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

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Federal Register › Vol. 90 › 90 FR 50952

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published in the Federal Register an interim final rule (2024 interim final rule) 6 to extend

the rule's compliance dates in accordance with orders issued by the United States District Court for the Southern District of Texas. 7

6 89 FR 55024 (July 3, 2024). See also Order Granting-in-Part & Denying-in-Part Pls.' Mot. for Prelim. Inj., Texas Bankers Ass'n v. 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 v. 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. et al. v. CFPB et al., No. 6:23-CV-00148-KKC (E.D. Ky. Mar. 11, 2025); Op. & Order, Revenue Based Finance Coalition v. CFPB et al., No. 1:23-CV-24882-DSL (S.D. Fla. May 6, 2025).

7 Texas Bankers Ass'n v. 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. 8 However, the courts did not stay the compliance dates for those who are not plaintiffs or intervenors in those cases.

8 See Unpublished Order, Texas Bankers Ass'n v. CFPB, No. 24-40705 (5th Cir. Feb. 7, 2025) (tolling the compliance deadlines for plaintiffs and intervenors in that case, until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. et al. v. CFPB et al., No. 6:23-CV-00148-KKC (E.D. Ky. Mar. 11, 2025) (same).

On June 18, 2025, the CFPB published in the Federal Register an interim final rule (2025 interim final rule) to extend compliance deadlines by approximately one year 9 to facilitate consistent compliance across all covered financial institutions. The CFPB sought comment on the 2025 interim final rule

icello Banking Co. et al. v. CFPB et al., No. 6:23-CV-00148-KKC (E.D. Ky. Mar. 11, 2025) (same).

9 90 FR 25874 (June 18, 2025).

On October 2, 2025, the CFPB 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. 10 The CFPB 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.

10 90 FR 47514 (Oct. 2, 2025).

Based on reactions to the 2023 final rule, including continued feedback from stakeholders and the ongoing litigation, the CFPB 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 CFPB preliminarily believes that that reaction to the 2023 final rule, practically speaking, was in part based on its expansive approach, appearing to seek broad coverage of lenders, products, and information collected. 11 The CFPB 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.

11 The CFPB 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

s ownership status of small business applicants and the format of demographic data collected concerning the principal owners of a small business.

Time and manner of data collection. The CFPB proposes changes to 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. The CFPB also proposes to add a provision that would emphasize for applicants their statutory rights under the rule.

Compliance dates. Finally, in light of these other proposed changes to the rule, the CFPB proposes to extend the rule's compliance date provisions to January 1, 2028 for all financial institutions that remain covered by the rule, and to make other simplifying and streamlining changes.

The CFPB also addresses in this summary two other issues.

Privacy and data publication. The CFPB does not address in this proposal 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. 21 Nor

has CFPB 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 CFPB also suggested that it intended to publish aggregate data in the first year of receiving data, and before publishing any application-level data. The CFPB is currently reconsidering all of these issues and preliminary findings, will continue to engage with stakeholders, and will address these issues and findings going forward in a timely fashion

a to conduct the necessary privacy analysis. The CFPB also suggested that it intended to publish aggregate data in the first year of receiving data, and before publishing any application-level data. The CFPB is currently reconsidering all of these issues and preliminary findings, will continue to engage with stakeholders, and will address these issues and findings going forward in a timely fashion.

21 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 CFPB 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 CFPB does not address the grace period policy statement in this proposal

to receive a percentage of the small business's future sales or income up to a ceiling amount. 22 Consistent with this proposed new exclusion, the CFPB proposes deleting several references to MCAs, and the related term sales-based financing, in commentary.

22 R. & R. on Cross Mots. for Summ. J. at 4, Revenue Based Finance Coalition v. CFPB et al., No. 1:23-CV-24882-DSL (S.D. Fla. Feb. 17, 2025).

In the 2023 final rule, the CFPB 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 CFPB 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 in existing 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 CFPB 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.

This proposal reconsiders the CFPB's previous conclusions, as illustrated in existing comment 104(a)(1)-1, which does not exclude MCAs from the definition of “covered credit transactions” under § 1002.104(a), for several independent reasons

es' formation and operation.

