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Category: Industry and markets

Supplemental estimation methodology for institutional coverage and market-level cost estimates in the small business lending data collection notice of proposed rulemaking

On September 1, 2021, the Bureau of Consumer Financial Protection (Bureau) released a notice of proposed rulemaking (proposed rule) to amend Regulation B to implement changes to the Equal Credit Opportunity Act made by section 1071 of the Dodd-Frank Act. Consistent with section 1071, the Bureau is proposing to require covered financial institutions to collect and report to the Bureau data on applications for credit for small businesses, including those that are owned by women or minorities.

The proposed rule uses the term “covered financial institution” to refer to those financial institutions that would be required to comply with section 1071’s data collection and reporting requirements. The Bureau is proposing that a covered financial institution is a financial institution that originated at least 25 covered credit transactions for small businesses in each of the two preceding calendar years.

In order to estimate how many institutions would be covered under the proposed rule, we need comprehensive data on originations of credit transactions made to small businesses for all financial institutions. However, market-wide data on small business lending are currently limited, and we are unaware of any such comprehensive data.

In this report, we describe our methodology for estimating how many banks would be required to report under the proposed rule and for producing market-level estimates of the costs associated with implementing the proposed rule.

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