Small Business Lending Under the Equal Credit Opportunity Act (Regulation B)

Federal RegisterMay 1, 2026

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CONSUMER FINANCIAL PROTECTION BUREAU

12 CFR Part 1002

[Docket No. CFPB-2025-0040]

RIN 3170-AB40

Small Business Lending Under the Equal Credit Opportunity Act (Regulation B)

AGENCY:

Consumer Financial Protection Bureau.

ACTION:

Final rule.

SUMMARY:

The Consumer Financial Protection Bureau (Bureau or CFPB) is revising certain provisions of Regulation B, subpart B, which implements changes to the Equal Credit Opportunity Act made by section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Bureau is amending coverage of certain credit transactions and financial institutions; the small business definition; inclusion of certain data points and how others are collected; and the compliance date. The Bureau believes these changes will streamline the rule, reduce complexity for lenders, improve data quality, and advance the purposes of section 1071.

DATES:

This final rule is effective on June 30, 2026. The compliance date for the rule is January 1, 2028.

FOR FURTHER INFORMATION CONTACT:

Dave Gettler, Paralegal Specialist, Office of Regulations, at 202-435-7700 or

https://reginquiries.consumerfinance.gov/.

If you require this document in an alternative electronic format, please contact

CFPB_Accessibility@cfpb.gov.

SUPPLEMENTARY INFORMATION:

I. Background

In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Section 1071 of that Act

amended the Equal Credit Opportunity Act (ECOA)

to require that financial institutions collect and report to the Bureau certain data regarding applications for credit for women-owned, minority-owned, and small businesses. Section 1071's statutory purposes are to (1) facilitate enforcement of fair lending laws, and (2) enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses. Section 1071 directs the Bureau to prescribe such rules and issue such guidance as may be necessary to carry out, enforce, and compile data pursuant to section 1071.

Public Law 111-203, tit. X, sec. 1071, 124 Stat. 1376, 2056 (2010), codified at ECOA sec. 704B, 15 U.S.C. 1691c-2.

15 U.S.C. 1691

et seq.

The Bureau worked toward a section 1071 rulemaking for a number of years and has sought public comment from stakeholders numerous times. The Bureau held a field hearing on May 10, 2017, and published a request for information regarding the small business lending market.

On July 22, 2020, the Bureau issued a survey to collect information about potential one-time costs to financial institutions to prepare to collect and report data on small business lending.

The Bureau received 17 comments in response to the request for information.

See

CFPB,

Requests for Information: Small Business Lending Market,

Docket No. CFPB 2017-0011,

https://www.regulations.gov/document/CFPB-2017-0011-0001/comment.

On September 15, 2020, the Bureau released an Outline of Proposals Under Consideration and Alternatives Considered pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). On October 15, 2020, the Bureau convened a Small Business Review Panel for the section 1071 rulemaking, and the Panel met with small entity representatives (SERs). The Panel Report, publicly released on December 15, 2020, was the culmination of the SBREFA process for the section 1071 rulemaking and included feedback from SERs and written feedback from other stakeholders as well.

On October 8, 2021, the Bureau published in the

Federal Register

a proposed rule (2021 proposed rule) amending Regulation B to implement changes to ECOA made by section 1071 of the Dodd-Frank Act.

The comment period for the 2021 proposed rule closed on January 6, 2022.

86 FR 56356 (Oct. 8, 2021).

The Bureau received approximately 2,100 comments on the 2021 proposed rule during the comment period. Approximately 650 of these comments were unique, detailed comment letters representing diverse interests. These commenters included lenders such as banks and credit unions, community development financial institutions (CDFIs), community development companies, Farm Credit System (FCS) lenders, online lenders, and others; national and regional industry trade associations; software vendors; business advocacy groups; community groups; research, academic, and other advocacy organizations; Members of Congress; Federal and State government offices/agencies; small businesses; and individuals.

On May 31, 2023, the Bureau published a final rule in the

Federal Register

to implement section 1071 by adding subpart B to Regulation B (2023 final rule).

Further details about section 1071, small business lending market dynamics, and the Bureau's rulemaking process leading up to the 2023 final rule can be found in the preamble to the 2023 final rule.

88 FR 35150 (May 31, 2023).

On July 3, 2024, the Bureau published in the

Federal Register

an interim final rule (2024 interim final rule)

to extend the rule's compliance dates in accordance with orders issued by the United States District Court for the Southern District of Texas.

89 FR 55024 (July 3, 2024).

See also

Order Granting-in-Part & Denying-in-Part Pls.' Mot. for Prelim. Inj.,

Texas Bankers Ass'n

CFPB,

No. 7:23-CV-00144 (S.D. Tex. July 31, 2023),

https://files.consumerfinance.gov/f/documents/cfpb_pi_order_texas_bankers.pdf;

Order Granting Intervenors' Mots. For Prelim. Inj.,

Texas Bankers Ass'n

CFPB,

No. 7:23-CV-00144 (S.D. Tex. Oct. 26, 2023),

https://files.consumerfinance.gov/f/documents/cfpb_pi_second_order_texas_bankers.pdf;

Op. & Order,

Monticello Banking Co.

CFPB,

No. 6:23-CV-00148-KKC (E.D. Ky. Mar. 11, 2025); Op. & Order,

Revenue Based Fin. Coal.

CFPB,

No. 1:23-CV-24882-DSL (S.D. Fla. May 6, 2025).

Texas Bankers Ass'n

CFPB,

No. 7:23-CV-00144 (S.D. Tex. July 31, 2023)

https://files.consumerfinance.gov/f/documents/cfpb_pi_order_texas_bankers.pdf.

Challenges to the 2023 final rule filed by various plaintiffs remain ongoing in three jurisdictions; each of those courts stayed the rule's compliance deadlines for some market participants.

However, the courts did not stay the compliance dates for those who are not plaintiffs or intervenors in those cases.

See

Unpublished Order,

Texas Bankers Ass'n

CFPB,

No. 24-40705 (5th Cir. Feb. 7, 2025) (tolling the compliance deadlines for plaintiffs and intervenors in that case, until further order of the court); Op. & Order,

Monticello Banking Co.

CFPB,

No. 6:23-CV-00148-KKC (E.D. Ky. Mar. 11, 2025) (same).

On June 18, 2025, the Bureau published in the

Federal Register

an interim final rule (2025 interim final rule) to extend compliance deadlines by approximately one year

to facilitate consistent compliance across all covered financial institutions. The Bureau sought comment on the 2025 interim final rule.

90 FR 25874 (June 18, 2025).

On October 2, 2025, the Bureau published in the

Federal Register

a final rule (2025 compliance date final rule) that confirmed its findings in the 2025 interim final rule and determined upon a review of comments received that no further substantive changes were necessary.

The Bureau received 20 comments in response to the 2025

interim final rule. Most commenters addressed the 2025 interim final rule itself. Other comments addressed provisions of the 2023 final rule not addressed by the 2025 interim final rule, some of which are discussed below.

90 FR 47514 (Oct. 2, 2025).

On November 13, 2025, the Bureau published in the

Federal Register

a proposed rule to amend the 2023 final rule (2025 proposed rule).

The comment period for the 2025 proposed rule closed on December 15, 2025. The Bureau received approximately 410 comments on the proposal during the comment period. These commenters included lenders such as banks and credit unions, community development financial institutions (CDFIs), Farm Credit System (FCS) lenders, online lenders, and others; national and regional industry trade associations; service providers; advocacy groups; community groups; Members of Congress; an independent office of a Federal agency; small businesses; and individuals. Materials on the record, including any ex parte submissions and summaries of ex parte discussions, are available on the public docket for this rulemaking.

90 FR 50952 (Nov. 13, 2025).

Based on reactions to the 2023 final rule, including continued feedback from stakeholders and the ongoing litigation, on comments received on the 2025 proposed rule, and on further consideration, the Bureau now believes that at the onset of a potentially long-term data collection regime, it should start with more modest requirements, focusing on core lending products, lenders, and data. The Bureau believes that that reaction to the 2023 final rule was in part based on its expansive approach, appearing to seek broad coverage of lenders, products, and information collected.

The Bureau does not believe that alignment with the statutory purposes of section 1071 requires the use of its discretionary authority to collect data with such a breadth of scope.

The Bureau had considered, in its SBREFA Outline of Proposals Under Consideration, a rule that was more limited in scope.

See generally

CFPB,

Final Report of the Small Business Review Panel on the CFPB's Proposals Under Consideration for the Small Business Lending Data Collection Rulemaking

(Dec. 14, 2020),

https://www.consumerfinance.gov/documents/9413/cfpb_1071-sbrefa-report.pdf.

The Bureau now believes that the 2023 final rule should have given more weight to qualitative differences among certain types of lenders and the likelihood that smaller lenders would face difficulties—which they had expressed in comments on the 2021 proposed rule, after the 2023 final rule, and on the 2025 proposed rules—addressing the complexity of a rule of broad scope, both of which could potentially diminish the quality of the data they collect.

The Bureau believes, based on this experience, that a longer-term approach to advance the statutory purposes of section 1071 is to commence the collection of data with a narrower scope to ensure its quality and to limit, as much as possible, any disturbance of the provision and availability of credit to small businesses. The statutory purposes of the rule are not well served by an expansive rule that could create disruptions in small business lending markets.

Rather, the Bureau now believes that an incremental approach will better serve the statutory purposes of section 1071 in the long term. Such an approach will start with core lending products, core providers, and core data points. This approach complies with section 1071 and furthers its statutory purposes while reducing the rule's initial impact on small businesses and lenders. Over time, as the Bureau and financial institutions learn from early iterations of data collections, the Bureau could consider amending the rule.

The gradual development of data collection under the Home Mortgage Disclosure Act (HMDA)

and its implementing Regulation C

over the past 50 years demonstrates the value of an incremental approach. Congress passed HMDA in 1975,

and the Board Governors of the Federal Reserve System (Board) promulgated implementing regulations in 1976, requiring the collection of relatively few data points from relatively few lenders. At various points, HMDA amendments passed by Congress, among other things, expanded the breadth of financial institutions covered, as well as the number of data points collected from those reporting institutions.

Over time, rulemakings by the Board and the Bureau implemented these amendments, added and removed data points, and expanded and contracted the scope of Regulation C.

12 U.S.C. 2801

et seq.

12 CFR part 1003.

Home Mortgage Disclosure Act of 1975, Public Law 94-200, sec. 303(2), 89 Stat. 1124, 1125 (1975).

Congress amended HMDA in 1980, 1988, 1989, 1992, 1996, 2010, and 2018.

See, e.g.,

Housing and Community Development Act of 1980, Public Law 96-399, sec. 340(c), 94 Stat. 1614 (1980) (codified as amended at 12 U.S.C. 2809(a)); Housing and Community Development Act of 1987, Public Law 100-242, sec. 565(a)(l), 101 Stat. 1815 (1988) (codified as amended at 12 U.S.C. 2802); Financial Institution Reform, Recovery, and Enforcement Act, Public Law 101-73, sec.1211(d)-(e), 103 Stat. 183 (1989) (codified as amended at 12 U.S.C. 2802(2)); Housing and Community Development Act of 1992, H. 5334, Public Law 102-550, sec. 932(a)-(b) (1992) (codified as amended at 12 U.S.C. 2803 (a)-(b)); Omnibus Consolidated Appropriations Act, 1997, HR 3610, Public Law 104-208, sec. 2225, 110 Stat 3009 (1996) (codified as amended at 12 U.S.C. 2808(b)(2)); Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, section 1094, 124 Stat. 1376 (2010); Economic Growth, Regulatory Relief, and Consumer Protection Act, Public Law 115-174, sec. 104, 132 Stat. 1296 (2018).

See, e.g.,

46 FR 40679 (Aug. 11, 1981); 53 FR 31683 (Aug. 19, 1988); 54 FR 51356 (Dec. 15, 1989); 57 FR 56963 (Dec. 2, 1992); 60 FR 22223 (May 4, 1995); 67 FR 7222 (Feb. 15, 2002); 67 FR 43217 (June 27, 2002); 80 FR 66128 (Oct. 28, 2015); 84 FR 57946 (Oct. 29, 2019); 85 FR 28364, 28367 (May 12, 2020).

The Bureau believes that it should approach the section 1071 data collection regime as a longer-term project akin to HMDA. The Bureau believes that it is a proper use of its authority under 15 U.S.C. 1691c-2 to make changes to several portions of the 2023 final rule to commence data collection with a focus on core lending products, core lenders, and mostly statutory data points. The Bureau believes that this incrementalist approach—starting with a more modest rule with a limited set of products, lenders, or data points—will serve the long-term interests of section 1071.

In addition, on January 20, 2025, the President issued Executive Order (E.O.) 14168, “Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government” (Defending Women E.O.).

That order, among other things, directs Federal agencies to remove references and questions discussing gender identity. The order also identifies a binary of male/female sex, directing agencies to use those terms when seeking information about an individual's sex.

90 FR 8615 (Jan. 30, 2025).

The Bureau has consulted with the appropriate prudential regulators and other Federal agencies regarding consistency with any prudential, market, or systemic objectives administered by these agencies as required by section 1022(b)(2)(B) of the Dodd-Frank Act.

II. Legal Authority

The Bureau is issuing this final rule pursuant to its authority under section 1071. As discussed above, in the Dodd-Frank Act, Congress amended ECOA by adding section 1071, which directs the Bureau to adopt regulations governing the collection and reporting of small business lending data. Specifically, section 1071 requires financial institutions to collect and report to the Bureau certain data on applications for

credit for women-owned, minority-owned, and small businesses. Congress enacted section 1071 for the purpose of (1) facilitating enforcement of fair lending laws and (2) enabling communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses.

15 U.S.C. 1691c-2(a).

To advance these statutory purposes, section 1071 grants the Bureau general rulemaking authority for section 1071, providing that the Bureau shall prescribe such rules and issue such guidance as may be necessary to carry out, enforce, and compile data pursuant to section 1071.

Section 1071, in 15 U.S.C. 1691c-2(g)(2), also permits the Bureau to adopt exceptions to any requirement of section 1071 and to conditionally or unconditionally exempt any financial institution or class of financial institutions from the requirements of section 1071, as the Bureau deems necessary or appropriate to carry out the purposes of section 1071. The Bureau relies on its general rulemaking authority under 15 U.S.C. 1691c-2(g)(1) in this final rule and relies on 15 U.S.C. 1691c-2(g)(2) when providing specific exceptions or exemptions to section 1071's requirements.

15 U.S.C. 1691c-2(g)(1).

See the 2023 final rule for a more detailed discussion of the Bureau's legal authorities.

