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Supplemental estimation methodology for institutional coverage and market-level cost estimates in the small business lending rulemaking

On March 30, 2023, the Consumer Financial Protection Bureau (CFPB) released a final rule to amend Regulation B to implement changes to the Equal Credit Opportunity Act made by section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Consistent with section 1071, the CFPB is requiring covered financial institutions to collect and report data on applications for credit for small businesses, including those that are owned by women or minorities.

The final rule uses the term “covered financial institution” to refer to those financial institutions that are required to comply with the rule’s data collection and reporting requirements. The rule provides that a covered financial institution is a financial institution that originated at least 100 covered credit transactions for small businesses in each of the two preceding calendar years.

In order to estimate how many institutions will be covered under the final 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 will be required to report under the final rule and for producing market-level estimates of the costs associated with implementing the final rule.

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