23 See current § 1002.107(a)(12)(v) (providing for the collection of data only applicable to merchant cash advance and other sales-based financings subject to the rule).

Second, the CFPB believes it erred in 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 also does 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” would be consistent with the way the CFPB 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, 24 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 and credit disguised as leases, 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 proposes taking a similar approach to MCA transactions as it did to leases.

24 See, e.g., 88 FR 35150, 35240 (“The Bureau is not covering leases under this final rule, as requested by some commenters

quirements).

Finally, while the final rule cited concerns about high costs and predatory practices in the MCA market, 26 those concerns may be addressed by Federal and State law enforcement agencies through their respective enforcement authorities.

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

The CFPB 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, that 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 generally been regulated as credit, many smaller MCA providers may lack the infrastructure needed to manage compliance with regulatory requirements associated with making extensions of credit. Taken together, requiring MCAs to be reported could lead to data quality issues, which would not advance the purposes of section 1071.

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

The CFPB seeks comment on this proposed revision to the rule

to data quality issues, which would not advance the purposes of section 1071.

The CFPB seeks comment on this proposed revision to the rule. It also seeks comment on topics including, but not limited to, the extent to which MCAs differ from or resemble traditional lending products; the diversity of MCA terms and practices and how they impact whether MCAs, or a subset of MCAs, meet the definition of “credit” under ECOA; whether certain types of MCAs are more or less appropriate for exclusion; and suggestions for how the 2023 final rule could be modified with respect to MCAs if the CFPB ultimately does not exclude them.

The CFPB further seeks comment on alternative definitions to the one proposed in § 1002.104(b)(7).

1002.104(b)(8)—Agricultural Lending

The CFPB proposes adding agricultural lending to the list of excluded transactions under § 1002.104(b). The CFPB proposes adding 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 addition, the Bureau proposes deleting references to agricultural credit in current commentary. 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

C CRA regulations defining small farm loans).

Second, agricultural lending is already subject to an existing Federal data collection framework, one that is tailored to this particular sector. The FCA 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. Among other things, the FCA collects demographic data including race, ethnicity, and gender from applicants as part of its program oversight, in contrast to other forms of small business lending where such data collection was not permissible under § 1002.5 of Regulation B until the promulgation of the 2023 final rule. 30 Further, under CRA regulations, institutions must report data on lending to small farms alongside reporting their lending to small businesses. The 2023 final rule did not adequately consider these distinctions. 31

30 See FSA Customer Data Worksheet (Form AD-2047).

31 As the CFPB 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, 35227.

The CFPB believes upon reconsideration that the fact that agricultural lenders are already reporting information to other agencies supports its conclusion 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 CFPB is commencing the collection of data under this rule. The Bureau believes that excluding agricultural lending would further the purposes of section 1071 because such an exclusion would limit potential issues with data quality

cessary 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 CFPB is commencing the collection of data under this rule. The Bureau believes that excluding agricultural lending would further the purposes of section 1071 because such an exclusion would limit 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, and they may need to divert their limited resources from lending activities. Further, for lenders that provide both agricultural and non-agricultural loans that would still be subject to coverage, the CFPB believes that such lenders would be better situated to focusing their section 1071 reporting efforts on improving the quality of data for more core lending products.

Given these factors, the CFPB believes it would be appropriate to reconsider the rule's application to agricultural lending to focus on conventional, generally applicable small business lending at this time, and to use its exemption authority under 15 U.S.C. 1691c-2(g)(2) to exclude agricultural lending from coverage under the rule.

The CFPB seeks comment on this proposed revision to the rule. It seeks comment on topics including, but not limited to, the definition of agricultural lending; the extent to which agricultural lending differs from or resembles other types of lending; and whether specific types of agricultural lending are more or less appropriate for exclusion.

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

The CFPB proposes adding 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

agricultural lending are more or less appropriate for exclusion.

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

In the 2023 final rule, the CFPB declined commenters' suggestions that it exempt credit transactions below a certain threshold; commenters had suggested exemption thresholds ranging from $25,000 to $10 million, on the grounds that it would help smaller institutions continue to make credit available. The CFPB explained that it was not adopting an exemption because of the significant volume of small business lending involving credit amounts below the threshold levels proposed by commenters.

