The Consumer Financial Protection Bureau (CFPB) has advised that financial institutions will not be required to begin collecting and reporting data under Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act until the effective date of implementing regulations issued by the CFPB.
In his letter dated April 11, 2011, and posted on the CFPB’s Web site, Leonard J. Kennedy, CFPB General Counsel, states that he is responding to multiple inquires regarding the timing of financial institutions’ obligations under Section 1071. That provision amended the Equal Credit Opportunity Act to require financial institutions to collect and report information on credit applications made by women- or minority-owned businesses and small businesses.
The Dodd-Frank Act directs the CFPB to prescribe regulations implementing Section 1071. However, because the statute makes Section 1071 effective on July 21, 2011 (the designated transfer date), uncertainty existed as to whether financial institutions would be required to comply with Section 1071 before the CFPB issued regulations. We are hopeful that among the issues the CFPB will clarify in its regulations is when the obligation of a financial institution to inquire about the ownership or size of a business applicant is triggered.
Although reaching the conclusion sought by the industry, Mr. Kennedy is quick to caution in his letter that the CFPB’s interpretation of Section 1071 “is dependent on the unique text, purpose, and legislative history” of that provision and is “therefore not necessarily applicable to any other provision of the Dodd-Frank Act or other Federal consumer financial law.”