See, e.g.,

88 FR 35150 at 35173-74.

III. Discussion of the Final Rule

A. Summary of the Final Rule

As set out above, the Bureau has reconsidered certain provisions of the 2023 final rule. The Bureau has determined that a potentially long-term data collection regime should start with a focus on core lending products, lenders, small businesses, and data points. The Bureau believes in retrospect that the approach it took in the 2023 final rule—a broad initial coverage of lenders, products, small businesses and data points—was not conducive to the long-term success of the data collection regime under section 1071. The Bureau now finds that a better, longer-term approach to advance the statutory purposes of section 1071 is to commence the collection of data with a narrower scope to ensure its quality, and to limit, as much as possible, any disturbance of the provision of credit to small businesses. The Bureau believes that such an incremental approach will also comply with section 1071 and minimize any negative initial impact on small business lending markets and on data quality. In the future, based on Bureau and industry experience during the early years of data collection, the Bureau may consider amending the rule as appropriate in furtherance of the purposes of section 1071.

The Bureau also finds that the 2023 final rule has not created significant reliance interests that dissuade the Bureau from reconsidering its position as to certain portions of the rule. Due to litigation challenging provisions of the 2023 final rule and delays in the compliance dates for this rule, the changes made by this final rule will not meaningfully change compliance obligations as they exist now.

Covered credit transactions.

The Bureau concludes that the initial iterations of data collection under the rule should focus on the core, widely used lending products most likely to be foundational to small businesses' formation and operation. This final rule therefore excludes merchant cash advances (MCAs), agricultural lending, and small dollar loans from the definition of covered credit transaction.

Covered financial institutions.

The Bureau concludes that the initial iterations of data collection under the rule should focus on larger core lenders. This final rule therefore contains two changes to the covered financial institution definition: first, to exclude FCS lenders from coverage; and second, to raise the origination threshold from 100 to 1,000 covered credit transactions for each of two consecutive years. This final rule also contains conforming changes to the bona fide error portions of the enforcement provisions in the rule.

Small business.

The Bureau concludes that the focus of the rule, at least initially, should be truly small businesses. This final rule therefore changes the gross annual revenue threshold in the rule's definition of small business from $5 million or less to $1 million or less.

Data points.

The Bureau concludes that the initial iterations of data collection under the rule should focus on core data points and be consistent with other executive agency directives concerning the collection of demographic data to minimize any burden accompanying new collections.

This final rule therefore focuses data collection on data points specifically identified in section 1071 and a limited number of other data points needed to facilitate the collection of these statutory data points. This final rule removes the discretionary data points for application method, application recipient, denial reasons, pricing information, and number of workers. This final rule also contains changes to better conform with an executive branch mandate, resulting in modifications to the collection of data concerning business ownership status of small business applicants and to the format of demographic data collected concerning the principal owners of a small business.

Time and manner of data collection.

This final rule amends the provisions on the time and manner of data collection, to remove certain requirements that are not statutorily required and appear to anticipate or presume non-compliance with the rule. It also adds a provision that emphasizes for applicants their statutory rights under the rule.

Compliance dates.

Finally, in light of the changes to the rule, this final rule extends the compliance date to January 1, 2028, for all financial institutions that remain covered by the rule. This final rule also adds certain special transitions rules to provide flexibility to potentially covered financial institutions.

The Bureau also addresses in this summary two other issues.

Privacy and data publication.

The Bureau does not address in this final rule the privacy discussions in the 2023 final rule or its statements about the eventual publication of data. The 2023 final rule did not purport to make any final or binding decisions concerning its privacy analysis, instead announcing only its “preliminary assessment of how it might appropriately assess and advance privacy interests by means of selective deletion or modification” of data. The 2023 final rule also did not reach conclusions regarding the procedural vehicle it would use to convey its decisions with respect to privacy.

Nor has the Bureau conclusively announced a timeline for the publication of application-level data, except for observing that it would need a full year's worth of data to conduct the necessary privacy analysis. The Bureau also suggested that it

intended to publish aggregate data in the first year of receiving data and before publishing any application-level data. The Bureau is currently reconsidering all of these issues and preliminary findings and will continue to engage with stakeholders. The Bureau commits to addressing these issues and findings in a notice of proposed rulemaking to be published likely after the collection of the first year's worth of data. As set out in detail below, the Bureau believes that a full notice-and-comment rulemaking would best inform the Bureau on its privacy assessment, including which modifications and deletions to make.

Id.

at 35460 (“The CFPB is not determining its final approach to protecting such interests via pre-publication deletion and modification because it lacks the reported data it needs to finalize its approach and it does not see comparable datasets to use for this purpose. In light of comments received on the NPRM's privacy analysis, this part VIII offers a preliminary assessment of how it might appropriately assess and advance privacy interests by means of selective deletion or modification. The CFPB is not at this point identifying the specific procedural vehicle for effecting its privacy assessment. With respect to both substance and process, it will continue to engage with external stakeholders; and it intends to invite further input on how it plans to appropriately protect privacy in connection with publishing application-level data.”).

As part of eventual data publication, as with HMDA data, the Bureau intends to note to data users that data alone are generally not used to determine whether a lender is complying with fair lending laws. The data do not include all the legitimate credit risk considerations for loan approval and loan pricing decisions. Therefore, when regulators conduct fair lending examinations, they analyze additional information before reaching a determination about an institution's compliance with fair lending laws.

Grace period.

The Bureau is retaining and updating the grace period articulated in the 2023 final rule, for the same reasons set out in that notice

and as set out in subsequent extensions of the compliance dates.

The grace period is now from January 1, 2028, through December 31, 2028, to align with the new single initial compliance date of January 1, 2028.

88 FR 35150 at 35458-59.

90 FR 25874 at 25876; 90 FR 47514 at 47518.

B. General Comments

Comments Received

Many commenters, including banks, credit unions, non-depository and online lenders, trade associations for lenders and small businesses, advocacy groups, individuals, and others supported the Bureau's proposed rule.

A number of commenters, including lenders, community groups, and trade associations affirmed the importance of section 1071 and its statutory purposes. A coalition of lenders and community groups stated that section 1071 was a market-based, pro-competition solution to improving access to capital. Several industry commenters supported the aims of section 1071 and the proposed rule. An advocacy group supported section 1071 as important to strengthening credit markets and access to credit, and encouraged the Bureau to promulgate a final rule that would support a robust and inclusive credit ecosystem. An independent office of a Federal agency stated that the proposed rule was squarely in line with the Regulatory Flexibility Act and implemented statutory goals without excessive small-entity compliance costs.

One advocacy group stated that the proposed rule aligned with the Constitution, section 1071, the Defending Women E.O., and biological reality.

Several banks and a trade association stated that while they preferred a statutory repeal of section 1071, they welcomed the Bureau's proposed revisions to the rule.

A number of lenders and trade associations, as well as an advocacy group supported the proposed rule's rationale that a long-term data collection regime should start with core products, providers, and data points to avoid disruption to the markets. Two trade associations stated that the effectiveness of the rule depends on maintaining, rather than disrupting, access to credit while collecting reliable data. Several commenters, including trade associations, banks, and an advocacy organization, supported the proposal's calibrated approach to data collection, reflecting the operational and legal concerns raised by commenters earlier in response to the 2021 proposed rule and the 2023 final rule, and balancing the statutory purposes of section 1071 and the capacity of community banks to serve small businesses. An advocacy group stated that a long-term program that begins with modest, core requirements will ultimately provide more accurate and useful data while avoiding disruptions in credit availability. The commenter suggested that the Bureau commit to ongoing reassessment of this rule's requirements and that the Bureau should use the initial data collection to determine whether products, lenders, or data points should be added.

Several credit unions and their trade associations stated that the proposed rule would help credit unions and would reduce regulatory burden on credit unions. Some of these commenters stated that the 2023 final rule may have stopped small business lending by credit unions, but that the revisions in the 2025 proposed rule encourage them to continue it. A trade association stated that the proposal recognized the importance of credit unions in small business lending. One credit union cautioned the Bureau to consider carefully any expansion of the rule beyond core lenders and products.

Several community banks and trade associations supported the proposed rule, stating that it would provide substantial relief to community banks from regulatory burden. Several of these commenters called the proposed rule a meaningful recalibration. Another trade association warned that if rule was not well-tailored, it could harm community banks, their small business borrowers, and the nation's economy. Several community banks said they did not have the resources to comply with the 2023 final rule. One bank stated that a rigid rule would disrupt the tailored lending relationships and flexibility of small banks.

Some banks, trade associations, and an advocacy group supported the proposed revisions but expressed concern that the remaining requirements of the rule would still impose unintended negative consequences on lenders and small businesses. One trade association, while generally supporting the rule, suggested that the rule be brought into greater alignment with the Community Reinvestment Act regulations. One of the trade associations suggested that the 2023 final rule be rescinded entirely to remove any uncertainty caused by the judicial stays in the litigation challenging the 2023 final rule. A bank expressed concern that section 1071 did not comply with recent Supreme Court decisions concerning race-conscious university admissions and disparate impact.

One bank supported the proposed revisions but opposed incremental expansion of the rule in the future, arguing that this approach would result in a lack of regulatory uncertainty. An individual commenter supported the proposed rule and stated that a rule without bright-line tests, particularly for data points and institutional coverage, would result in the collection of insufficient or inconsistent data.

A trade association stated that the rule should evolve thoughtfully to generate reliable insights to support oversight over small business lending.

One advocacy group urged the Bureau to provide early and comprehensive technical compliance resources, including filing instructions, standardized demographic-data definitions, and system specifications, well before the January 1, 2028 effective date, noting that large last-minute revisions would undermine preparation efforts. Two trade associations requested that lenders have sufficient compliance lead time to develop data-collection platforms that accurately capture and report section 1071 data.

Many other commenters opposed the proposed rule generally. These commenters included community

groups; Members of Congress; trade associations for CDFIs, small farms, and small businesses; advocacy groups; service providers to lenders; and individuals.

Many commenters asserted that lending discrimination is still widespread, and that data collected under this rule is vital to addressing it. Two advocacy groups identified ongoing disparities in approvals or amounts approved for minority-owned and women-owned businesses. A trade association for small businesses cited studies by Federal agencies identifying gaps in credit access for minority-owned and women-owned businesses. A trade association for minority-owned CDFIs asserted that any revisions to the 2023 final rule must be evaluated against longstanding credit inequities section 1071 was enacted to address. An individual commenter stated women-owned and minority-owned businesses have faced systemic barriers in accessing fair credit, and that a rule that does not result in robust transparency in lending would be contrary to section 1071.

Several commenters, including community groups, Members of Congress, and an advocacy group, argued that the collection of less data would undermine fair lending laws. A community group supported the reduction in burdens related to this rule but argued that the proposed revisions would unintentionally reduce the usefulness of the section 1071 data, and that the Bureau must maintain elements necessary to maintain clear and consistent data on small business lending. The commenter encouraged the Bureau to reduce burden by focusing on implementation planning, clear definitions, and sequencing rather than removing data fields. Another community group stated that the Bureau should implement the 2023 final rule and collect a critical mass of data before revising the rule. Another stated that the Bureau should withdraw the 2025 proposed rule and restore the 2023 final rule to ensure the rule is sufficiently comprehensive.

One community group argued that it was inconsistent for the Bureau to propose a rule with more modest requirements that it could expand over time while seeking in the short term to shed staff and shut down its own operations. Members of Congress stated that the proposed rule would preserve the appearance that data was going to be collected but that the actual result would be too thin and partial to be useful.

Several commenters noted the benefits of collecting more data than less. A community group and a bank argued that a broader data collection would benefit both borrowers and lenders; lenders would be able to identify unmet credit needs, generate more revenue, and avoid fair lending violations, and small businesses would receive loans and expand. Several commenters stated that their experience with HMDA reinforced the importance of broad data collection and reporting in the context of section 1071. A community group argued that the Bureau should collect data on non-core lenders because data analysis can account for differences that may be attributable to different types of reporting lenders, such as MCAs.

A number of community groups, advocacy groups, service providers, and individuals, as well as a trade association for minority-owned CDFIs, argued that the proposed rule undermines the statutory purposes of section 1071. A community group asserted that, to comply with section 1071, the rule must require collection of sufficiently detailed data, and claimed that the proposed rule did not meet this standard. A coalition of community groups argued that the proposed rule would undermine section 1071's promise of bringing transparency to small business lending. One community group noted that data from the Paycheck Protection Program (PPP) demonstrated the value of section 1071 data in identifying issues faced by women-owned and minority-owned businesses in obtaining PPP funding. Another commenter noted that minority-owned community lenders have seen firsthand how incomplete data can obscure disparities and impede effective intervention.

An individual commenter asserted that the Bureau failed to adequately explain how its proposed changes would improve consumer outcomes or market stability, that a rational connection had not been made between the stated objectives and the foreseeable consequences for consumers, and that the Bureau had not considered alternatives that would maintain strong consumer protections while addressing administrative or operational concerns.

A number of commenters opposed the Bureau's rationale focusing on an initial data collection involving core products, lenders, and data points. Several community groups argued that section 1071 does not direct the CFPB to pursue a modest, pilot data collection but rather to develop a broad, comprehensive data collection immediately, sufficient to reveal patterns in credit access and support fair lending enforcement; they concluded that the proposal failed to do this and therefore would frustrate the statutory purposes of section 1071. Commenters also argued that the incremental expansion of section 1071 data would not be the best way to preserve data quality, and that lenders had years to prepare to comply with the 2023 final rule.

One advocacy group asserted that the Bureau offered no evidence of a plan to re-assess the rule at a later date to potentially expand the collection of data. A community group argued that the Bureau had taken other actions demonstrating that it was not committed to fair lending.

A bank disputed an assertion in the proposed rule that smaller institutions would produce worse data. A community group stated that the proposed revisions would shrink the scope of the rule despite evidence of an increase in high-cost and opaque small business lending products. Another community group stated that additional data is needed to explain these changes in the market. A coalition of lenders and community groups urged the Bureau to consider the risk of narrowing the rule, and argued that a less comprehensive rule could have gaps which would not permit a reliable assessment of credit flows and would limit the utility of the rule. A community group claimed that the proposed rule acknowledged, but did not justify, the loss of benefits associated with the proposed rule including a loss of fair lending benefits, reduction in community development benefits, as well as benefits associated with the coverage of certain financing markets and lenders.

One community group stated that the proposed rule's discussion of the history of HMDA was a misguided basis for the Bureau's longer-term, incremental approach to data collection. The commenter stated that HMDA implementation demonstrated that even small lenders can comply with data collection requirements, and that the market is stronger for data transparency. The commenter also asserted that while HMDA expanded over time, section 1071 does not require iteration because Congress learned from its decades of experience with HMDA. Another community group stated that the proposed revisions were not supported by evidence; by contrast, the commenter stated that HMDA's evolution provided 50 years of lessons to be learned that were embedded in the 2023 final rule.

A community group claimed that the Bureau repeatedly cited unsubstantiated comments justifying the proposed rule, arguing that where the Bureau referred to stakeholder feedback, it had met with groups with special access. The

commenter also argued that the Bureau cannot use an Executive Order as justification to override a statutory mandate. The commenter finally provided a lengthy list of specific communities—including non-profit organizations, advocacy groups, community lenders and others—that it argued would be harmed by the lack of data.

