CFPB Finalizes Rule to Ease Small Business Lending Data Collection

WASHINGTON — The Consumer Financial Protection Bureau (CFPB) on April 30 finalized a rule that significantly scales back data collection and reporting requirements for small business lenders, a move that will exempt thousands of financial institutions from previous, more stringent regulations. The final rule dramatically alters the scope of Section 1071 of the Dodd-Frank Act, which mandates the collection of data on credit applications for women-owned, minority-owned, and small businesses. Under the new guidelines, the threshold for lenders required to report data has been raised tenfold. Financial institutions must now originate at least 1,000 small business loans in each of two consecutive years to be covered, a substantial increase from the 100-loan threshold established in a 2023 version of the rule. Furthermore, the definition of a “small business” for the purpose of this data collection has been narrowed. The new rule defines a small business as an enterprise with $1 million or less in annual revenue, down from the $5 million threshold set in 2023. According to an analysis by American Banker, these changes mean the rule will now apply to approximately 280 of the largest small-business lenders, a sharp decrease from the estimated 2,500 lenders that would have been covered under the previous iteration. Acting CFPB Director Russell Vought spearheaded the rollback, which also slashes the number of required data fields from 81 to just 13, the statutory minimum. The stated goals of the original rule were to increase transparency in small business lending, help identify community development needs, and facilitate the enforcement of fair lending laws. However, the CFPB cited several reasons for the revisions, including reducing the compliance burden on smaller institutions that may lack the infrastructure for complex reporting and avoiding a potential “chilling effect” on small business lending that could result from high compliance costs. The journey to implement Section 1071, which was passed as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, has been long and contentious. The CFPB issued a comprehensive final rule in March 2023, but it was immediately met with legal challenges from banking and credit union trade groups. They argued the requirements were overly burdensome and would ultimately shrink the availability of credit for the very businesses the law was intended to help. Multiple court orders stayed the rule’s compliance deadlines for plaintiffs in those cases, creating an inconsistent regulatory landscape. In response, the CFPB issued interim final rules to extend compliance dates for all lenders. The agency stated that the extensions were intended to facilitate consistent compliance across the market while it reconsidered the rule's scope. The new, scaled-back final rule sets a clear timeline for the institutions that remain covered. Lenders will be required to begin collecting the specified data in 2028 and submit their first reports to the CFPB in 2029, nearly two decades after the original mandate was signed into law. While the changes provide relief for many community banks and credit unions, the final rule has drawn criticism from consumer advocacy groups. A notable change from the 2025 proposal was the decision to no longer require the collection of disaggregated ethnicity and race categories. Proponents of more detailed data collection argued that these subgroups would have provided crucial insights into lending patterns and potential disparities among different communities. While this rule change is a clear win for smaller lenders facing significant compliance costs, we see a more complicated picture for the small businesses we serve. The dramatic reduction in data collection, from 81 fields to just 13, and the exclusion of over 2,200 lenders from reporting requirements, risks making the credit landscape more opaque. For women- and minority-owned businesses, in particular, this lack of transparency could make it harder to identify and challenge discriminatory lending patterns. In our experience, securing funding is often the single greatest hurdle for entrepreneurs. This rule change underscores the importance of being exceptionally well-prepared when seeking capital. Proving creditworthiness and demonstrating a strong business case becomes even more critical when systemic data is less available. This is precisely where our capital raising and investor strategy services become invaluable. We help clients build the robust financial narratives and documentation needed to succeed in any lending environment. For guidance on positioning your business for funding, contact C&S Finance Group LLC at csfinancegroup.com. Looking ahead, the 280 financial institutions still covered by the rule will need to ensure their systems, processes, and forms are updated to adhere to the new requirements by the 2028 deadline. Meanwhile, the broader policy debate over balancing regulatory burden with the need for fair lending transparency is expected to persist, as stakeholders continue to evaluate the long-term impact of this significantly narrowed rule.