The CFPB now believes that an exclusion for the smallest loans—well under the thresholds suggested by commenters in the 2023 final rule—is necessary or appropriate to carry out the purposes of section 1071. Indeed, in considering comments regarding larger exemption thresholds, the 2023 final rule did not explicitly address an exemption for loans under $1,000.

The CFPB believes that the collection of data on such loans, to the extent that they exist, are more likely to result in poor data quality for purposes of any analyses in furtherance of the statutory purposes of section 1071, given that small businesses will generally require much larger loans to begin or operate their businesses. Typically, very small loans below $1,000 would be satisfied by consumer credit options and small non-profit lenders who lack infrastructure to support regulatory compliance. Consequently, data collected from smaller transactions may not provide meaningful insight into the practices of most core lenders to small businesses

ll generally require much larger loans to begin or operate their businesses. Typically, very small loans below $1,000 would be satisfied by consumer credit options and small non-profit lenders who lack infrastructure to support regulatory compliance. Consequently, data collected from smaller transactions may not provide meaningful insight into the practices of most core lenders to small businesses.

Further, requiring data reporting on loans of $1,000 or less may make offering such small credit products uneconomical for lenders. Detailed data collection and reporting requirements are likely to impose operational complexity, which would make producing quality data difficult for smaller financial institutions. The CFPB is concerned that this could impact data quality.

Moreover, the CFPB believes, based on its experience and understanding of the markets, that many lenders treat transactions under $1,000 as consumer credit, rather than business credit. Further, $1,000 is substantially lower than loan amounts already characterized as “microloans” to businesses. The CFPB understands that loans in such amounts are not material for the small business lending markets. For example, the Small Business Administration (SBA) offers business credit that it characterizes as “microloans,” which are generally for loan amounts under $50,000 and an average loan amount of $13,000. 32 Further, several commenters in the 2023 final rule requested that the CFPB carve out loans under $50,000 to

$100,000 as microloans. 33 Some State-run programs offer business credit that start at a minimum loan amount of $1,000. 34 The CFPB believes that it seems unlikely that many such small dollar loans under $1,000 to small businesses are made, and if so the collection of such data would not advance the statutory purposes of the rule.

32 See Small Bus. Admin., Microloans, https://www.sba.gov/funding-programs/loans/microloans (last visited Oct. 1, 2025).

33 88 FR 35150, 35245.

34 See, e.g., Md. Dep't

nt of $1,000. 34 The CFPB believes that it seems unlikely that many such small dollar loans under $1,000 to small businesses are made, and if so the collection of such data would not advance the statutory purposes of the rule.

32 See Small Bus. Admin., Microloans, https://www.sba.gov/funding-programs/loans/microloans (last visited Oct. 1, 2025).

33 88 FR 35150, 35245.

34 See, e.g., Md. Dep't. of Com., Military Personnel and Veteran-owned Small Business Loan Program (MPVOLP), https://commerce.maryland.gov/fund/programs-for-businesses/mpvolp (last visited Sept. 10, 2025) (providing no interest loans, ranging from $1,000 to $100,000, for businesses owned by military reservists, veterans, National Guard personnel and for small businesses that employ or are owned by such person).

The CFPB seeks comment on this proposed revision to the rule. It seeks comment on topics including, but not limited to, the loan amount at which the exclusion for small dollar business credit should be set; whether the exclusion should be limited to certain types of loan products, financial institutions, or small businesses; the extent to which financial institutions lend to small businesses in amounts less than $1,000 and why they do so; and whether the exclusion should account for a lender extending multiple small dollar loans to a single small business.

C. Section 1002.105—Covered Financial Institutions and Exempt Institutions

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

r-owned, cooperative institutions with a statutory mandate to provide the agricultural sector with reliable credit. FCS borrowers include agricultural and related businesses as well as rural homeowners. As owners of the FCS lending associations, these borrowers can receive patronage dividends that can reduce borrowing costs and make FCS loans difficult to compare to loans issued by non-FCS lenders. Commercial banks, by contrast, are owned by shareholders, and credit unions, while member-owned, serve a wide range of customers, provide a wide range of products and services, and lack a specific charter that is exclusively focused on agriculture. These differences between FCS lenders and other types of lenders, which the CFPB did not meaningfully address in the 2023 final rule, make it difficult to easily compare loans made by FCS lenders with those of other non-cooperative lenders.