The commenter further argued that frequent changes to regulations would depress economic output; regulatory uncertainty leads lenders to be overly cautious, leading them to restrict credit access. An advocacy group argued that smaller lenders tend to pull back when regulatory standards are unclear or overly expansive.

Responses to Comments Received

With regard to concerns expressed regarding the remaining requirements of the rule, the Bureau has attempted to reduce unnecessary costs or complexity as much as possible while still complying with the statutory mandate provided by section 1071. The Bureau also notes, in response to a commenter, that rescinding the 2023 final rule entirely would be impracticable.

The Bureau does not believe that incremental expansion of the rule in the future would lead to regulatory uncertainty. The Bureau intends to consider any future expansion carefully, with sufficient advance notice to avoid regulatory uncertainty.

In response to comments stating that lending discrimination is ongoing, the Bureau notes that the data cited by commenters are consistent with data cited in the 2023 final rule. The Bureau disagrees that this information requires the Bureau to pursue an immediate and maximalist approach to data collection to comply with section 1071. As the Bureau has noted before, such a position may have the effect of discouraging lending, including to those populations described by commenters, or the collection of accurate data generally, to the extent that lenders face cost and complexity that could have been avoided under a more gradual, longer-term approach to a new data collection.

The Bureau also disagrees that that the collection of less data in the short term necessarily undermines fair lending laws. The Bureau notes that the revisions in this final rule are intended to result in a fuller, higher-quality collection of data in the longer term with a minimum of disruption to the small business lending markets. Nothing in the text or history of section 1071 requires the Bureau to pursue a maximalist collection of data in the short term, regardless of the consequences of such a program on smaller lenders. The Bureau believes based on comments received and its experience with small business lending that caution at the start of this data collection is both warranted and appropriate.

With regard to the comment that the Bureau should focus on non-rule policies to reduce burden on lenders, rather than revising the rule, the Bureau believes that this is a false dichotomy. The Bureau intends to assist covered financial institutions with implementation planning outside of the rule. The Bureau believes that its definitions are sufficiently clear for operational purposes. The Bureau notes that its long-term approach to section 1071 is a type of sequencing, as characterized by the commenter. The Bureau disagrees that it should first collect data under the 2023 final rule and then revise the rule based on that data. The Bureau is concerned that the initial cost and complexity imposed on smaller lenders and those not experienced with similar data collection regimes may cause avoidable and irreversible harm.

The Bureau agrees in principle with comments that under section 1071, all else equal, there are benefits to collecting more data rather than less. The Bureau disagrees that this general principle means that the immediate collection of the most data possible is beneficial, for the reasons stated above; the Bureau believes that there is a risk that such an approach would disrupt credit access, and may cause lenders to reconsider participation in the small business lending markets, as comments from industry have stated. The Bureau disagrees that it should collect data from non-core lenders in the short term at the start of this data collection. While data analysis may help account for differences between such lenders and core lenders, the Bureau reiterates its concerns that the rule may impact such non-core lenders if required to comply in the short term. The Bureau believes that data collected from core lenders, on core products, may help guide and ease compliance for non-core lenders and products in the longer term.

The Bureau disagrees with commenters that the proposal undermines the statutory purposes of section 1071. The Bureau again believes that this position, taken by various commenters, assumes that section 1071 on its face requires an immediate collection of the most data possible without regard to the practical consequences of doing so. Further, these commenters characterize data collection under the proposed revisions as if they would result in the collection of no data, rather than the Bureau's estimates that the revised rule would result in the collection of 92 to 93 percent of small business loans by depository institutions. By contrast, the Bureau estimated that the 2023 final rule would result in the collection of approximately 94 to 95 percent of small business credit transactions.

Regarding one commenter's assertion that there was no evidence of a plan to reassess the rule in the future, the Bureau stated in the proposed rule that it would review data received and continue to observe the small business lending markets to determine whether and how to expand coverage of the rule in the future. There are also several other mechanisms that represent natural points for the Bureau to reassess the rule, including the inflation adjustment to the small business definition under § 1002.106(b)(2) occurring every five years, as well as the statutory requirement under Dodd-Frank Act section 1022(d) that requires a retrospective assessment of a significant rule five years after the effective date.

Regarding comments asserting that the proposal acknowledged, but did not justify, the loss of benefits associated with the proposed revisions, the Bureau disagrees. The preamble to the proposed rule is forthright in acknowledging the potential value of certain data that the Bureau has determined not to collect initially, but balances this against the cost and complexity of including such requirements at the start of this long-term data collection regime.

The Bureau disagrees that its discussion of the history of HMDA is a misguided basis for the proposal's incremental, longer-term approach to data collection. The Bureau is not persuaded by comments that the market's specific experience with HMDA has prepared small lenders to comply with section 1071 immediately; commenters stated the contrary, that either they have little or no experience with HMDA. As many commenters have noted, mortgage lending is different from the varied market in small business credit; many lenders that submitted comments stated that they are not HMDA-filers and have no previous experience in complying with any data collection rules.

The broader understanding the Bureau takes from its HMDA experience is that there is a learning curve to any new data collection requirement. In this sense, the experience that lenders, borrowers, and regulators have had with HMDA suggests that it is more prudent to start modestly and later expand a data collection rule than to start immediately

with the broadest possible rule. While the rule will result in costs and operational complexity for covered financial institutions, the manner and speed with which the requirements are implemented, based on the Bureau's experience and from feedback, matters immensely.

The Bureau disagrees that it cited unsubstantiated comments justifying the proposed rule. Since the release of the 2023 final rule, much of the commentary on the requirements of that rule have been entirely public in the form of submissions to the Bureau and publications on stakeholder websites, as well as formal submissions in litigation challenging the 2023 final rule.

The Bureau disagrees with the assertion that it is using Executive Orders to override a statutory mandate. The Bureau's revisions do not override statutory requirements but, rather, comply with the requirements of section 1071. In any case the revisions to the rule that reference their consistency with Executive Orders are justified on other independent grounds, as explained below in passages discussing different Executive Orders.

The Bureau agrees in principle with the commenter that frequent changes to regulations may depress economic output. The Bureau notes, however, that final rule revises regulatory provisions that lenders have not yet had to comply with; one of the purpose of these revisions is to minimize burdens at the start of this longer-term data collection and to avoid depressing economic output. The Bureau intends to consider any future revisions to the rule carefully and to implement them in a manner intended to reduce regulatory uncertainty and maintain credit access. The Bureau agrees with the same commenter that it should provide early and comprehensive technical compliance resources, including filing instructions, and other materials, well before the compliance date.

C. Comment Period Comments

In the NPRM, the Bureau provided a 30-day comment period for the public to review and submit feedback on the proposed revisions to the section 1071 regulatory framework.

The Bureau received a number of comments requesting an extension of the 30-day comment period from a variety of stakeholders, including banks, community groups, and individuals.

Most of the commenters requesting an extension asked for an additional 60 days. One bank requested an additional 90 days, and two individual commenters requested an extension without specifying a timeframe.

Many of these commenters argued that 30 days was an insufficient amount of time to determine the proposal's impacts and provide meaningful feedback. Commenters pointed to the complexity and significance of the proposal, asserting that it was lengthy, differed significantly from the existing regulation, and contained issues that, they said, the Bureau had never before proposed or sought comment on. One bank specifically requested a 90-day extension to update the financial impact analysis it had conducted for the initial 2023 final rule, stating it needed more time for data collection and analysis to better inform the final rule.

Several commenters contrasted the 30-day period with the Bureau's past practices regarding the process leading up to the 2023 final rule, which included a robust SBREFA consultation process and public comment on the Bureau's Outline of Proposals Under Consideration, along with a 90-day comment period on the 2021 proposed rule (with some commenters noting stakeholders actually had 120 days to review the 2021 proposed rule because it was posted on the Bureau's website 30 days prior to publication in the

Federal Register

). One commenter expressed specific concern that the Bureau chose to forgo a new SBREFA process for this rulemaking. A few commenters stated that the Administrative Procedure Act (APA) and E.O. 13563 require agencies to afford the public a meaningful opportunity to participate in the regulatory process, with one commenter asserting that this generally requires a comment period of at least 60 days.

Commenters also cited logistical challenges making the 30-day deadline difficult to meet. Many commenters highlighted that the Bureau simultaneously issued a separate Regulation B proposal subject to the same 30-day deadline, stressing that it was difficult to delve into both complex proposals since they required review by many of the same organizational stakeholders and experts. Additionally, many commenters pointed out that the Thanksgiving and winter holidays fell within or immediately followed the comment period.

Commenters raised special concerns regarding the comment period's impact on certain types of stakeholders. Specifically, commenters suggested the short deadline was particularly challenging for community-based organizations that needed time to develop community-informed comments; trade associations that required time to meaningfully consult with their member banks to provide robust and granular feedback; and small or public-interest organizations that lack the resources to turn around complex analyses quickly.

Finally, one commenter asserted that the short comment period—combined with the simultaneous Regulation B proposal and the holiday timing—demonstrated the Bureau's disinterest in receiving and fully considering public comments. The commenter also suggested that the timeline indicated the Bureau was ready to ignore the full weight of the public record and its own detailed analysis leading up to the 2023 final rule.

For the reasons set forth below, the Bureau concludes the 30-day period provided in the proposed rule was sufficient.

The Bureau disagrees with commenters who argued that the 30-day timeframe was too short to allow for meaningful feedback or a thorough analysis of impacts, including the specific request for a 90-day extension to update a financial impact analysis. The issues raised in this rulemaking build upon a well-established foundation, familiar to the stakeholders who commented on this rule. The public has had a substantial amount of time to consider the core concepts of the section 1071 data collection regime across a multi-year, iterative process. This process has included the 2017 Request for Information, the 2020 SBREFA process, the 2021 proposed rule, and the 2023 final rule itself. Many commenters, including those opposed to the proposed revisions, reiterated many of the things they had said in prior comment letters, precisely because they had familiarity with many, if not most, of the issues raised by the 2025 proposed rule. The comment letters that the Bureau received, both in support of and in opposition to the proposed revisions to the rule, were detailed and appeared to have considered the proposal carefully and comprehensively.

For this same reason, and because this rulemaking largely proposes burden-reducing exemptions and clarifications rather than a new regulatory framework from the ground up, the Bureau determines that a new SBREFA process is neither required nor necessary. In addition, the SBA Office of Advocacy has given the Bureau a waiver from the requirement to conduct a SBREFA Panel for purposes of this rulemaking because the Bureau had already conducted a panel in advance of the 2023 final rule, as described below in part VII.

While the occurrence of the Thanksgiving and winter holidays may have placed competing demands on commenters' time, the Bureau reiterates

that the quality and quantity of comments it received confirms that commenters had sufficient time to consider and address material issues in the proposal.

The Bureau disagrees that this timing, the concurrent publication of a separate Regulation B proposal, or the 30-day period itself, signaled a lack of interest in receiving and fully considering public feedback or an intent to ignore the full weight of the public record and its own detailed analysis leading up to the 2023 final rule. The Bureau does not agree that the concurrent Regulation B proposal limited commenters' ability to respond, because the topics of the two rulemakings were very different; while this rulemaking focuses on small business lending data collection under section 1071, the other proposal addressed aspects of ECOA related to its discrimination prohibition, specifically disparate impact, discriminatory discouragement of applications, and special purpose credit programs. To the contrary, the APA requires agencies to provide the public with a meaningful opportunity to participate in the regulatory process, but it does not mandate a minimum 60-day or 90-day comment period. The Bureau determines that 30 days provided a meaningful opportunity to comment under both the APA and all relevant E.O.s, including E.O. 13563, particularly given the targeted nature of the proposal and the extensive historical context surrounding the rule.

Furthermore, the Bureau's review of the rulemaking docket confirms that the 30-day period was sufficient for robust public participation. In total, the Bureau received approximately 410 comments on the proposal. The Bureau notes that many of the entities that submitted requests for an extension successfully submitted substantive, detailed comments on the proposal within the 30-day window. The Bureau has carefully reviewed all of these comments and utilized them to inform this final rule, demonstrating that the comment period provided an adequate and meaningful opportunity for public participation.

D. Section 1002.104—Covered Credit Transactions and Excluded Transactions

The Bureau finds that at the onset of data collection under section 1071, the rule should focus on core, generally applicable lending products that are most likely to be foundational to small businesses' formation and operation—loans, lines of credit, and credit cards—before determining whether to expand the scope of the rule to include more niche or specialty lending products. This final rule therefore excludes MCAs, agricultural lending, and small dollar loans from the definition of covered credit transaction to better ensure the smooth operation of the initial period of data collection, while minimizing disruptions and regulatory complexity in the credit markets subject to section 1071.

A trade association representing community banks opposed the Bureau's proposed exclusions, characterizing the exclusion of non-core lending products as “loopholes” that the Bureau should close. The commenter argued that small businesses—particularly those with limited access to traditional financing—frequently rely on non-traditional forms of credit, and that their exclusion would permit abuse and borrower dissatisfaction to go undetected in these less-regulated markets. Furthermore, the commenter asserted that such exclusions would give lightly regulated lenders a competitive advantage over community banks, which it described as unquestionably trusted small business lenders, potentially pushing borrowers toward what it characterized as more dangerous creditors. The commenter suggested that if the Bureau retains the exclusions, it should commit to monitoring the market with the intention of removing them at a later date.

The Bureau disagrees that these exclusions constitute “loopholes” that will harm small business borrowers. As discussed in the 2025 proposed rule and as confirmed in this final rule, the Bureau is adopting an incremental approach to coverage that focuses on core lending products that are most foundational to small business operations. The Bureau believes that this approach, at the inception of this data collection regime, appropriately balances the benefits of data collection with the need to minimize market disruption and regulatory complexity. The Bureau may revisit the scope of its coverage of credit products in future rulemakings.

1002.104(b)(7)—Merchant Cash Advance

Proposed Rule

Existing § 1002.104(a) defines a “covered credit transaction” as “an extension of business credit that is not an excluded transaction under paragraph (b) of this section.” Section 1002.104(b)(1)-(6) enumerates six types of transactions that are excluded from covered credit extensions. The Bureau proposed to add MCAs to the list of excluded transactions in § 1002.104(b). Proposed § 1002.104(b)(7) would exclude MCAs, which it would define as an agreement under which a small business receives a lump-sum payment in exchange for the right to receive a percentage of the small business's future sales or income up to a ceiling amount. Consistent with this proposed new exclusion, the Bureau also proposed deleting several references to MCAs, and the related term sales-based financing, in commentary.

