The Consumer Financial Protection Bureau is seeking to gain insight into the availability of credit for small businesses. The bureau has published a request for information into ways to collect and use information to identify the financing needs of small businesses, especially those owned by women and minorities. According to the CFPB, small businesses typically need access to credit to take advantage of growth opportunities, but public information on this lending market is inconsistent and incomplete. In addition to the request for information, the CFPB has released a white paper reviewing the available evidence concerning the small business lending industry.
Request for information. Section 1071 of the Dodd-Frank Act amends the Equal Credit Opportunity Act to require financial institutions to compile, maintain, and report information concerning credit applications made by women-owned, minority-owned, and small businesses. In prepared remarks for a small business lending field hearing, CFPB Director Richard Cordray noted that the act specifically directs the bureau to develop regulations for financial institutions that lend to small businesses. The request for information is intended to help the bureau "better understand how to carry out this directive in a way that is careful, thoughtful, and cost-effective."
Comments on the request for information will be due 60 days after the notice is published in the Federal Register.
White paper. The CFPB’s white paper reflects the initial findings of the bureau’s research on the small business lending market. According to the report, the CFPB’s preliminary research suggests the following:
- Small businesses play a key role in fostering community development and fueling economic growth both nationally and in their local communities. Women-owned and minority-owned small businesses in particular play an important role in supporting their local communities.
- Data on how small businesses engage with credit markets are incomplete and provide only a limited picture of the relationships between small businesses and financial institutions.
The paper also explores:
- how readily-available financing assists in the development and growth of small businesses;
- the impact of the recent recession on the ability of small businesses to access credit; and
- the need for additional data and how implementing data collection can further understanding of the market.
For more information about the CFPB's inquiry into the small business lending industry, subscribe to the Banking and Finance Law Daily.