In addition to their unique nature and mission, as described above, FCS lenders are also already subject to an existing regulatory reporting framework through the FCA, including the collection of demographic data as part of its program oversight. 35

35 See also 88 FR 35150, 35227 (noting that many agricultural lenders currently required to collect and report data to FCA).

In issuing the 2023 final rule, the Bureau explained the decision not to categorically exempt any specific type of financial institution from the rule's coverage, stating that such exemptions “would create significant gaps in the data and would create an uneven playing field between different types of institutions.” 36 The CFPB did not appear to meaningfully consider the extent to which FCS lending differs in kind from general-purpose lending.

36 Id. at 35258

mplexity may result in decreased data quality for those institutions, which would not advance the statutory purposes of section 1071.

The proposed change to § 1002.105(b) would, in turn, require other changes. Current § 1002.112(b) provides that a bona fide error is not a violation of ECOA or Regulation B, subpart B. The provision cross-references numerical error thresholds in current appendix F. Under appendix F, a financial institution is presumed to maintain procedures reasonably adapted to avoid errors with respect to a given data field if the number of errors found in a random sample of a financial institution's data submission for a given data field do not equal or exceed the threshold in column C of table 1 of appendix F.

The CFPB proposes revising appendix F to conform to the proposed changes to § 1002.105(b), defining “covered financial institution,” based on a revised origination threshold of 1,000 covered credit transactions. Specifically, column A of existing appendix F lists ranges of small business lending application register counts. The CFPB proposes eliminating the rows in table 1 associated with application counts under 1,000, and revising the count in what is currently the 4th row to be “1,000-100,000” rather than the current “500-100,000.” The CFPB requests comment on these proposed changes.

The CFPB seeks comment on this proposed revision to the rule, in particular whether an originations threshold at 200, 500, 2,000, or some other number would be appropriate, and whether the associated changes to appendix F are appropriate.

D. Section 1002.106—Business and Small Business

106(b) Small Business

ciated changes to appendix F are appropriate.

D. Section 1002.106—Business and Small Business

106(b) Small Business

Current § 1002.106(b)(1) defines “small business” and provides, among other criteria, that a business is small if its gross annual revenue for its preceding fiscal year is $5 million or less. Section 1002.106(b)(2) provides procedures for inflation adjustments to that threshold. For the reasons discussed below, the CFPB is proposing to reduce the gross annual revenue threshold from $5 million or less to $1 million or less.

In the 2023 final rule, the CFPB explained that its definition reflected the need for financial institutions to apply a simple, broad definition of a small business across industries. It also explained its belief that a $5 million gross annual revenue threshold strikes the right balance in terms of broadly covering the small business financing market while meeting the SBA's criteria for an alternative size standard. It noted that it did not propose a $1 million gross annual revenue threshold out of concern that such a threshold likely would not satisfy the SBA's requirements for an alternative size standard across industries, while also observing that a $1 million threshold would better align with existing Regulation B adverse action notification requirements. It also concluded that a $1 million threshold would exclude many businesses that should be characterized as small.

The CFPB will retain the use of a simple, broad definition of a small business across industries but is

proposing to change the gross annual revenue threshold from $5 million or less to $1 million or less, and to make conforming changes throughout the regulatory text and commentary. The CFPB is seeking SBA approval for this alternate small business size standard pursuant to the Small Business Act. 42

42 15 U.S.C. 632(a)(2)(C).

Since the 2023 final rule was published, the President issued E.O. 14192

egulations in 2024 to change the relevant threshold from $1 million to $5 million to conform with the CFPB's rule implementing section 1071. 89 FR 6574 (Feb. 1, 2024). These agencies have subsequently issued a joint notice of proposed rulemaking that would rescind the 2024 amendments to the CRA regulations, reverting back to the 1995/2001 version of the CRA regulations. 90 FR 34086 (July 18, 2025).