Comments Received

The Bureau received many comments on several aspects of the proposal concerning MCAs from a wide range of lenders, trade associations, business advocacy groups, community groups, and individuals. The Bureau previously observed that, throughout the development of the rule to implement section 1071, MCAs had been the focus of significant attention and a unique source of near-consensus among a diverse array of stakeholders—almost all of whom advocated for covering MCAs except for MCA providers themselves and some trade associations representing MCA providers. Comments received in response to the recent NPRM were slightly different in that commenters supporting the exclusion from the rule also consisted of a few community banks and a research advocacy organization in addition to MCA providers and nonprofit trade associations. These commenters argued that MCAs do not meet the definition of credit under ECOA or State law. Conversely, many other commenters, including community groups, trade associations, and lenders urged the inclusion of MCAs in order to effectively monitor the small business credit market and facilitate fair lending enforcement. Below is a more detailed summary of comments grouped by topic.

Comparison of MCAs to Traditional Lending Products and the Growth of MCAs.

In response to the request for comments on the extent to which MCAs differ from or resemble traditional lending products, several community banks asserted that there was limited comparability between MCAs and traditional loans. Some of these commenters explained that the exclusion of MCAs is appropriate given their unique structures and underwriting characteristics. A trade association for MCA providers supported the Bureau's focus on core lenders, asserting that the coverage of MCAs would not produce data promoting the statutory purposes of section 1071, given that MCAs are structured differently. The commenter

also observed that covering MCAs would be of limited utility given their small share of small business finance, relative to the hundreds of billions of dollars in traditional loans.

Several commenters disagreed with the Bureau's focus on core lenders as justification for excluding MCAs. Community groups argued that MCAs should be covered because their originations have grown exponentially, they are no longer marginal products, and small businesses are commonly exposed to them via advertising. One commenter estimated that volume of MCAs would grow from $18 billion in 2024 to $25 billion by 2029; a small business trade association estimated that MCA volume would grow from $19.7 billion in 2024 to $32.7 billion by 2032. Both commenters, as a result, argued that covering MCAs is necessary to be consistent with the statutory purposes of section 1071.

One community group noted that while MCAs function differently from traditional loans, such differences would not preclude data comparability. For instance, the commenter noted that a standard MCA contract contains enough information to calculate an estimated annual percentage rate.

A small business trade association asserted that the proposed exclusion of MCAs would harm the financial health of small businesses and obscure from policymakers and industry stakeholders the predatory and high-cost nature of these products. This commenter argued that MCAs operate with little Federal oversight and harm small businesses, as evidenced by opaque pricing terms used by many financing companies that conceal the full cost of MCA products instead of displaying the annual percentage rate (APR). Further, the commenter stated the MCA industry has faced backlash from government entities, stating that, for instance, SBA 7(a) loans may not be used directly to refinance MCA debt because of the damaging nature of high-cost MCA products that often leave small firms with no choice but to restructure or refinance to retain or improve their credit history. The commenter further stated that, because of the absence of any regulation requiring data on the MCA industry and the unwillingness of certain government guaranteed lenders to refinance small businesses with MCAs, small businesses will feel the impact by facing the difficult decision to close their doors or declare bankruptcy.

A community group cited the 2024 Federal Reserve Small Business Credit Survey indicating that 9 percent of reporting small businesses applied for an MCA and that medium- and high-risk applicants were much more likely than low-risk applicants to apply for financing at online lenders. This commenter also stated that applicants that seek financing from online lenders were more likely than applicants to other sources to experience challenges with their lenders. The commenter argued that confirming the prevalence of MCA lending in certain markets will further the statutory purposes of section 1071 and provide valuable data to policymakers and lenders about small business community development needs, including concerns about potentially detrimental and discriminatory lending.

Other feedback on MCA data reporting.

Several trade associations and community banks supported the proposed exclusion of MCAs coverage under this rule, praising the Bureau's commitment to a practical implementation approach that will have a positive impact on data integrity and reporting. A community bank asserted that excluding MCAs makes the dataset more relevant and reduces unnecessary reporting. Another community bank stated that excluding MCAs allows more actionable and relevant data collection aligned with the core intent of section 1071. One trade association suggested that the exclusion of MCAs recognizes practical operational realities, and that MCAs are less likely to generate comparable data for section 1071 analyses.

A trade association for MCA providers asserted that subjecting MCAs to the rule would be especially costly and impractical because of how MCAs are structured. This commenter predicted that implementing tracking systems under the rule would require costly programming upgrades and adjustments to MCA systems that might force smaller MCA providers to exit the industry, resulting in a less competitive markets dominated by larger funders and higher costs for MCA users.

An advocacy group supported excluding MCAs from coverage to avoid unnecessary complexity and disruptions in lending markets. This commenter asserted that including novel or specialized financing structures in the earliest round of data collection risks undermining both data quality and market stability. For example, the commenter said that MCAs differ fundamentally from conventional extensions of credit in structure, risk allocation, and repayment mechanics since pricing mechanisms are often tied to receivables rather than interest rates, underwriting focuses on future cash-flow volatility, and legal treatment varies significantly under State law.

By contrast, other community groups, trade associations, and a business advocacy group maintained that exclusion will create a blind spot in the data, obscure risks to small business borrowers, and reduce market transparency. A trade association asserted that excluding these transactions undermines the statutory purposes of section 1071 and risks perpetuating inequities in credit access since alternate lenders, such as MCA providers, frequently serve more vulnerable businesses that cannot qualify for conventional loans. A trade association representing CDFIs urged the Bureau to retain broad product coverage to support effective enforcement and sound policy analysis, especially given that the MCA market plays a substantial role in the financing outcomes of minority-owned firms. It also noted that a failure to cover them would constrain the Bureau's ability to assess pricing structures, repayment burdens, and other features relevant to fair lending analysis.

A trade association representing small businesses suggested excluding MCAs contradicts the proposed rule's own data quality rationale. Specifically, this commenter explained that the Bureau justifies many of its proposed changes by citing concerns that complex requirements might yield poor-quality data from smaller, less-resourced lenders. The commenter argues that this logic does not support excluding MCAs because MCA providers typically have advanced underwriting algorithms that already collect demographic-like data, use automated systems that could easily be adapted for data reporting, and are generally larger and better-resourced than many small lenders. This commenter claimed that excluding MCAs would eliminate oversight of a growing alternative finance sector with no regulatory oversight, without reducing compliance burden on traditional lenders requesting relief.

MCAs and the ECOA definition of credit.

A trade association for credit unions and a business trade association expressed uncertainty about whether MCAs constitute “credit” under ECOA but urged the Bureau to finalize the proposed exclusion of MCAs. A fintech trade association supporting the exclusion also claimed that MCAs do not meet the definition of “credit” consistent with their longstanding treatment as purchases of future receivables. A trade association representing MCA providers asked the Bureau to clarify in the preamble that MCAs are not “credit” under ECOA, arguing that MCAs do not involve debt, do not confer a right to defer payment,

and are not loans, and that MCA funders have reliance interests in the Bureau's purportedly longstanding interpretation that MCAs are not “credit.”

Two bank trade associations stated that MCAs should be covered because they do constitute credit under ECOA, even if they are structured differently than traditional loans. These commenters argued that unlike with factoring, the small business must repay the MCA provider for the advance out of future revenue. The commenters also stated that if there were some MCAs that would not meet the definition of credit, the Bureau should limit the exclusion to those specific MCAs as this would create a more level playing field across institutions that provide financing to small businesses, and create a data set that better reflects demand for small business financing.

State Laws and MCAs.

A trade association representing MCA providers and an advocacy group agreed with the proposal that the MCA exclusion would not render MCA financing unregulated because of State law developments in sales-based financing. The trade association also asserted that State-level disclosure regimes impose transparency obligations tailored to these products which decreases the risk of unfair or deceptive practices. The commenter also stressed how, in light of growing State regulations on MCA financing, a final rule implementing section 1071 that imposes more Federal requirements could result in duplicative and conflicting laws that spread confusion regarding compliance.

A community group stated that the proposal's discussion of State regulation of MCAs reflected the Bureau's misunderstanding of the purpose of State laws regulating MCAs and their impact on the 1071 rule, arguing that instead such laws reflect concern about the pervasiveness of MCA lending and the impact on small businesses, and that they justify inclusion of MCAs in the final rule. The commenter further asserted that Congress did not require collection of 1071 data contingent on whether States regulate the product or not, and that in the period since the 2023 final rule was issued, few States substantively regulate MCAs and these State laws cannot reasonably be cited as a changed circumstance that justifies a substantial rewrite to the rule. Lastly, this commenter disagreed with the Bureau's contention that high costs and predatory practices in the MCA market could be addressed by Federal and State law enforcement agencies.

Final Rule

The Bureau is finalizing its proposal to add MCAs to the list of excluded transactions under § 1002.104(b). Final § 1002.104(a) defines a “covered credit transaction” as an extension of business credit that is not an excluded transaction under § 1002.104(b). Section 1002.104(b) enumerates types of transactions that are excluded from the definition of a covered credit transaction. The Bureau is adding MCAs to the list of excluded transactions in § 1002.104(b). Final § 1002.104(b)(7) excludes MCAs, which are defined as agreements under which a small business receives a lump-sum payment in exchange for the right to receive a percentage of the small business's future sales or income up to a ceiling amount.

Consistent with this new exclusion, the Bureau also is deleting several references to MCAs, and the related term sales-based financing, in commentary.

See

R.&R. on Cross Mots. for Summ. J. at 4,

Revenue Based Fin. Coal.

CFPB,

No. 1:23-CV-24882-DSL (S.D. Fla. Feb. 17, 2025).

In the 2023 final rule, the Bureau declined to exclude MCAs from its definition of a “covered credit transaction.” It explained its belief that the statutory term “credit” in ECOA is intentionally broad so as to include a wide variety of products without specifically identifying any particular product by name, such that all credit products should be included in the rule unless the Bureau specifically excluded them and concluded that “credit” encompasses MCAs. It further explained that MCAs should not be understood to constitute factoring within the meaning of the existing commentary to Regulation B subpart A or the definition it was including as comment 104(b)-1, because factoring involves entities selling an existing legal right to payment from a third party, while no such contemporaneous right exists in an MCA. The Bureau also noted its understanding that, as a practical matter, MCAs are underwritten and function like a typical loan (

i.e.,

underwriting of the recipient of the funds; repayment that functionally comes from the recipient's own accounts rather than from a third party; repayment of the advance itself plus additional amounts akin to interest; and, at least for some subset of MCAs, repayment in regular intervals over a predictable period of time), although it also implicitly acknowledged practical differences between MCAs and conventional loans by including numerous provisions intended to capture MCA-specific data.

Upon further consideration and in light of the comments received, the Bureau believes it would be consistent with the purposes of section 1071 to exclude MCAs from the definition of “covered credit transaction” under § 1002.104(a). The Bureau agrees with commenters who stated that monitoring the growth and development of MCAs will generate a stronger policy record to determine whether and how MCA products should be integrated into Federal data collection requirements in the future. For the reasons outlined below, the Bureau believes it advances the purposes of section 1071 at this time to exclude MCAs from the definition of covered credit transaction, and to focus on ensuring the smooth operation of data collection as to core lending products and providers most likely to be foundational to small businesses' formation and operation.

The Bureau believes that at the onset of the data collection under section 1071 the focus should be on core lenders and products before the Bureau considers expanding the scope of the rule. The CFPB believes it would advance the purposes of section 1071 at this time to exclude MCAs from the definition of covered credit transaction, and to focus on ensuring the smooth operation of data collection as to core lending products and providers most likely to be foundational to small businesses' formation and operation.

The Bureau believes it erred in the 2023 final rule by prematurely determining that collection of data on MCA transactions would serve section 1071's statutory purposes by concluding that all MCAs constitute credit. The 2023 final rule's one-size-fits-all approach did not take into account the varied terms and features of MCAs across the market that may be relevant to whether the products meet the definition of “credit” under ECOA, nor did it account for the fact that MCAs are relatively new products whose features and practices may be evolving, including in response to State regulation. Moreover, while some State courts have analyzed whether some MCAs meet State law definitions of “debt” or “credit,” there is a dearth of case law analyzing whether MCAs meet ECOA's definition of “credit.”

Excluding MCAs from the definition of “covered credit transaction” is consistent with the way the Bureau has already treated leases, which also present close questions as to whether they meet the definition of “credit” under ECOA. In the 2023 final rule's

analysis of leases,

the CFPB acknowledged that some lease transactions could constitute “credit.” But rather than include all lease transactions in the 2023 final rule to ensure coverage of those leases that did actually constitute credit the CFPB determined that it would be able to monitor the market for such products without including them in the 2023 final rule. The CFPB is now taking a similar approach to MCA transactions as it did to leases.

See, e.g.,

88 FR 35150, 35240 (May 31, 2023). (“The Bureau is not covering leases under this final rule, as requested by some commenters. The Bureau agrees that some business leases are structured like loans and other credit but notes that a commenter's example of a small business being able to retain leased equipment is an example of the creation of a security interest, not a lease under final comment 104(b)-2.”);

id.

(“The Bureau appreciates commenters' concerns that not covering leases could open a door to potential evasion and lead to data gaps or fair lending problems. The Bureau believes that it can observe the small business financing market for such abuses and prevent them without including all leases in the rule. For example, in considering financial institutions' compliance with the rule, the Bureau intends to closely scrutinize transactions to ensure that companies are appropriately categorizing and reporting products as required by section 1071.”).

The Bureau also concludes that the 2023 final rule's coverage of MCAs did not take into account State law developments addressing sales-based financing. Several States have legislation and/or regulations in place addressing the MCA market and requiring providers to disclose terms such as the total cost of capital and the financing rate. The Bureau understands that such laws provide key protections for users of MCAs and may shape MCA terms and practices in ways that bear on the question of whether they meet ECOA's definition of “credit.”

While the 2023 final rule referenced these pieces of State legislation, it did not consider the extent to which the evolving landscape under State law rendered premature a determination that including MCAs in the definition of “covered credit transaction” for purposes of mandating data collection furthered section 1071's statutory purposes.

See, e.g.,

Conn. Pub. Act 23-201, Conn. Gen. Stat. sec. 36a-861

et seq.

(2024) (creating a disclosure regime specific to MCA and other sales-based financing transactions); Va. Code Ann. sec. 6.2-2230

et seq.

(imposing licensing and disclosure requirements);

Utah Commercial Financial Registration and Disclosure Act,

Utah Code Ann. sec. 7-27-102 and 7-27-202 (imposing licensing and disclosure requirements).

Comparison to Traditional Lending Products and the Growth of MCAs.

In response to the request for comments on whether and how much MCAs differ from or resemble traditional lending products, the Bureau agrees with community banks asserting that MCAs are structured differently from traditional loans. The Bureau also agrees that they make up a small share of small business financing overall. The Bureau does not believe that these alone are sufficient to exclude MCAs from the rule. The Bureau determines, however, at the onset of this long-term data collection program that it is prudent not to cover MCAs at this time.

