withdrawn)

  • Date the application was received

  • Reasons for denial

  • Lender Information:

  • Lender's identifier (e.g., Legal Entity Identifier - LEI)

  • The channel in which the application was received.

  • Firewall: Financial institutions must implement procedures to protect the independence of loan officers from the collection of certain demographic data (like race, ethnicity, and sex) to prevent potential discrimination. This often involves a firewall where loan officers don't see this information until after a credit decision has been made.

  • Data Submission: Financial institutions are required to submit the collected data to the CFPB annually.

  • Privacy and Security: The CFPB has implemented measures to protect the privacy of applicants and ensure the security of the collected data.

  • Data Publication: The CFPB will publish anonymized data to promote transparency in small business lending and facilitate fair lending enforcement.

  • Maintenance of Records: Institutions must keep records of the information collected for at least three years.

  • Compliance Program: Establish a compliance program with policies and procedures to ensure adherence to the rule.


Purpose of the Rule
  • Fair Lending Enforcement: To help identify and address potential discrimination in small business lending.

  • Transparency: To provide more transparency in the small business lending market.

  • Research: To enable research into the credit needs of small businesses, especially those owned by women and minorities.

  • Community Development: To support community development efforts by providing data on lending patterns.


Compliance Dates:

The CFPB has staggered implementation based on an institution's origination volume:

  • Tier 1 (Originated at least 2,500 covered small business credit transactions in both 2022 and 2023): October 1, 2024

  • Tier 2 (Originated at least 500 covered small business credit transactions in both 2022 and 2023): April 1, 2025

  • Tier 3 (Originated at least 100 covered small business credit transactions in both 2022 and 2023): January 1, 2026


Challenges for Financial Institutions
  • Data Collection Systems: Implementing systems to collect and manage the required data.

  • Compliance Costs: The rule imposes significant compliance costs, particularly for smaller institutions.

  • Privacy Concerns: Balancing data collection with the need to protect applicant privacy.

  • Training: Training staff on the new data collection requirements and firewall procedures.


Resources
  • CFPB's Section 1071 Resources: The CFPB website is the primary source for official information, including the final rule, implementation guidance, and other resources. (Search for "CFPB Section 1071")

  • Industry Associations: Trade groups like the American Bankers Association (ABA) and the Credit Union National Association (CUNA) offer compliance resources and training for their members.


In Summary: Section 1071 is a complex regulation that requires financial institutions to collect and report extensive data on small business lending. Compliance requires careful planning, implementation of appropriate systems, and ongoing monitoring. It's crucial to consult the CFPB's official resources and seek expert advice to ensure full compliance.

13:29
MistralMistral AI
cfpb 1071 requirements

The Consumer Financial Protection Bureau (CFPB) Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires financial institutions to collect, report, and make public certain information concerning credit applications made by women-owned, minority-owned, and small businesses. The goal is to facilitate enforcement of fair lending laws and enable communities, governmental entities, and creditors to identify business and community development needs and opportunities for women-owned, minority-owned, and small businesses.

Here are some key requirements of Section 1071:

  • Data Collection: Financial institutions must collect data on credit applications for small businesses, including women-owned and minority-owned businesses. The data to be collected includes:

  • The application date

  • The type and purpose of the loan or other credit

  • The credit amount or limit applied for and approved

  • The type of action taken on the application

  • The census tract in which the business is located

  • The gross annual revenue of the business in the last fiscal year before the date of application

  • The race, sex, and ethnicity of the principal owners of the business

  • Reporting: Financial institutions must submit an annual report to the CFPB containing the data collected.

  • Public Disclosure: The CFPB will make the reported data publicly available, subject to certain privacy protections.

  • Recordkeeping: Financial institutions must maintain records of the data collected for a certain period, typically 3 years.

  • Implementation: The CFPB has been working on implementing rules for Section 1071, which will provide more detailed guidance on how to comply with these requirements.

  • Coverage: The rule applies to a wide range of financial institutions, including banks, savings associations, credit unions, and other types of lenders.


The CFPB aims to promote transparency and fair lending practices through these requirements, ultimately benefiting small, women-owned, and minority-owned businesses. As with any regulatory requirement, it's important for financial institutions to stay informed about the specific details and any updates from the CFPB.

13:29

💡 Try this comparison yourself:Compare AI models side-by-side on SNEOS

Analysis

This comparison demonstrates the different approaches each AI model takes when responding to the same prompt. Here are the key differences observed:

Response Characteristics

DeepSeek: Provides a detailed response with 63 sentences.

Gemini: Provides a detailed response with 46 sentences.

Mistral: Provides a detailed response with 16 sentences.

Key Takeaways

  • Each model brings unique strengths to this type of query
  • Response styles vary significantly between models
  • Consider your specific use case when choosing between these models

Try This Comparison Yourself

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This comparison was generated using the SNEOS AI Comparison ToolPublished: October 02, 2025 | Models: DeepSeek, Gemini, Mistral