Second, the CFPB also believes that the revised threshold in proposed § 1002.106(b) would be more consistent with Regulation B, subpart A, further helping to reduce regulatory burden pursuant to E.O. 14192. 46 As noted in the 2023 final rule, Regulation B, subpart A uses a $1 million revenue threshold to determine what kind of adverse action notice a business credit applicant receives; those under the threshold receive a notification similar to one a consumer would receive. 47 As a result, many covered financial institutions likely already apply a $1 million threshold to determine which businesses are small. Here, the CFPB believes that using an existing size standard would reduce regulatory complexity for covered financial institutions.

46 90 FR 9065 (Feb. 6, 2025).

47 See 88 FR 35150, 35186.

Third, as many financial institutions have worked on implementing the 2023 final rule, the Bureau has received more feedback, including from a number of community banks and trade groups representing larger institutions, that a $1 million revenue threshold would more closely align with their internal thresholds that separate small and medium-sized businesses within their own institutions.

inesses within their own institutions.

The CFPB notes that the 2023 final rule adopted a $5 million threshold in significant part because it believed that a $1 million threshold, discussed as an alternative to the $5 million threshold, would not satisfy the SBA's requirements for an alternative size standard and would exclude too many businesses designated as small under the SBA's size standards. Whether an alternative size standard satisfies the requirements for an alternative size standard is within the SBA's purview to determine, and as noted above the CFPB is seeking SBA approval for its proposed $1 million threshold.

Further, as commenters initially stated, a $1 million threshold would cover most (over 95 percent) of small businesses as defined by the SBA size standards in effect at the time of the 2021 proposed rule. The CFPB estimated in the 2023 final rule that among non-agricultural industries over 1.5 million small businesses (27 percent) would not be covered by an alternative $1 million gross annual revenue threshold. 48 The CFPB is now reconsidering the data provided by commenters and its final rule estimate. In any case, the CFPB believes that a change to $1 million is consistent with the alignment goals noted above given the E.O.s discussed throughout, even if a 27 percent decline in small business coverage would result. At a $1 million threshold, the proposed rule would still cover a supermajority of small businesses that the 2023 final rule covers.

48 Id. at 35266.

The CFPB is proposing conforming changes also to the inflation adjustment provision in § 1002.106(b)(2), to require adjustment in $100,000 increments (rather than $500,000) every five years after 2030 (rather than 2025). The CFPB is concerned that, given the proposed change to a $1 million revenue threshold, inflation adjustments in $500,000 increments would not be granular enough for this provision to meaningfully track inflation

ult in lesser data quality and integrity.

53 The Bureau is not proposing to remove NAICS code, time in business, and number of principal owners because those discretionary data points are generally integral to collection and understanding of statutorily required data points and the Bureau did not receive evidence during the implementation period of logistical challenges not previously considered.

The CFPB believes it prudent to focus on the collection of a more limited number of core data points (the statutory data points and a limited number of other data points needed to facilitate the collection of these statutory data points) to avoid complexity in the initial implementation of a rule to implement section 1071. This in turn would make it more likely that covered financial institutions face a smoother transition in the initial years of the rule in ramping up to the accurate, recurring collection of data. 54

54 The Bureau notes that in its experience with new regulatory regimes, especially new data collections such as the revisions to HMDA in 2015, covered institutions face initial difficulties with collecting and reporting data accurately, especially given the expansive changes required by the 2015 HMDA rulemaking.

Application method. The 2023 final rule required financial institutions to collect data on whether applications were submitted in person, by phone, online, or by mail. It explained its belief that this data will improve the market's understanding of how different types of applicants apply for credit and provide additional context for the business and community development needs of particular geographic regions. The Bureau now believes that this information is of relatively low value in furthering the purposes of section 1071 while adding to the overall complexity of a lengthy data collection, and thus should not be included. Upon reconsideration, the Bureau believes that in the 2023 final rule, it had underestimated the potential complexity of this data point

pment needs of particular geographic regions. The Bureau now believes that this information is of relatively low value in furthering the purposes of section 1071 while adding to the overall complexity of a lengthy data collection, and thus should not be included. Upon reconsideration, the Bureau believes that in the 2023 final rule, it had underestimated the potential complexity of this data point. The Bureau acknowledged that many lenders do not already collect this data point as such, and that many small business applicants have multiple interactions across the different methods listed (in-person, telephone, online) during the application process. However, current § 1002.107(a)(3) does not seem to address this but rather appears to reduce the potentially complex set of interactions to identifying only one means of collecting a covered application. The logic of the 2023 final rule justifying this provision suggests the futility of collecting this data point without capturing the full scope of interaction between applicant and lender for purposes of this rule. The Bureau believes, as a result, that at this time, this data point should be removed because its utility does not outweigh the cost and complexity of collecting it.