The Bureau acknowledges comments noting the rapid growth of MCAs and the wide exposure small businesses have to such products, but disagrees that this gives rise to an immediate necessity of covering MCAs. The Bureau recognizes that MCA data may be comparable with traditional loan data in that an estimated annual percentage rate can be calculated, but the Bureau does not agree that the calculation of an estimated APR resolves the question of whether all MCAs can or should be covered under section 1071.

The Bureau acknowledges commenter concerns that MCAs may harm the financial health of small businesses, including that government lenders will not refinance small businesses that have taken out MCAs, and that more data might help policymakers and industry stakeholders identify predatory and high-cost products. The Bureau also acknowledges the Federal Reserve survey data noting that many small businesses are familiar with and have applied for MCAs, and more often that it was medium- and high-risk applicants that did so. The Bureau further does not dispute that additional data on the prevalence of MCA financing may help policymakers and lenders understand small business community development needs, including concerns about potentially detrimental and discriminatory financings.

However, the Bureau does not necessarily agree with the conclusions of commenters that either MCAs must all be excluded from the rule on the grounds that none of them are credit or that they must all be covered by the rule on the grounds that all of them are credit. The Bureau further disagrees with the conclusion commenters draw from their observations regarding current MCA market dynamics, including that because of their growth and impact amongst small business lenders, the Bureau must collect data on all MCAs.

These observations do suggest, however, that it would be useful for the Bureau to continue monitoring the MCA market going forward. In any case, the Bureau reaffirms its determination that, while data cited by commenters suggests that nine percent of small businesses apply for MCAs, they are not yet a core product that should be covered at the onset of this long-term data collection program.

Other feedback on MCA data reporting.

The Bureau disagrees with the assertion that subjecting MCAs to the rule would be any more costly or impractical than covering loans simply because of how MCAs are structured. The Bureau observes that the implementation of any compliance systems may be less costly to certain MCA providers in markets that are covered by State compliance or data collection obligations.

The Bureau agrees that MCAs should be excluded from the definition of a “covered credit transaction,” at least at the onset of this long-term data collection regime, to avoid unnecessary complexity and disruption in lending markets. The Bureau agrees fully that including novel or specialized financing structures in the earliest round of data collection risks undermining both data quality and market stability as to these products.

The Bureau acknowledges the concern by some commenters that excluding MCAs may obscure risks to small business that use MCAs and reduce market transparency. The Bureau further acknowledges comments that MCA providers frequently serve more vulnerable businesses that cannot obtain conventional loans. The Bureau agrees that MCAs may play a substantial role for many minority-owned firms. However, the Bureau returns to the predicate issue of whether it was appropriate in the 2023 rule for the Bureau to broadly conclude that all MCAs, regardless of their particular terms and features, meet ECOA's definition of “credit.” Given the difficulty of this determination, and the lack of clear resolution on this issue based on comments received, the Bureau believes it is prudent not to require the collection of data on MCAs at the onset of this data collection regime.

The Bureau disagrees that excluding MCAs necessarily contradicts the proposed rule's data quality rationale. Based on comments received, while some MCA providers may be well-positioned to provide data because they already comply with State laws or regulation requiring data collection and reporting. The same comments also suggest, however, that some MCA providers, more often but not necessarily smaller ones, have no such compliance infrastructure in place. These questions, however, appear to address the manner of implementing any data collection regime, assuming

that the transactions at issue are ones that Bureau has authority to collect data on under section 1071.

MCAs and the ECOA definition of credit.

The Bureau disagrees with the assertions of certain commenters that MCAs are categorically not credit. The Bureau also disagrees with categorical attempts to exclude MCAs from the definition of credit, including on the grounds that they should be treated as simply a purchase of future receivables.

There is evidence provided by commenters that in certain instances, MCAs in practice do involve debt, confer a right to payment, and are loans. Commenters also provided evidence that in many instances MCA providers are seeking recourse against the natural person owners of a small business that no longer has revenue. The Bureau also disagrees that MCA providers have a reliance interest in the purportedly longstanding interpretation that MCAs do not constitute credit; the 2023 final rule stated that all MCA transactions constitute credit. The Bureau also disagrees with the assertion that all MCAs should be covered as credit under ECOA. The Bureau believes that certain MCAs may have some features resembling factoring in certain circumstances.

The 2023 final rule refers to a joint letter from community and business advocacy groups who explained that that merchant cash advances are distinct from factoring in that a genuine factoring transaction creates a completed sale of receivables owed to the seller as a result of goods delivered or services provided by the seller to a third party. 88 FR 35150 at 35222.

The Bureau determines, however, that it has not found information in the comments it has received that would help in developing a clear, bright-line definition separating MCAs that constitute credit from those that do not. The Bureau believes, as a result, that further analysis is required to determine what subset of MCAs constitute credit for purposes of ECOA.

State laws and MCAs.

The Bureau acknowledges comments that exclusion of MCAs from this rule would not render MCA financing unregulated because of State law developments in sales-based financing. The Bureau also acknowledges that State-level disclosure regimes help impose transparency obligations tailored to MCAs, potentially reducing the risk of unfair or deceptive practices, and that coverage under this rule may give rise to duplicative efforts.

The Bureau believes the discussion on whether MCAs are credit and the connection to State laws developments is misplaced. The Bureau solicited comment on State laws and regulations to understand whether their categorization of MCAs generally, or of certain MCAs, meet the criteria of ECOA credit and coverage under this rule. Many States regulate MCAs, describing them as financings without addressing directly whether such products are credit or not.

The Bureau believes that, taking into account the factors listed above, the relative novelty and evolving landscape of the MCA industry and the ongoing changes at the State level concerning the regulation of MCAs, excluding MCA transactions from coverage under the rule at this time is necessary and appropriate to carry out the purposes of section 1071. As explained above, MCAs differ in kind from traditional lending products, such that collecting data on MCA transactions under section 1071 may not produce information that is comparable to data collected on other types of transactions. And because MCAs have not been widely regulated, many smaller MCA providers may lack the infrastructure needed to manage compliance with regulatory requirements. Taken together, requiring MCAs to be reported could lead to data quality issues, which would not advance the purposes of section 1071.

While the 2023 final rule and commenters cited concerns about high costs and predatory practices in the MCA market,

the Bureau continues to believe those concerns may be addressed by Federal and State law enforcement agencies through their respective enforcement authorities.

At the same time the Bureau acknowledged that “information on merchant cash advance lending volume and practices is limited.” 88 FR 35150 at 35220.

The CFPB will continue to monitor developments in the markets for MCAs and other sales-based financing to determine whether, over time, sufficient evidence might become available to allow a subset to be appropriately included in the definition of “covered credit transaction” for purposes of data collection.

1002.104(b)(8)—Agricultural Lending

Proposed Rule

The Bureau proposed to add agricultural lending to the list of excluded transactions under § 1002.104(b). The Bureau proposed new § 1002.104(b)(8), which would define agricultural lending as a transaction to fund the production of crops, fruits, vegetables, and livestock, or to fund the purchase or refinance of capital assets such as farmland, machinery and equipment, breeder livestock, and farm real estate improvements. Consistent with this proposed amendment, the Bureau proposed to delete references to agricultural credit in the current commentary. The Bureau explained in its proposal that this would simplify the rule by narrowing its scope to core, generally applicable, small business lending products and avoid covering a distinct and specialized lending sector that is already subject to a different regulatory reporting scheme.

Comments Received

Agricultural lenders, banks, trade associations, and community groups commented on this proposed exclusion. A number of banks and trade associations supported the exclusion. An advocacy group supported a phased approach to section 1071 requirements, noting that excluding coverage of certain products in the short term does not foreclose future coverage once lenders gain experience with data reporting and compliance burdens are better understood.

Some banks and trade associations stated that the utility of agricultural loan data is limited because such loans are subject to different underwriting criteria, are secured by unique assets (such as crops or livestock), and are subject to unique repayment cycles tied to seasons and commodity price cycles, making them difficult to compare with non-agricultural loans.

A trade association for banks argued that agricultural loan data is not likely useful in fulfilling section 1071's statutory purposes, explaining that agricultural lenders provide product offerings based on individual needs, financial strength, access to other funding, and other relationships with the creditor or collateral, and that the credit requests of agricultural borrowers pose unique underwriting challenges.

Other community bank commenters highlighted the relationship between community banks and agricultural borrowers, arguing that the exclusion would allow community banks to continue to serve such borrowers without increasing the costs of credit or reducing credit availability. One commenter emphasized the disproportionate importance of community banks in agricultural lending, stating that community banks extend over 75 percent of agricultural loans while representing less than 15 percent of banking assets nationwide. Two trade associations representing credit unions, and a community bank asserted that covering agricultural lending would increase compliance costs and reduce credit available to farmers.

Several commenters stated that the proposed exemption would avoid duplicate oversight and reduce unnecessary reporting. A trade association for banks, a community bank, and a small business trade association asserted that agricultural lending is already subject to Federal data collection requirements by the Farm Credit Administration (FCA) and by prudential regulators under the Community Reinvestment Act (CRA). A trade association for FCS lenders noted that if the rule covered agricultural lending, it would overlap with existing reporting requirements for small agricultural lending and would burden FCS lenders.

Commenters opposing the exclusion emphasized that agricultural lenders have a significant impact on small business lending markets and should be covered by the rule. One community group noted that farms are small businesses that apply for agricultural loans and are therefore a subset of small business loans intended to be covered by section 1071. A small business advocacy group expressed concern that the proposed exclusion would prevent lenders and policymakers from addressing gaps in lending that threaten the livelihood of small, family-owned farms, and urged coverage of agricultural lending to generate data necessary to address lending disparities, especially because minority-owned farms constitute less than 5 percent of all small farms.

One community group representing farmers asserted that no nationwide, publicly available data set exists for farm loan applications. This commenter stated that the FCA does not publish applicant-level data, that the data they have is available only through Freedom of Information Act (FOIA) requests, that the data do not contain demographic information, and that because the CRA only applies to banks, there is no comparable data on small farm loans made by credit unions, FCS lenders, or nondepository institutions. Another community group also objected to the proposed rule's statement that agricultural lending data is already reported to other agencies, noting that the same argument could be made to exclude small business loans reported under the CRA. This commenter stated that Congress, in establishing section 1071, did not distinguish between lending data that was or was not otherwise collected by different agencies. An advocacy group for small farms expressed concerns that the exclusion will negatively impact the farmers who have long struggled to access credit that works for them.

A community-based organization and group representing farms stated that the proposed exclusion would obscure lending to small farms, which would frustrate the community development and fair lending purposes of section 1071. These commenters disagreed with the rationale proposing to exclude agricultural lending, arguing that data on farm loans could still be collected and identified as such, permitting an analysis of farm and non-farm credit trends. Several commenters cited past litigation concerning discrimination against Black farmers as evidence of a significant risk of discrimination and unequal credit access in the agricultural context as a reason justifying the collection of agricultural loans, including whether the loans were issued by a public sector lender or had a Federal guarantee. A community group and advocacy group stated that this history of discrimination, including in public sector lending, necessitates the collection of agricultural lending data.

Several advocacy groups representing farms characterized the proposed exclusion as an unlawful, arbitrary, and capricious action that abdicates the Bureau's statutory responsibility through a policy of non-enforcement. These commenters argued that Congress mandated that the collection and publication of all application-level small business loan data, and that the proposed exclusion of farm loans would violate the plain text and purpose of section 1071. Another commenter stated that the proposed exclusion ignores the evidentiary record, the Bureau's own prior findings, and overwhelming public comments on the need for transparency in agricultural lending. This commenter asserted that the Bureau's rationale for the proposed exclusion—

i.e.,

the need to simplify data collection at this early phase—is a complete reversal that lacks new factual support and fails the APA's requirement for reasoned decision-making.

In response to the request for comments on the proposed definition of agricultural lending, a trade association for banks requested several clarifications in the regulation text and commentary. First, the commenter suggested adding the word “principally” to the beginning of the regulatory text in proposed § 1002.104(b)(8) so that the revised text would be “transaction

principally

to fund” (proposed addition in italics) to ensure that lenders know that if a borrower applies for a loan for multiple purposes, the transaction is exempt if the primary purpose of the loan is agricultural. Second, the commenter requested extensive additional commentary and guidance on what the proposed exclusion includes because the terms “crops” and “livestock” could be interpreted in different ways. Third, the commenter encouraged the Bureau to adopt expansive definitions to capture specialized farming operations beyond “traditional” crops and livestock. Fourth, the commenter said the Bureau also should clarify the scope of the exemption, such as whether it includes businesses that provide inputs to farmers. Lastly, this commenter urged the Bureau to adopt a safe harbor for lenders applying the definition in good faith.

An FCS lender and a trade association for banks asked the Bureau to use the definition of “agricultural purpose” in comment 8 of section 1026.3(a) in Regulation Z instead of the text of proposed § 1002.104(b)(8). One of these commenters further suggested a slight edit to the pre-existing Regulation Z definition of “agricultural purpose” by replacing “a natural person” with “any person.”

Final Rule

The Bureau is finalizing its proposal to add agricultural lending to the list of excluded transactions under § 1002.104(b). Final § 1002.104(b)(8) defines agricultural lending as a transaction to fund the production of crops, fruits, vegetables, and livestock, or to fund the purchase or refinance of capital assets such as farmland, machinery and equipment, breeder livestock, and farm real estate improvements. Consistent with this addition, the Bureau is deleting references to agricultural credit in commentary. This will simplify the rule by narrowing its scope to core, generally applicable, small business lending products and avoid covering a distinct and specialized lending sector that is already subject to a different regulatory reporting scheme.

See revisions to § 1002.105(b) discussed below excluding FCS lenders from the definition of “covered financial institution.” To the extent that a given financial institution can point to multiple reasons why it does not qualify as a “covered financial institution”—

i.e.,

both because it no longer meets the raised activity threshold for non-agricultural loans, and because it is an FCS lender—either independent reason would suffice. The overlap reflects the Bureau's intent to ensure that these lenders are excluded from coverage.

In the 2023 final rule, the Bureau declined to exclude agricultural credit from its definition of a “covered credit transaction.” It noted that ECOA itself has no exceptions for agricultural credit, that agricultural businesses are included in section 1071's statutory definition of small business (defined by cross-reference to the Small Business Act),

and that there have been instances of discrimination in agricultural lending. It rejected comments asserting that agricultural credit is unique and not comparable to other types of small business lending, instead observing that “every small business industry has its own unique characteristics.”

In response to commenters' concerns about the impact on local community financial institutions and an outsized effect on the cost of credit for farmers, the Bureau emphasized that it was increasing its institutional coverage threshold to 100 annual originations, from the 25 originations it had originally proposed. The Bureau mentioned that many agricultural lenders have already been required to collect and report some form of data by HMDA, the CRA, and/or the FCA, but did so only to note that lenders accordingly should be able to adapt to the Bureau's new data collection requirements.

