WASHINGTON—NAFCU President and CEO Dan Berger has sent a letter to new CFPB Director Rohit Chopra over the Bureau's proposed rule to implement changes made by section 1071 of the Dodd-Frank Act. Specifically the letter addresses its likely effects as related to a proposal in the Build Back Better Act to authorize the Small Business Administration (SBA) to establish a direct 7(a) lending program.
The Bureau’s section 1071 proposed rule would require credit unions and credit union service organizations (CUSOs) that originated at least 25 covered small business credit transactions in each of the two preceding calendar years to collect and report certain small business credit application data, including data related to the ethnicity, race, and sex of business applicants’ principal owners.
While NAFCU said it will respond more fully to the Bureau’s section 1071 proposed rule during the comment period, Berger said there are time-sensitive concerns regarding the interaction between the proposed rule and proposed direct lending authorization.
Organizations at Risk
"Not only does the legislative proposal risk the SBA becoming credit unions’ direct lending competitor, but the legislative proposal also risks fintechs, who have never been permitted to originate 7(a) loans, driving credit unions entirely out of 7(a) lending," wrote Berger. "And the proposed rule, if adopted as written, would cause many credit unions to exit the business lending market altogether.
"Operating alongside one another, the legislative proposal and the proposed rule risk greatly damaging the vibrant, robust business lending market without which continued and broader small business successes are impossible," Berger added.
Berger encouraged the Bureau to examine the areas where the Bureau's proposed rule and the SBA direct lending program may have negative impacts on the credit union industry's involvement in small business lending.
Call for Exemption
NAFCU noted it has repeatedly advocated for the exclusion of credit unions from any burdensome rulemaking requiring financial institutions to collect and report data related to small business lending, noting the constraints credit unions face associated with the implementation of the data collection.