Application recipient. In the 2023 rule, the Bureau required financial institutions to collect data on application method—whether the applicant submitted the covered application directly to the financial institution or its affiliate, or whether the applicant submitted the covered application indirectly to the financial institution via a third party. It explained

to the financial institution via a third party. It explained

that this discretionary data point will improve the market's understanding of how small businesses interact with financial institutions when applying for credit, such as whether financial institutions making credit decisions are directly interacting with the applicant and/or generally operating in the same community as the applicant. The Bureau now believes that this information is of relatively low value in furthering the purposes of section 1071 while adding to the overall complexity of a lengthy data collection. Upon reconsideration, the Bureau believes that in the 2023 final rule, it overestimated the utility and underestimated the cost and complexity of this data point. The justification for this data point in the 2023 final rule suggested that it would help determine whether lenders were operating in the communities with applicants but did not offer details on why a data point on third-party submissions would advance such an understanding, above and beyond the other data points more apparently targeted to identify community development needs, such as census tract. Further, in response to a comment that lenders do not track data on application submissions by third parties because such data played no role in underwriting decisions, the Bureau summarily replied that it did not believe it would be difficult for lenders to track this information. The Bureau believes that submissions through third parties may not always be identified as such, and that its statement in the 2023 final rule justifying the inclusion of this data point did not account for this. The Bureau as a result believes that at the start of a potentially long-term data collection regime that this data point should be removed.

Denial reasons

ers to track this information. The Bureau believes that submissions through third parties may not always be identified as such, and that its statement in the 2023 final rule justifying the inclusion of this data point did not account for this. The Bureau as a result believes that at the start of a potentially long-term data collection regime that this data point should be removed.

Denial reasons. The Bureau explained in the 2023 rule that data on denial reasons will allow data users to better understand the rationale behind denial decisions, help identify potential fair lending concerns, and provide financial institutions with data to evaluate their business underwriting criteria and address potential gaps as needed. As the Bureau acknowledged in the 2023 rule, reasons for denial data could be harmful or sensitive for applicants or related natural persons. The Bureau now believes that the sensitivity of this information, combined with its addition to the overall complexity of a lengthy data collection, justifies proposing to remove it from the discretionary data points. The 2023 final rule did not explain how the marginal or added usefulness of denial reasons would justify the added cost and complexity above and beyond the collection of data on denials, already captured by the mandatory “type of action taken” data point. Further, to the extent that this data point was intended to assist lenders to analyze their own fair lending concerns, as the 2023 final rule stated, the data point is redundant as lenders already possess this information. To the extent that this data point was intended to assist applicants, under subpart A of Regulation B they are already able to access a statement of denial reasons. Section 1002.9(a)(3) in subpart A already requires lenders to inform applicants for business credit with $1 million or less in gross annual revenue of their right to receive a statement of denial reasons upon request

ation. The 2023 rule acknowledge the potential complexity of collecting this data, and commenters noted the risk that it could reveal confidential business information or lead to incorrect inferences about discrimination. The Bureau now believes that the potential risk of harm to applicants and the substantial complexity of the data collection justify removing it from the discretionary data points. While the Bureau acknowledged comments “about the harmful consequences of potentially misleading data,” the Bureau addressed this concern in the 2023 final rule by stating that it would note “when disclosing the 1071 data that the data alone generally do not offer proof of compliance with fair lending laws.” 55 The Bureau upon reconsideration believes that such a statement may not be sufficient to address concerns about the misuse of pricing data. In adopting the pricing data point, the Bureau assumed that community groups would use data responsibly but did not address how other members of the public with access to the data might use it. 56 Further, the 2023 final rule stated that “the 1071 data need not reflect every determinant of credit pricing to provide value to users” but also acknowledged the relevant and importance of credit score of principal owners to “explain[] pricing differences between transactions.” 57 That is, the Bureau believes that the publication of pricing information absent certain other information may be incomplete and give rise to incorrect inferences concerning discrimination; however, the collection of sufficient data points to correct potentially erroneous inferences may make the data collection unduly complex. This combination of difficulties leads the Bureau to believe that this data point should not be included at the start of a potentially long-term data collection regime.