88 FR 35150 at 35227.

The Bureau has considered the comments on the proposal and believes that excluding agricultural lending from the definition of “covered credit transaction” advances the statutory purposes of section 1071 at this early phase as the Bureau begins the collection of small business lending data. While the 2023 final rule declined to create such an exclusion, the Bureau now believes, on reconsideration and in light of comments received, that it did not adequately consider the marked distinctions—and resulting data disparities—between agricultural lending and other types of commercial lending.

Agricultural loans are often secured by biological-based assets such as crops or livestock, which are subject to variables and risk from weather and disease. These characteristics create unique underwriting challenges that make such loans difficult to compare to those in other industries. Indeed, other data collection regimes, such as CRA regulations, appear to acknowledge categorical differences between loans to small businesses generally and loans to small farms.

Contrary to the assertion of some commenters, the Bureau need not proffer new factual support in order to reevaluate its previous policy choices.

Compare, e.g.,

12 CFR 25.12(v) (OCC CRA regulations defining small business loans),

with

§ 25.12(w) (OCC CRA regulations defining small farm loans).

Some commenters argued agricultural lending must not be excluded from the definition of “covered credit transaction” to monitor the farm economy sector and identify access to credit issues. However, as the Bureau and commenters have noted, agricultural lending is subject to several existing Federal data collection frameworks, meaning that existing data regimes serve to monitor agricultural lending and access to credit. The Farm Credit System, as discussed in further detail in part III.E conducts a substantial amount of agricultural lending through a nationwide network of congressionally chartered, borrower-owned cooperatives. This system is subject to extensive oversight by the FCA and other Federal agencies with oversight over agricultural lending. Among other things, many agricultural borrowers report data to the Farm Service Agency, which collects demographic data including race, ethnicity, and gender from applicants as part of its program oversight.

Further, under CRA regulations, banks must report data on lending to small farms alongside reporting their lending to small businesses. The 2023 final rule did not adequately consider the existing data reporting requirements for agricultural lending.

While the application-level data that will be collected under this rule are not necessarily identical to the data that is collected by the FCA, CRA, and FSA (an agency of the USDA), the Bureau believes that these varied sources of data overlap and are currently sufficient to monitor agricultural lending.

See

U.S. Dep't of Agric.,

Farm Service Agency Customer Data Worksheet (Form AD-2047)

(updated Mar. 19, 2025),

https://www.farmers.gov/sites/default/files/documents/farmersgov-form-ad-2047.pdf.

As the Bureau acknowledged in the 2023 final rule, “many agricultural lenders have already been collecting and reporting some form of data by HMDA, the CRA, and/or the Farm Credit Administration.” 88 FR 35150 at 35227.

Further, the Bureau believes that excluding agricultural lending is necessary or appropriate to carry out the purposes of section 1071 to avoid imposing new, overlapping reporting requirements on agricultural lenders at this point when the Bureau is commencing the collection of data under this rule. The Bureau disagrees with commenters that characterize the proposed exclusion of agricultural lending as unlawful, arbitrary, and capricious. The Bureau has stated its change in position from the 2023 final rule, and justified it based on its own reconsideration of existing evidence and additional feedback from an array of stakeholders. The Bureau also believes that these comments did not take into consideration the approach Bureau articulated in the 2025 proposed rule. The Bureau believes that excluding agricultural lending at this time furthers the purposes of section 1071 because such an exclusion limits potential issues with data quality. Compliance may pose greater difficulties for small agricultural lenders, which are often rural entities with less compliance infrastructure than other lenders, potentially impacting the quality of their data. The Bureau is also concerned that these entities may need to divert their limited resources away from lending activities to comply with this rule. Further, for lenders that provide both agricultural and non-agricultural loans that will still be subject to coverage, the agricultural exclusion better situates such lenders to focus their section 1071 reporting efforts on data for core lending products.

Regarding the comment requesting modifications to the proposed definition of “covered credit transaction,” the Bureau does not believe it is necessary to modify or clarify the regulation text and commentary at this time. The Bureau is concerned that the modifications or clarifications requested might have the effect of reaching lending that may be related to agricultural lending but actually is not differentiated at all from non-agricultural small business lending. After this final rule is issued, lenders will have ample opportunity to contact the Bureau for informal staff guidance on specific questions about the agricultural lending exclusion.

The Bureau also declines to adopt the definition of “agricultural purpose” in Regulation Z instead of the definition of “agricultural lending” in § 1002.104(b)(8). Commenters failed to identify practical or material differences between the Regulation Z definition and § 1002.104(b)(8). The Bureau believes that cross-referencing Regulation Z may give rise to potential unintended consequences of adopting an acontextual definition from a legal and regulatory regime with somewhat different purposes and scopes. In particular, Regulation Z generally governs only consumer-purpose credit, in contrast to this rulemaking's explicit limitation to business-purpose credit.

Given these factors, the Bureau believes it is appropriate to focus on conventional, generally applicable small business lending at this time by excluding agricultural lending from coverage under the rule. In doing so, the Bureau is using its authority under ECOA section 704B(g)(2) to adopt exceptions to any requirement of section 1071 and, conditionally or unconditionally, exempt any financial institution or class of financial institutions from the requirements of section 1071, as the Bureau deems necessary or appropriate to carry out the purposes of section 1071.

1002.104(b)(9)—Small Dollar Business Credit

Proposed Rule

Under the 2023 final rule, a “covered credit transaction” is defined as an extension of business credit that is not an excluded transaction under § 1002.104(b). In adopting the 2023 final rule, the Bureau considered but declined to adopt a de minimis loan size threshold, citing the significant volume of lending involving credit amounts below the thresholds suggested by commenters at that time.

The Bureau proposed to add small dollar business credit to the list of excluded transactions under § 1002.104(b). Proposed § 1002.104(b)(9) would exclude from the definition of covered credit transaction a transaction in an amount of $1,000 or less, to be adjusted for inflation over time.

Comments Received

The Bureau received comments regarding the proposed exclusion of small dollar business credit in § 1002.104(b)(9) from a wide range of industry stakeholders, including banks, credit unions, and trade associations representing financial institutions. The Bureau also received comments on the proposal from consumer and civil rights advocacy organizations, as well as community development financial institutions.

Industry commenters generally supported the Bureau's proposal to exclude small-dollar loans at any threshold, with banks, credit unions, and their trade associations arguing that the costs of data collection could make the provision of small loans infeasible, increase their cost, or reduce credit availability. One commenter explained the potential harm from such effects, emphasizing that small-dollar commercial loans are critical for vulnerable businesses, with another commenter highlighting their importance in rural and underserved communities. Several commenters stated that the exclusion would allow the Bureau to focus on market segments where transparency is most valuable and prevent the distortion of data by small transactions. A few commenters noted that small-dollar loans are typically incidental in nature and often function more like consumer credit than traditional small-business loans, and a trade association for fintechs similarly observed that these products do not align with traditional small business lending structures. Finally, one commenter noted that the Bureau could always increase the threshold at a later date.

Some industry commenters, including several banks, several trade associations for banks, a trade association for small businesses, and a trade association for fintechs supported the proposed $1,000 threshold, with one trade association noting that very few small business operations can be funded with $1,000 or less.

However, other industry commenters urged the Bureau to adopt a higher threshold. A coalition of trade associations for banks argued that a $1,000 exemption is of limited benefit because businesses are more likely to use consumer credit for loans of that size. This commenter also noted that merchant cash advance providers (which the Bureau proposed to exclude from the rule) offer advances as low as $5,000, suggesting that a higher threshold is needed to allow covered lenders to compete.

Regarding specific thresholds, one trade association representing fintechs suggested a $2,500 threshold to match the CDFI Small Dollar Loan Program and better fit the commercial lending context. Several commenters recommended a $5,000 threshold. These commenters argued that $5,000 would better capture operational realities, particularly in rural or high-cost markets, and avoid capturing loans that are likely exceptions to typical lending practices, while still excluding loans that are administratively burdensome to report.

One commenter suggested a $25,000 threshold to balance operational burden with the frequent business need for fast turn-around for loans needed to, for example, fund equipment repairs or purchase inventory. Several other commenters, including credit unions and related trade associations, advocated for a $50,000 threshold. They noted that this amount tracks the National Credit Union Administration's (NCUA) definition of a “commercial loan” and that consumer credit is available below this amount. One trade association argued that loans above $50,000 are more likely to involve individualized underwriting decisions and negotiated terms that are probative for fair lending analysis. It also asserted that this threshold provides a good balance between preserving the integrity and usefulness of the data set, while protecting borrower privacy and access to small-dollar business credit. Finally, the commenter suggested that if the Bureau does not adopt a $50,000 threshold, it should adopt a more streamlined reporting regime for such loans.

Some industry commenters requested specific modifications to the proposal other than the threshold amount. One trade association requested that the exclusion be optional, noting that some lenders may have difficulty tracking and excluding small loans, particularly for credit limit increases. Another trade association stated that there should be no distinction between types of loans or lenders, nor any limit on the number of small dollar loans to a single borrower. Finally, one trade association for small businesses suggested that the Bureau monitor whether this exemption inadvertently excludes meaningful data from the microlending sector.

Two community groups opposed the proposed exclusion, arguing that it would create significant gaps in understanding how small businesses access capital. They noted that the exclusion would limit the view of credit extended to businesses with limited access to traditional credit, as well as to businesses in rural and smaller communities, and would leave out a significant portion of financing used at the earliest stages of business formation. One community group also argued that the exclusion is unnecessary because technological improvements have reduced the burden of data submission. Additionally, an individual commenter challenged the Bureau's assumption that credit under $1,000 is not relevant to small business formation or operation, particularly for minority-owned businesses. This commenter opposed the proposal, citing statistics indicating that 17 percent of new businesses took a loan of less than $5,000 in their first year, and that minority groups are more likely to borrow smaller amounts. Finally, this commenter noted that the exclusion would reduce benefits associated with the community development purposes of the rule.

Final Rule

For the reasons set forth below, the Bureau is finalizing § 1002.104(b)(9) as proposed to exclude from the definition of a covered credit transaction any transaction in an amount of $1,000 or less, to be adjusted for inflation over time.

In finalizing these revisions, the Bureau agrees with industry commenters that requiring data collection on very small transactions would create a compliance burden disproportionate to the utility of the data collected. The Bureau acknowledges that establishing a specific threshold for such an exclusion involves a degree of judgment in balancing data utility against industry burden. Based on the comments received and its understanding of small business lending markets, gained

through years of rulemaking and small business lending market observation and expertise, the Bureau agrees with commenters that business loans under $1,000 are typically circumstantial, often serving as auxiliary features of business deposit accounts, such as overdraft facilities. The Bureau thus determines that the $1,000 threshold strikes an appropriate balance and aligns with market realities by filtering out circumstantial transactions. Collecting data on transactions in this range would likely yield a partial and distorted view of the market. Simultaneously, the Bureau believes that this threshold preserves visibility into the smallest substantive commercial lending, including business credit cards. This threshold ensures coverage of core credit products often utilized by small businesses.

The Bureau declines to adopt any of the higher thresholds recommended by commenters because it is concerned about losing data necessary to fulfill the statutory purposes of section 1071. Regarding $2,500 or $5,000 alternative thresholds, the Bureau concludes that a $1,000 threshold better distinguishes between credit that is circumstantial or ancillary to a deposit account and more purposeful commercial credit that section 1071 intends to monitor. The Bureau disagrees that loans in this range generally represent exceptions to typical lending practices or that operational realities justify their exclusion. The Bureau believes, based on the comments received and its understanding of small business lending markets, that a $2,500 or $5,000 threshold would exclude valuable data on smaller dollar loans, which, as noted by commenters, is often a source of capital for the smallest minority-owned businesses. The $2,500 limit of the CDFI Small Dollar Loan Program is inapposite to this rule, as the program's goals—ultimately to assist consumers by funding CDFIs—differ from the statutory purposes of section 1071 focused on small businesses.

Finally, the Bureau disagrees that a higher threshold is necessary to allow lenders to compete with MCA providers. According to the commenters requesting a $5,000 threshold, most MCA providers do not offer advances under $5,000; this suggests that MCA providers do not compete with lenders for small businesses seeking financing under $5,000. The Bureau does not believe, therefore, that a $1,000 threshold would prevent lenders from competing effectively with MCA providers.

Cmty. Dev. Fin. Insts. Fund,

Small Dollar Loan Program, https://www.cdfifund.gov/programs-training/programs/sdlp

(“The Small Dollar Loan Program (SDL Program) is intended to expand consumer access to financial institutions by providing alternatives to high-cost small dollar lending.”) (last visited Mar. 24, 2026).

The Bureau also declines to adopt a threshold of $25,000 or $50,000. If loans in the $1,000 to $5,000 range include credit transactions that are not ancillary and advance the statutory purposes of section 1071, this is even more true of transactions between $5,000 and $50,000. While the Bureau acknowledges industry comments regarding the operational burden of reporting these loans, and the availability of consumer credit below these amounts, the Bureau concludes that thresholds at these levels would leave substantial gaps in the dataset. Available data indicates that financing in amounts of $25,000 or less is particularly important for the smallest firms, including those with low annual revenues, startup firms, and non-employer firms.

Adopting a higher threshold would obscure lending patterns for these entities and fail to capture data on “microloans,” a critical source of capital often defined as loans up to $50,000. Regarding the argument that the $50,000 threshold aligns with the NCUA definition of a “commercial loan,” the Bureau notes that the NCUA definition serves a purpose distinct from the fair lending and community development purposes of section 1071. The Bureau further disagrees that loans below $50,000 should be excluded because they lack individualized underwriting; such loans remain highly relevant for analyzing access to credit and potential fair lending risks. Finally, given the importance of these transactions to fulfill the purposes of section 1071, the Bureau declines to adopt the alternative suggestion for a streamlined reporting regime for them. Such a bifurcated system of reporting is likely to add complexity to the section 1071 data collection regime, rather than reduce it.

See, e.g.,

Fed. Rsrv. Sys.,

2025 Firms in Focus: Chartbook on Firms by Revenue Size, https://www.fedsmallbusiness.org/reports/survey/2025/2025-small-business-data-chartbooks

(last visited Apr. 3, 2026).

See also

Fed. Rsrv. Sys.,

2024 Report on Startup Firms: Findings from the 2023 Small Business Credit Survey, https://www.fedsmallbusiness.org/reports/survey/2024/2024-report-on-startup-firms

(last visited Apr. 3, 2026).

