Director Kraninger's Speech at CFPB Symposium on Section 1071 of the Dodd-Frank Act

Good morning. I am excited to welcome everyone to today’s symposium on Section 1071 of the Dodd-Frank Act. I would like to thank all of our panelists for participating today and our moderators, Grady and Elena. Through our symposia series we have convened experts in a variety of different fields to tackle legal and policy issues facing the Bureau. 

Today, we are focused on Section 1071, which requires financial institutions to collect, report, and make public certain information concerning credit applications made by women-owned, minority-owned, and small businesses. 

Small businesses, including those owned by women and minorities, are critical engines for economic growth. According to the Census Bureau, there are more than 27.6 million small businesses in the United States. More than 7.9 million of these businesses are minority-owned and over 9.8 million are women-owned. 

Access to financing is a crucial component of the success of these businesses. To contribute meaningfully to the U.S. economy, small businesses -- including minority and women owned small businesses -- need access to credit to smooth out business cash flows and to enable entrepreneurial investments that take advantage of, and sustain, opportunities for growth.  

The Bureau understands that the market these businesses turn to for credit is vast and complex.  Small businesses have many different options when it comes to financing, including products and providers. Using publicly available data and informed by conversations with market participants, the Bureau estimates the small business financing market is roughly $1.4 trillion in size. 

Section 1071 would increase public data about small business lending. Congress wanted the Bureau, and the public generally to better understand the landscape for all small businesses, and specifically those owned and operated by women and minorities. And the law specifically directs the Bureau to develop a rule for the collection, reporting, and publication of certain data.  

We know the data collection rule is something that has been on a lot of your minds for some time now.

Early on, in order to help meet our statutory mandate, the Bureau created the Small Business Lending Markets office. This office, in close collaboration with other offices across the Bureau, has focused on outreach and research to enhance our understanding of small business financing.  We have heard feedback from various stakeholders and know that there is concern with the burden to small entities, possible curtailment of credit, and privacy considerations, as well as a general desire for consistency with current business practices. The Bureau fully recognizes the sensitivities here and we know that a rule needs to be done with great care and consideration in order that the rule not impede the ability of small businesses -- including minority and women owned small businesses -- to access the credit they need.

That is why we are seeking your input. Today’s symposium explores how to efficiently collect appropriate data without imposing unnecessary or undue costs that could limit access to credit from existing market participants or discourage new entrants into the market for small business credit. This symposium will provide an opportunity for academics, market participants, and policy makers to discuss the hurdles and goals of an effective rule. Among the myriad issues around Section 1071, the panels will explore the definition of small business, what data points are important to collect, and what information lenders are currently using to evaluate credit to small businesses. 

I am looking forward to today’s symposium and the opportunity to hear from experts on these issues. Our first panel will focus on the current state of, and future outlook for, the small business lending marketplace. Our second panel will include a discussion surrounding the implementation of Section 1071. We have a great need to understand more about the small business financing market, the products that are offered to small businesses, and the financial institutions offering the credit. So thank you so much for your participation. I am looking forward to the discussion.