55 88 FR 35150, 35310.

56 Id. at 35310.

57 Id.

Number of workers

ing discrimination; however, the collection of sufficient data points to correct potentially erroneous inferences may make the data collection unduly complex. This combination of difficulties leads the Bureau to believe that this data point should not be included at the start of a potentially long-term data collection regime.

55 88 FR 35150, 35310.

56 Id. at 35310.

57 Id.

Number of workers. The 2023 rule required financial institutions to report the number of workers in ranges, and stated that data on the number of persons working for a small business applicant will provide data users and relevant stakeholders with a better understanding of the job maintenance and creation that small business credit provides. The Bureau now believes that this information is of relatively low value in furthering the purposes of section 1071 while adding to the overall complexity of a lengthy data collection. First, in the 2023 final rule, the Bureau acknowledged that “[t]he majority of small businesses are run by a single owner.” Given the proposed change to § 1002.106(b), revising the definition of small business to those businesses with $1 million or less in gross annual revenue, fewer small businesses with employees would be covered under the rule. Second, as acknowledged in the 2023 final rule, small businesses may encounter difficulties in providing this information to financial institutions, especially small businesses that use contractors, temporary or gig workers, or seasonal workers, or those that cycle through employees frequently. While the Bureau simplified a covered financial institution's reporting requirements for this data point, the Bureau believes that even as simplified this data point's complexity outweighs its potential utility. That is, the Bureau

for this data point, the Bureau believes that even as simplified this data point's complexity outweighs its potential utility. That is, the Bureau

now believes that it would be difficult to ensure consistency in reporting this data point across a variety of different small business applicants, making it likely that the data collected would be of poor quality or otherwise difficult to interpret. Further, the 2023 final rule justified this data point solely on community development grounds. It did not justify this data point on fair lending grounds because nothing in Regulation B, including subpart A, offers differential protection based on a business credit applicant's number of workers. Based on the Bureau's intention to commence this rulemaking regime focused on truly small businesses, the Bureau believes that this data point should not be included at the start of a potentially long-term data collection regime as it is not likely to result in the collection of useful data at this time.

LGBTQI+-owned business status. The 2023 rule required financial institutions to inquire whether a small business applicant for credit is a minority-owned, women-owned, and/or LGBTQI+-owned business. This discretionary data point is addressed in more detail below in the section on the Defending Women E.O.

The Bureau solicits comment on these proposed changes, including whether any of the identified discretionary data points should be modified or retained, in part or in full.

Collection of Disaggregated Ethnicity and Race Categories

Current § 1002.107(a)(19) requires the collection of both aggregate and disaggregated race and ethnicity information on principal owners of small business applicants. However, 15 U.S.C. 1691c-2(e)(2)(G) only requires covered lenders to collect and report the “race, sex, and ethnicity of the principal owners of the business.” This statutory provision does not explicitly call for the collection of disaggregated data on the race and ethnicity of principal owners

gate and disaggregated race and ethnicity information on principal owners of small business applicants. However, 15 U.S.C. 1691c-2(e)(2)(G) only requires covered lenders to collect and report the “race, sex, and ethnicity of the principal owners of the business.” This statutory provision does not explicitly call for the collection of disaggregated data on the race and ethnicity of principal owners. Given its concern about commencing a long-term data collection regime by asking for potentially complex and costly data points, the Bureau seeks comment on whether it should revise the rule's data collection requirements to require collection only of aggregate ethnicity and race categories.

As a result, and consistent with its reconsideration of discretionary data points, the Bureau also seeks specific comment on what utility there might be for carrying out the purposes of section 1071 in requiring the collection of disaggregated categories of ethnicity and race, in addition to the aggregate categories. The Bureau also seeks comment on the costs and burdens for financial institutions in requiring the collection of these disaggregated categories of ethnicity and race.