With respect to comments from community groups opposing the exclusion entirely, the Bureau concludes that the $1,000 threshold minimizes the loss of meaningful data while preventing distortions that result from reporting ancillary credit transactions. The Bureau acknowledges the importance of capturing data on credit for the smallest businesses, including minority-owned businesses, businesses in rural and underserved communities, and startups, and concludes that the $1,000 threshold will effectively capture such data. To the extent that the threshold excludes some non-ancillary credit, the Bureau determines that this reflects the necessary balance between data utility and burden reduction described above. Regarding the statistics cited by an individual commenter, that 17 percent of new businesses utilize loans of less than $5,000 in their first year, the Bureau notes that the exemption retains coverage for transactions between $1,001 and $5,000. Consequently, the threshold preserves significant visibility into the microlending activity cited by this commenter. The Bureau disagrees with the assertion that technological improvements render the exclusion unnecessary. The Bureau determines that, even with automated systems, the fixed costs and other burdens of data collection relative to the potential return on a transaction of $1,000 or less remain disproportionately high, creating a risk that lenders might cease offering very low dollar loans to avoid the compliance burden.

Finally, the Bureau declines to adopt the industry request to make the exclusion optional. The Bureau determines that lenders are capable of filtering these transactions out themselves before submission. Because lenders generally track the amount of the credit application, the Bureau does not believe it will be difficult for lenders to identify and exclude transactions of $1,000 or less. Regarding the comment that there should be no distinction between types of loans or lenders, the Bureau confirms that the exclusion in § 1002.104(b)(9) provides for none; nor is there a limit on the number of such small dollar loans to a single borrower that may be excluded. Finally, the Bureau intends to monitor the small business lending markets to determine if the threshold amount (as adjusted every five years for inflation) remains appropriate over time.

1002.104(b)—Other Requests for Exemptions

Proposed Rule

The 2023 final rule broadly defined a “covered credit transaction” as an extension of business credit that is not specifically excluded. While the rule enumerated certain exclusions—such as trade credit, HMDA-reportable transactions, insurance premium financing, public utilities credit, securities credit, and incidental credit—

it aimed for broad coverage to prevent evasion and ensure a complete data set. Consequently, the 2023 final rule encompassed a wide range of credit products, including merchant cash advances and agricultural credit.

In the 2025 proposed rule, the Bureau proposed narrowing the definition of “covered credit transaction” to focus on “core” lending products—loans, lines of credit, and credit cards—that are most likely to be foundational to small business formation and operation. Consistent with this focus, the Bureau proposed adding specific exclusions for merchant cash advances, agricultural lending, and small-dollar credit transactions. While the Bureau solicited comment on these specific proposals (discussed further elsewhere), the Bureau did not seek comment on other potential product or transactional exclusions.

Comments Received

A wide range of industry participants, including banks, credit unions, fintechs, and national and specialized trade associations urged the Bureau to adopt additional exclusions or clarify existing exclusions for specific types of products, transaction structures, and borrowers. Specific requests addressed indirect lending, trade credit, individual products (such as Purchase Money Obligations and Buy Now, Pay Later transactions), commercial real estate, and transactions involving entities with non-standard ownership structures such as trusts and government agencies.

A broad group of industry trade associations requested that the Bureau exclude all indirect lending transactions from coverage. These commenters argued that indirect lenders lack a direct relationship with the small business applicant, which would make data collection by the financial institution impractical and burdensome. They further asserted that indirect lenders would be forced to contact applicants solely to collect data, describing this as an unprecedented requirement unlikely to yield meaningful data and likely to harm the customer experience. Commenters also noted that intermediaries, such as vendors or dealers, often seek financing terms from multiple indirect lenders simultaneously, and that without an exclusion, the Bureau would receive duplicative data submissions from numerous financial institutions regarding the same potential transaction. One trade association suggested that if a full exemption were not feasible, the Bureau could instead allow demographic information collection after the credit decision, allow data collection to occur at the first contact between customer and financial institution, or create unique customer identifiers within loan applications and provide clear guidance on how vendors, dealers, and finance companies should collectively handle reporting using these identifiers.

Some commenters made specific requests for clarification or exclusion regarding indirect automobile lending. A group of banking trade associations urged the Bureau to clarify, through examples in commentary, that the compliance obligation for these transactions lies with the dealer, not the indirect lender, because dealers are typically the entities that interact with the applicant and have final authority to set credit terms. The commenters further noted that this was warranted because auto lending contracts are sometimes purchased by lenders after completion, when the customer already has their vehicle. Meanwhile, two trade associations for auto dealers requested that the Bureau work with the Federal Reserve Board (which has authority over auto dealers) to exempt auto dealers from any future rulemaking on this topic. The coalition argued that auto dealers do not have the appropriate staff or resources to carry out compliance functions designed for financial institutions. It also stated that auto dealers are often the type of small, women-owned, and minority-owned businesses that section 1071 is designed to protect, not the entities it should burden.

A few commenters requested exclusions for other forms of indirect credit. A group of trade associations, including one representing the equipment finance industry, requested an exclusion for indirect equipment finance transactions facilitated by dealers. The commenters argued that dealers have the final authority to set terms of equipment financing transactions, and that discrimination risk is low because credit decisions primarily focus on the value of the equipment being purchased rather than borrower characteristics. Another group of commenters requested an exclusion for private label, store-brand credit. These commenters pointed to Federal regulators' historical recognition of the unique nature of these point-of-sale transactions, citing specific exclusions in the Financial Crimes Enforcement Network's (FinCEN) beneficial ownership rule and the Bureau's Regulation P, and noted that data collection in this context would disincentivize retailers from offering this form of credit, as they are particularly interested in swift, frictionless transactions. The commenters recommended that the Bureau exempt in-store applications or at least permit demographic data requests to be sent to applicant's post-application.

A trade association representing the equipment finance industry requested that the Bureau exclude purchase money obligations (PMOs) as defined under UCC Article 9. The commenter argued that PMOs are distinct because they finance specific equipment rather than general business operations, and lenders rely on a priority security interest in that equipment for underwriting rather than borrower characteristics. Furthermore, the commenter noted that PMOs are often arranged through dealers or vendors, creating an indirect relationship between lender and borrower. Finally, the commenter asserted that PMOs should be exempt consistent with the rationale for excluding true leases, merchant cash advances, factoring, and trade credit, arguing that regulatory parity is necessary to ensure consistent treatment across similar financing structures.

Several trade associations requested that the Bureau expand the existing trade credit exclusion, which applies to “financing arrangement[s] where a business acquires goods or services from another business without immediate payment.” Two trade associations requested that the Bureau expand the exclusion to include similar credit provided by a financial institution. One of the commenters argued that such credit facilitates the same transactions between the same businesses and therefore deserves the same regulatory treatment; it also argued that any data collected by financial institutions would be of limited use without equivalent data from business-to-business trade credit. The commenter additionally asserted that, absent this exclusion, businesses would be forced to provide their own credit, but they sometimes lack the expertise or cash flow, potentially reducing the availability of credit.

A trade association requested that the Bureau exclude “floor plan financing,” which it argued is similar to trade credit in that the merchant receives the inventory without advance payment. The commenter also explained that floor plan financing has flexible timing and pricing terms that do not align well with other data to be collected under section 1071. Finally, two trade associations representing auto dealers recommended expanding the exclusion to include trade credit in situations where the business lender intends to sell or

transfer its rights as creditor to a third party. The commenters asserted that this limitation to the trade credit exclusion was added to commentary for the first time in the 2023 final rule without explanation or discussion, which it argued both violates procedural requirements of the APA and undermines the core of the trade credit exemption.

They recommended removing that text from the commentary to achieve a more balanced regulatory burden.

See

Regulation B, subpart B, comment 104(b)(1)-1.

A trade association representing the factoring industry supported the existing exclusion for factoring arrangements, noting that the 2025 proposed rule did not propose to change it.

With respect to leases, although the Bureau did not propose altering the existing exclusion for true leases, several industry participants requested an exclusion of such transactions from coverage, arguing that leases differ substantially from traditional small business credit because they involve the transfer of possession or use rather than an extension of credit. One commenter asserted that leases do not constitute credit under ECOA, and that including them would impose operational costs without advancing the rule's objectives. The commenter emphasized that the exclusion is necessary to ensure consistency with regulatory definitions and preserve data integrity.

A coalition of trade associations representing the commercial real estate finance industry requested an exclusion for all loans secured by non-owner-occupied commercial real estate. The coalition argued that such loans are not foundational to small business formation or operations. It further argued that commercial real estate loans differ from traditional small business loans because real estate loans are based on a property's expected cash flow and value, rather than the business's cash flow, and that Federal law acknowledges the distinction, citing SBA regulations, FFIEC Call Report instructions, and the OCC Commercial Real Estate Lending Handbook.

A trade association representing mid-size banks requested that the Bureau provide greater clarity regarding the existing exemption for HMDA-reportable transactions. The coalition noted that Regulation C, which implements HMDA, excludes mortgages and open-end lines of credit that are primarily for business purposes unless the loan is for home purchase, home improvement, or refinancing. They explained that although the existing rule exempts loans reportable under HMDA, the determination is burdensome and unclear because HMDA coverage depends on the purpose of the loan. To resolve this, the commenter recommended that the Bureau either provide more illustrative examples in commentary or base applicability of the section 1071 reporting framework on the purpose of the loan as expressed in FFIEC Call Report codes. One bank expressed support for the existing HMDA exemption, and an individual commenter urged the Bureau to end HMDA reporting for all commercial loans in favor of section 1071 reporting.

A trade association representing fintechs requested that the Bureau exclude Buy Now, Pay Later (BNPL) transactions, which it characterized as credit “not subject to a finance charge and not payable in more than four installments.” The commenter argued that BNPL loans differ from traditional small business loans because they facilitate discrete commercial purchases and do not involve pricing, risk-based terms, or extended underwriting considerations that give rise to potential discriminatory outcomes. The commenter further noted that BNPL loans lack the pricing variables required to even detect discriminatory credit practices. As a result, the commenter argued that the coverage under this rule of BNPL would introduce substantial volumes of low-risk data thus diluting the interpretive value of the reporting framework, could discourage BNPL lending, and would be inconsistent with Regulation Z, which the commenter characterized as excluding such arrangements from the definition of credit.

A bank requested that the Bureau exclude partner lines of credit, also known as “capital call lines of credit,” which are single-purpose loans extended to partners in venture capital or private equity firms to cover capital calls. Characterizing these loans as niche transactions, the commenter argued that an exemption would advance the purposes of the statute by allowing the Bureau to focus its data collection on core lending products that are foundational to small business formation and operation.

Two trade associations requested that the Bureau exclude transactions involving certain entities for which ownership is ambiguous or not determinable. Specifically, the commenters requested the exclusion of commercial loans made to trusts, arguing that these could raise difficult issues, including identifying the appropriate individuals for data collection (

e.g.,

settlors, beneficiaries, trustees), determining the “net profit or loss” of the trust, and identifying the beneficiaries entitled to that net profit or loss. The request also covered nonprofit organizations, which the commenters noted do not have a “net profit or loss” that accrues to individuals and generally do not have owners. Commenters further cited non-operating entities such as special purpose vehicles, pass-through entities, and other types of wealth management vehicles, which they characterized as primarily investment vehicles and therefore outside the intended scope of section 1071. Finally, the commenters listed public agencies, which they noted are rarely considered small businesses and have no identifiable owners.

Final Rule

The Bureau declines to adopt the additional categorical product exclusions suggested by commenters, though this final rule includes a correction to § 1002.109(a)(3) that will clarify reporting obligations, and provides clarifications regarding coverage and permissible data collection procedures for certain transactions as discussed below.

The Bureau declines to exclude indirect lending transactions from coverage. This decision encompasses the specific requests to exclude indirect automobile lending, indirect equipment finance, PMOs, and private label or store-brand credit. The Bureau believes, consistent with the 2023 final rule, that data concerning indirect lending furthers section 1071's statutory purposes. For instance, data on indirect auto and equipment finance helps data users identify business and community development needs because vehicles and equipment are often essential for small businesses to operate. Similarly, private label and co-branded credit cards can be an important source of working capital for small businesses.

In response to the request to clarify, through examples in commentary, that the compliance obligation for indirect auto transactions lies with the auto dealer, not the indirect lender, the Bureau notes that comment 105(a)-1 already clarifies the exclusion of auto dealers from coverage under this rule. Regarding the request that the Bureau work with the Federal Reserve Board (Board) to exempt auto dealers from future rulemaking, the Bureau notes that application of section 1071 requirements to entities excluded from the Bureau's jurisdiction by section 1029 of the Consumer Financial Protection Act is a matter for the Board to determine, and requests regarding the

Board's potential future actions are outside the scope of this rulemaking. Additionally, comments 109(a)(3)-1 and -2 provide several scenarios and ten specific examples identifying various indirect lending scenarios, including those in which no data on a transaction would be submitted to the Bureau because an auto dealer would have been ultimately responsible for reporting it. The Bureau recognizes, however, that the inclusion of the word “covered” in § 1002.109(a)(3) in the 2023 final rule was an error that contributed to confusion regarding these obligations in the auto lending context. Because auto dealers are statutorily excluded from the Bureau's rulemaking authority, they are not “covered” financial institutions under this rule. As a result, the phrase “last covered financial institution” inadvertently implied that the reporting obligation defaults to the indirect auto lender even when an auto dealer has the final authority to set material terms. This was not the Bureau's intent. To correct this error and clarify reporting obligations, this final rule removes the word “covered” from § 1002.109(a)(3). Thus, if the last financial institution with authority to set material terms is not a covered financial institution, the application is not reported. Finally, with respect to comments concerning the purchase of auto loans after origination, the Bureau notes that comment 104(b)-4 makes clear that the term “covered credit transaction” does not cover the purchase of an originated credit transaction.

Moreover, the Bureau finds the remaining arguments for excluding other indirect lending products unpersuasive. The Bureau does not believe that sufficient evidence has been presented that asset-based underwriting in equipment finance or PMOs eliminates discrimination risk; fair lending concerns remain relevant regardless of collateral. Similarly, the Bureau rejects the contention that these products are not foundational; for many small businesses, securing a vehicle or equipment is as critical to operations as a working line of credit. Regarding regulatory parity, PMOs differ from true leases (which are not “credit” under ECOA) and trade credit (which is strictly between business buyers and sellers without a financial or other intermediary). Finally, with respect to comments concerning the role of dealers in other indirect lending contexts, the Bureau emphasizes that § 1002.109(a)(3) and related commentary make clear that the compliance obligation rests with the last financial institution with authority to set material terms.

The Bureau acknowledges, however, the concerns raised by commenters regarding the practical difficulties of collecting data in indirect lending and point-of-sale environments. The Bureau recognizes that in these transactions, the financial institution typically does not have any direct interaction with the applicant at the time of application. The Bureau agrees that requiring third-party intermediaries—such as auto dealers, equipment vendors, or retailers—to collect demographic data could be operationally complex and possibly disruptive to the customer experience. The Bureau also shares the concern that requiring data collection before a credit decision is made for indirect loans could—depending on which entity is the last with authority to set material terms—result in an applicant receiving duplicative data requests from multiple lenders competing for the same contract.

