Preemptive strikes

ICBA is working to neutralize burdensome small-business rules before they arrive.

By Aaron Stetter and Lilly Thomas

In the community banking industry’s continued push for relief from excessive and unnecessary regulations, it is not enough to roll back the glut of regulations that have accumulated over the years. Replacing the nation’s one-size-fits-all regulatory system with tiered and proportionate rules also requires industry advocates to intercept dangerous standards before they can be implemented.

ICBA is using this active approach to regulatory relief in tackling upcoming small-business data collection and reporting requirements being developed by the Consumer Financial Protection Bureau (CFPB). Unless the industry can achieve needed reforms, these still-under-development reporting mandates will require community banks and other institutions to collect and report vast quantities of information regarding small-business loan applications. ICBA is employing a multipronged campaign on Capitol Hill and at the CFPB to head these rules off at the pass.

Section 1071 of the Dodd-Frank Act requires the CFPB to implement rules for the collection and reporting of data on financial institutions’ small-business lending under the Equal Credit Opportunity Act. The statute lays out 12 pieces of data required for every small-business credit application and for women- or minority-owned businesses of any size, including the race, sex and ethnicity of the principal business owners. The CFPB has the discretion to require the reporting of any additional information it deems necessary to fulfill the purposes of the statute.

Covered financial institutions would have to make an inquiry of any applicant for business credit and maintain a record of responses separate from their applications. Additionally, these records are to be kept separate from the underwriting process, compelling banks to create a distinct bureaucracy apart from their lending operations.


bipartisan members of Congress called on the CFPB to exempt community banks from any forthcoming rule

Institutions that cannot afford to deploy these firewall structures are required to accommodate additional notice requirements, a requirement that disproportionately affects community banks and penalizes them for their smaller size and risk profile. Further, data collected by community banks and subsequently made public by government agencies could compromise the privacy of applicants—damaging the relationship-based community bank model.

Forceful response
At a time of ever-rising regulatory mandates and sluggish economic growth, imposing the small-business equivalent of the Home Mortgage Disclosure Act is the last thing community banks and their customers need. If enacted as written, this paperwork burden will harm community banks, waste critical resources and further restrict lending, while offering little benefit to consumers, regulators and the financial system.

ICBA has been waiting expectantly for the CFPB to begin the rulemaking process, though not idly. While ICBA has for years encouraged the bureau to delay the implementing rules amid the cacophony of new regulations that followed the 2008 financial crisis, an outright repeal has been a key provision in several iterations of our Plan for Prosperity and has been repeatedly introduced in multiple Congresses by Rep. Robert Pittenger (R-N.C.).

So when the CFPB earlier this year launched an inquiry on small-business reporting in its first step toward a rulemaking, ICBA responded forcefully. ICBA and a group of member community bankers met with CFPB representatives so they could hear directly from the industry. In a public statement, ICBA urged the CFPB to exempt community banks and continued its call for Congress to repeal the Section 1071 mandates in their entirety. “The CFPB’s data collection and reporting mandates will compound existing regulatory and paperwork burdens to the detriment of economic and job growth,” ICBA president and CEO Cam Fine said.

In support of ICBA’s efforts, a bipartisan group of 72 members of Congress in June called on the CFPB to use its authority to exempt community banks from any forthcoming rule. The joint letter to CFPB director Richard Cordray said the requirements threaten to undermine community bank lending and decrease access to credit—harming the small-business owners the rules are intended to help.

Repeal effort
Meanwhile, ICBA continues to work with Congress on behalf of an outright repeal, which is included in House Financial Services Committee chairman Jeb Hensarling’s (R-Texas) Financial CHOICE Act, Rep. Blaine Luetkemeyer’s (R-Mo.) CLEAR Relief Act and Pittenger’s soon-to-be-reintroduced Right to Lend Act. The Treasury Department has also lent its support to a repeal, saying in its June report on banking regulations that the new standards would be costly to implement and decrease credit availability.

How can you help?

While ICBA continues working with Congress to advance a repeal, lawmakers need to hear directly from the industry on this important policy. Community bankers can do their part by using ICBA’s Be Heard grassroots website to call on their lawmakers to support the CLEAR Relief Act:

This data-collection rulemaking poses the threat of significant new burdens on community banks at a time of rising overregulation. It is up to ICBA and the community banking industry to continue the campaign for tiered and sensible oversight by checking this new mandate before it is written into yet another resource-consuming regulation

Aaron Stetter ( is ICBA executive vice president of policy and political operations.
Lilly Thomas ( is ICBA senior vice president of senior regulatory counsel.