Washington, D.C.— Today, the House Small Business Committee Subcommittee on Economic Growth, Tax, and Capital Access held a hearing examining the impact of Section 1071 of the Dodd-Frank Act on small banks and small businesses. During the hearing, Ranking Member Greg Landsman (D-OH) addressed the need for policies that combat systemic discrimination in lending that hurts women- and minority-owned small businesses.
“For far too long, women- and minority-owned small businesses have experienced obstacles in accessing capital. Part of the reason is the lack of data and transparency related to small business lending,” said Ranking Member Landsman. “The scant data that exists continues to show that these businesses lack the same access to external financing when compared to white-owned firms.”
In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which reformed the financial regulatory system and helped protect consumers from unfair and deceptive financial practices. Section 1071 of Dodd-Frank amended requires that financial institutions collect and report to the Consumer Financial Protection Bureau (CFPB) information on the race, ethnicity, and gender of a small business owner during the application for small business credit. The primary purpose of Section 1071 is to facilitate fair and transparent lending and combat long-standing discrimination in the small business lending market.
The CFPB’s final rule, which was crafted with input from small businesses and financial institutions, is expected to be released by March 31st. The hearing allowed members to hear directly from community banks and small financial institutions about the impact Section 1071 would have on their enterprises.
“There are Mom and Pop stores in communities that are rural and urban; red and blue; Black and White, Hispanic, and Asian—and they are all powering our economy. But we cannot do that without Section 1071 to shine light on these small businesses’ credit applications,” said Luz Urrutia Chief Executive Officer of Accion Opportunity Fund in San Jose, CA. “Because as I said before--We cannot manage what we do not measure, and Sunlight is the best Disinfectant. As we implement this well, we will finally be able to increase access to capital for small businesses and create a more transparent and successful financial services system.”
“Section 1071 of Dodd-Frank – passed over a decade ago – attempts to remedy this situation by requiring financial institutions to collect and report on the demographics of small business owners applying for financing,” said Ranking Member Landsman. “Doing so facilitates the enforcement of fair lending laws and identifies business and community development needs for small businesses. I am encouraged that the CFPB will be issuing a final rule in the next few days.”
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