CFPB proposed changes to small business lending data a step in the right direction

The Consumer Financial Protection Bureau (CFPB) released yesterday an outline of proposals under consideration to collect data on lending to small businesses and help identify and address discrimination. 

Jesse Van Tol, CEO of the National Community Reinvestment Coalition (NCRC), made the following statement:

“This is the first step in the rulemaking process that could shed much-needed light on the small business credit market and is one of the last pieces of the landmark Dodd-Frank financial reform law to be implemented. It could bring much needed, uniform transparency to the small business credit market by collecting data on applications and lending to small businesses, woman-owned businesses and businesses owned by people of color; requiring disclosure from most types of lenders active in the small business market, including banks, credit unions, online lenders and others; and collecting data on loan pricing, number of employees and years in business to ensure fair access for the smallest businesses and start-ups.

“However, there are approaches outlined in the proposal that must not be included in further proposals. The CFPB must ensure consistent reporting from all lenders and limit the number of exemptions, including eliminating exemptions based solely on the assets held by the institution. Also, non-traditional lenders like merchant cash advance providers should not be exempt from the new disclosure requirements.

“We have seen firsthand what happens when small business lending occurs without adequate data disclosure.  This Spring, small business owners of color struggled to access forgivable loans from the Paycheck Protection Program (PPP), a program designed to help small business owners weather the current economic crisis brought on by the global pandemic. Recent NCRC research found that business owners of color were more likely than White business owners to face discouragement and discrimination when applying for forgivable PPP loans.  Additional research identified glaring gaps in the collection of data on loans made to business owners of color and woman-owned businesses.

The Home Mortgage Disclosure Act (HMDA), which collects data on mortgage lending, has, for over 40 years, played a critical role in preventing discrimination and has helped NCRC and others uncover discouragement and discrimination in the mortgage market. We need the same transparency for small business lending.”

This is an initial response and NCRC will provide more detailed comments on the full proposal in the coming months. 

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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