To address these concerns, and consistent with its request for comment regarding the 2023 final rule's provisions dictating the time and manner of information collection, the Bureau is adopting revisions to the “time and manner” provisions in § 1002.107(c), as discussed in detail below. Specifically, this final rule amends the provision concerning the timing and manner of the collection of demographic data, clarifying that such collection may take place in certain situations even after a credit decision is made on an application. This flexibility allows indirect lenders to avoid adding complexity to point-of-sale interactions and eliminates the need for dealers or vendors to collect the data on the lender's behalf. Furthermore, because the rule permits this post-decision collection, financial institutions can gather the required information directly from the applicant at a later time, ensuring that the process does not delay or interrupt the underlying commercial sale. Consequently, the Bureau believes that these modifications to the data collection procedures largely resolve the operational challenges cited by commenters, rendering a categorical exclusion for these products unnecessary.

The Bureau declines to expand the trade credit exclusion to include credit similar to trade credit provided by financial institutions. As the Bureau explained in the 2023 final rule, trade credit is excluded because it is not a general-use business loan; rather, trade creditors generally extend credit as a means to facilitate the sale of their own goods or services. These entities are not primarily financial services providers, nor do they generally have the infrastructure needed to manage compliance with regulatory requirements associated with making extensions of credit. The Bureau understands that, unlike trade creditors themselves, financial institutions requesting this exclusion offer stand-alone credit products in the same way as other lenders and are not retailers or merchants with limited regulatory compliance experience. As such, the Bureau does not have the same concerns about data quality or reduced small business lending regarding these entities that it does about trade creditors themselves. The Bureau also disagrees that limiting the trade credit exclusion to non-financial institutions will negatively impact small business cash flow; small businesses retain access to diverse credit products, including trade credit from vendors and standard credit products from financial institutions.

Consistent with this distinction, the Bureau declines to remove the commentary provision regarding the transfer of creditor rights and declines to broadly exclude floor plan financing. Regarding the transfer of rights, the Bureau reiterates that credit extended by a business is not trade credit where the supplying business intends to sell or transfer its rights as a creditor to a third party. The Bureau stands by its determination that the trade credit exclusion should be limited to arrangements where the business providing the goods or services retains the credit obligation, rather than extending to transactions that involve financial institutions or third-party purchasers. The Bureau further disagrees that the inclusion of this commentary in the 2023 final rule violated the APA; rather, it was a logical outgrowth of the Bureau's proposal and directly responsive to comments on the 2021 proposed rule requesting that the exclusion be expanded to include third-party financial institutions. The commentary affirmed the Bureau's position that the trade credit exclusion is designed for merchants, not financial institutions or those acting on their behalf. Similarly, regarding the request to exclude floor plan financing, the Bureau notes that under § 1002.104(b)(1), the trade credit exclusion applies where the manufacturer or distributor is financing its own inventory, but not where a financial institution is providing the financing.

The Bureau reaffirms the existing exclusions for true leases and factoring arrangements. The Bureau agrees with commenters that true leases differ from small business loans because they involve the transfer of possession and use rather than the extension of credit.

Accordingly, true leases are not covered credit transactions. The Bureau likewise maintains the long-standing exclusion for factoring arrangements, for the reasons set forth in the 2023 final rule.

The Bureau declines to exclude all loans secured by non-owner-occupied commercial real estate. While some commenters argued that these loans are underwritten based on property value rather than business cash flow, or that they often involve special-purpose vehicles (SPVs) formed by larger entities, the Bureau believes a categorical exclusion is unnecessary. The new definition of small business in revised § 1002.106(b), setting the gross annual revenue threshold at $1 million rather than $5 million, will likely exclude many of the transactions cited by commenters. Further, because comment 106(b)-3 allows financial institutions to include the revenue of an applicant's affiliates when determining whether an applicant is a small business, single-purpose entities—such as those common in commercial real estate—are permitted to have their revenue aggregated with that of their parent or affiliates for purposes of determining whether they are a small business under this rule. For instance, if a large developer with well over $1 million in revenue forms a new SPV with no gross annual revenue in the past fiscal year to purchase a property, the comment on affiliate revenue permits the SPV applicant for credit to be considered not a small business under this rule. The Bureau believes that this approach effectively filters out the large real estate developers that commenters sought to exclude, while preserving the collection of data on small businesses that purchase small rental properties without the help of large affiliates, as their access to credit is a core concern of the statute.

The Bureau also declines to modify the existing exclusion for HMDA-reportable transactions or to adopt an alternative standard based on FFIEC Call Report codes. The Bureau believes that existing § 1002.104(b)(2) is sufficiently clear: a transaction is excluded if it is a “covered loan” under Regulation C. The Bureau declines to adopt a different standard based on Call Report codes, as doing so could create inconsistencies where the definitions do not align, leading to coverage gaps or duplicative reporting. The Bureau also declines to provide additional illustrative examples in commentary, as the cross-reference to Regulation C already provides a precise and legally distinct boundary.

The Bureau declines to specifically exclude BNPL transactions from coverage, since the rule already excludes them as a type of “incidental credit.” The commenter requesting this exclusion defined BNPL credit in part as “not subject to a finance charge and not payable in more than four installments.” Existing § 1002.104(b)(6) excludes “incidental credit,” defined by reference to § 1002.3(c)(1) in Regulation B, subpart A (but without regard to whether the credit is consumer credit). Under that definition, extensions of credit are considered incidental credit if they are not made pursuant to the terms of a credit card account, are not subject to a finance charge, and are not payable by agreement in more than four installments. Accordingly, the BNPL transactions identified by the commenter requesting an exclusion already appear to meet these criteria for incidental credit, and are thus already excluded from the definition of a covered credit transaction.

The Bureau declines to adopt a specific exclusion for partner lines of credit, also known as “capital call lines of credit.” Specific exemptions for particular sub-types of lines of credit would complicate the rule and undermine the goal of a streamlined, consistent definition of coverage. Moreover, the concerns raised are largely mitigated by the existing regulatory framework. The commenter did not provide evidence regarding the scope of entities affected by this issue, but the Bureau believes that the volume of reportable transactions involving small businesses, as defined by revised § 1002.104(b)(2), in this context is likely minimal. Furthermore, as noted above regarding commercial real estate, the adjusted revenue threshold and existing affiliate revenue commentary will likely exclude the vast majority of investment funds and sophisticated vehicles that utilize these products.

Regarding comments on specific entity types, the Bureau confirms that nonprofit organizations and public agencies are generally excluded from coverage. The term “business” is defined in existing § 1002.106(a) by reference to the term “business or business concern” in 13 CFR 121.105 of SBA regulations. This definition, in turn, defines a business as an entity “organized for profit.” Nonprofit organizations and public agencies do not meet this definition of “business” and are not small businesses for purposes of this rule.

The Bureau declines to categorically exclude trusts or non-operating entities. Regarding trusts, the Bureau notes that many businesses are organized as trusts for commercial purposes and, provided they are organized for profit, meet the definition of “business” subject to coverage. While commenters raised concerns about identifying principal owners for trusts, the Bureau believes that existing comment 102(o)-2 provides sufficient clarity. That comment states that if the applicant is a trust, a trustee is considered the principal owner. Finally, regarding non-operating entities and wealth management vehicles, concerns regarding the reporting of investment vehicles are largely addressed by the changes to the small business definition discussed above. Specifically, the adjusted revenue threshold and existing affiliate revenue commentary will likely exclude the vast majority of the high-value investment vehicles and passive holding companies cited by commenters.

E. Section 1002.105—Covered Financial Institutions and Exempt Institutions

The Bureau finds that at the onset of data collection under section 1071 the focus should be on larger core lenders before the Bureau considers whether it would be appropriate to expand the scope of the rule to specialty lenders and smaller lenders. The Bureau therefore is excluding FCS lenders from the definition of covered financial institution and is raising the origination threshold from 100 to 1,000 covered credit transactions to better ensure the smooth operation of the initial period of data collection.

105(b) Covered Financial Institution—FCS Lenders

Proposed Rule

The Bureau proposed to exclude FCS lenders from the “covered financial institution” definition in § 1002.105(b). Consistent with this exemption, the Bureau proposed to delete several references to FCS lenders in commentary.

The CFPB sought comment on this proposed revision to the rule.

Comments Received

The Bureau received comments on this proposed exemption from various financial institutions, trade associations, research and business advocacy groups as well as community groups. Supporters of the exclusion included FCS lenders, an advocacy group, and trade associations representing small businesses and credit unions. An advocacy group characterized the exclusion of FCS lenders as acknowledging the specialized statutory oversight of agricultural credit and recognizing that reporting obligations under section 1071 would duplicate or conflict with existing supervisory

frameworks. An FCS lender described the exclusion as a necessary and practical limitation to the scope of the rule and stated that the benefits outweigh any basis for including these transactions for FCS borrower-owners. A trade association for small businesses asserted that the FCS lender exemption avoids duplicative oversight and is justified by FCS lenders' unique cooperative structure as well as existing FCA reporting requirements.

A trade association for FCS lenders argued that FCS lenders are different from other types of lenders and offered several rationales for why FCS lenders should not be covered. First, the commenter argued that FCS lenders are overseen solely by the FCA, and that Congress explicitly decreed that the Bureau should not supervise or enforce laws against FCS lenders, including requiring the reporting of data. Second, the commenter argued that Federal law limits FCS lenders to providing credit to “eligible” customers, and that therefore FCS lenders should not be subject to a broad reporting regime like section 1071. Third, the commenter asserted that FCS lenders are distinguishable from other lenders because their cooperative structure limits how their net income can be utilized, meaning that compliance costs would be passed onto to its Farm Credit customers since many FCS lenders also lack the compliance infrastructure of large commercial lenders. Fourth, FCS lenders are already subject to an existing regulatory reporting framework through the FCA. Lastly, the commenter asserted that FCS lenders should be exempt from a generally applicable reporting regime because their loan data would prove misleading. Specifically, the actual cost to the Farm Credit borrowers is usually less than the loan's contract pricing would indicate because FCS lenders provide their borrower-owners with patronage dividends from the FCS lenders' profits, unlike commercial banks and other lenders.

Community banks, trade associations, community groups, and an independent office of a Federal agency opposed the proposed FCS lender exemption. A number of banks and trade associations urged the Bureau to cover FCS lenders to ensure coverage of functionally identical lending and provide a level playing field. These commenters argued that such an exemption would add to the tax, funding, and regulatory advantages that FCS lenders, regardless of asset size, hold over banks. These commenters noted community banks make over 75 percent of bank-originated agricultural loans, and that imposing extensive reporting obligations on community banks while exempting FCS lenders would create a regulatory imbalance.

A trade association for community banks and a number of banks argued that exempting FCS lenders would disadvantage community banks, CDFIs, and other non-FCS agricultural lenders, and advocated for banks and FCS lenders to receive the same treatment for offering farm credit. These commenters stated that FCS lenders are able to provide more favorable loan terms and flexible payment options than community banks, and that FCS lenders are undermining their statutory mission and harming rural banks by increasingly competing in non-agricultural lending by operating as general-purpose lenders. A trade association for banks asserted that FCS lenders should not be categorically exempt and that both the agricultural lending exclusion and the 1,000-loan origination threshold should apply equally to all lenders. A trade association implied that an FCS lender originating more than 1,000 non-agricultural loans has deviated from a focus on agricultural lending and should be subject to reporting data related to those loans. This commenter further argued that an FCS lender that originates more than 1,000 loans in the rural area it is serving is a primary contributor of credit services, and that failing to collect data from that lender would provide an inaccurate portrayal of the small business lending market.

An employee from a community bank stated that all entities providing credit should be included in the definition of a “covered financial institution,” regardless of the credit's purposes or form, or whether the transaction is subject to a finance charge. Commenters argued that exempting FCS lenders is contrary to the congressional intent of section 1071, would distort the lending landscape, inhibit analysis of unmet credit needs, and lead to reputational risk for FCS lenders.

In reference to the statement in the 2025 proposed rule that FCS lenders already report certain data, including race, ethnicity, and gender from applicants, a bank trade association, community group, and trade association for farms stated that FCA does not publish applicant-level data, any such data can only be accessed by a FOIA request, that FCA does not collect demographic information, and that FCS lenders are not required to collect and report the data points required by the section 1071 rule. One of these commenters argued that section 1071 data will provide an incomplete picture of credit availability where FCS lenders operate if FCS lenders are excluded from the rule. Another commenter disagreed with the Bureau's statement that FCS lenders are already subject to regulatory compliance under the FCA as reasoning for exempting from section 1071 data collection and reporting requirements. This commenter stated that the goal of FCA oversight is to ensure compliance by FCS lenders with the unique rules governing the Farm Credit System, whereas it described the goals of section 1071 as disclosure and providing a complete view of the small business financing landscape for the benefit of the public, small businesses, and regulators. A community group suggested that since FCS lenders have years of experience submitting required data to FCA, the Bureau and the FCA could coordinate to eliminate duplicative data requirements.

Some community banks focused on the favorable and unique regulatory framework under which FCS lenders operate. One commenter noted a crucial difference between FCS lenders and other financial institutions—that community banks, which must compete for higher cost deposits in the private sector to fund their operations, must compete directly with FCS lenders, which are funded at a significantly lower cost by a government guarantee. The commenter also stated that the FCS lenders operate outside of safety and soundness supervision and examination by Federal prudential regulators and are subject to oversight by agricultural, rather than financial, committees in Congress. Lastly, the commenter asserted that the FCS is not accountable for compliance with the same rules and regulations as community banks, including the Community Reinvestment Act (CRA), and that FCS lenders would not be accountable for section 1071 small business data collection and reporting if exempted.

A trade association for community banks suggested covering FCS lenders in the final rule with phased compliance or tailored guidance as an alternative to exclusion if implementation challenges exist for FCS lenders. An independent office of a Federal agency recommended monitoring of the FCS lending market to assess whether coverage would be suitable in the future as regulatory frameworks and products develop.

Final Rule

For the reasons set forth herein, the Bureau is excluding FCS lenders from the “covered financial institution” definition in § 1002.105(b).

Consistent

with this exemption, the Bureau is deleting several references to FCS lenders in commentary. This revision will simplify the rule by narrowing its scope to core small business lending practices and lenders. The revision will also avoid imposing reporting requirements on a category of specialized lenders that are already subject to a separate regulatory reporting scheme. The Bureau finds that an exemption for FCS lenders will advance the statutory purposes of section 1071.

FCS lenders have a unique mission-driven structure, and they operate in a specific regulatory environment.

As discussed with respect to § 1002.104(b)(8) above, the Bureau is also excluding agricultural lending as a covered credit product. To the extent

that a given financial institution can point to multiple reasons why it does not qualify as a “covered financial institution”—

i.e.,

Because the Bureau is excluding FCS lenders at this time, it need not address a commenter's assertion that it lacks authority to require FCS lenders to report data.

The Bureau disagrees with the argument by commenters that FCS lenders engage in functionally identical lending as other types o

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