Defending Women E.O.

LGBTQI+-ownership. Current § 1002.107(a)(18) requires financial institutions to inquire whether a small business applicant for credit is a minority-owned, women-owned, and/or LGBTQI+-owned business. The Bureau explained that, based on limited information available, it believed that LGBTQI+-owned businesses may experience particular challenges accessing small business credit, and used its discretionary authority under 15 U.S.C. 1691c-2(e)(2)(H) to require financial institutions to request information about whether an applicant is a LGBTQI+-owned business

likely result in poor data quality, given the variety of possible responses to the sex question even for a single type of answer. 59 The potential for confusion is

exacerbated by the lack of clarifying instructions. The Bureau now believes that the most appropriate way to collect data on the sex of a principal owner is to ask the straightforward question of whether the owner is male or female.

59 Responses intended to indicate “female” sex could include “female,” “woman,” “feminine,”

“ mujer, ” “F,” “W,” and even “M.” Responses intended to indicate “male” could include “man,” “male,” “ hombre, ” “guy,” “M,” “m,” “H,” etc. Free-form text responses may also result in non-serious responses.

Additionally, this proposed change comports with the Defending Women order described above. Specifically, the changes consistent with E.O. 14168 would include revising how principal owners' sex is to be collected in commentary accompanying § 1002.107(a)(19). The Bureau is also proposing to make conforming changes elsewhere throughout the regulatory text and associated commentary, as well as the sample form in appendix E.

The Bureau solicits comment on these proposed changes.

Applicant's Right To Refuse To Provide Demographic Data

Current § 1002.107(a)(18) requires covered financial institutions to seek information from applicants about their women-owned, minority-owned, and LGBTQI+-owned business status and § 1002.107(a)(19) requires covered financial institutions to seek information from applicants about the ethnicity, race, and sex of the principal owners of the applicant business. Those provisions and associated commentary also include discussions of the statutorily provided right of an applicant to refuse to provide this information. 60

60 15 U.S.C. 1691c-2(c).

The Bureau is proposing to revise the applicant right to refuse discussions in § 1002.107(a)(18) and (19), as well as the related commentary

d changes.

107(c) Time and Manner of Collection

Anti-Discouragement and Related Provisions

In the 2023 rule, the Bureau explained that it was adopting the provisions in § 1002.107(c) in an attempt to provide a balance between allowing institutions flexibility in how they collect data and ensuring that institutions do not discourage or otherwise interfere with applicants' providing their data. Existing § 1002.107(c) requires a covered financial institution to (1) not discourage an applicant from responding to requests for applicant-provided data under final § 1002.107(a) and to otherwise maintain procedures to collect such data at a time and in a manner that are reasonably designed to obtain a response; (2) identify certain minimum components when collecting data directly from the applicant that must be included within a financial institution's procedures to ensure they are reasonably designed to obtain a response; (3) maintain procedures to identify and respond to indicia that it may be discouraging applicants from responding to requests for applicant-provided data, including low response rates for applicant-provided data; as well as (4) provide that low response rates for applicant-provided data may indicate that a financial institution is discouraging applicants from responding to requests for applicant-provided data or otherwise failing to maintain procedures to collect applicant-provided data that are reasonably designed to obtain a response.

The CFPB proposes to remove certain references to the discouragement prohibition in § 1002.107(c)(1) and (c)(2)(iii), as well as related commentary that the Bureau believes are redundant and add unnecessary regulatory complexity. It also proposes to remove § 1002.107(c)(3) and (c)(4) and related commentary; these provisions detail requirements to monitor for indicia of discouragement, such as low response rates from applicants, and explicitly provide that low response rates may be indicia of discouragement

ned to elicit responses are already subject to the enforcement provisions of § 1002.112 in the event of non-compliance. Further, comments received in response to the 2025 interim final rule from a trade association suggested that these provisions were vague and did not make clear what would and would not constitute discouragement. All of this would add unnecessary regulatory complexity for lenders.

The CFPB observes that the other requirements in the current commentary to § 1002.107(c)(2)—concerning maximizing the collection of data, requesting applicant-provided data before a credit decision is made, and ensuring that applicants not overlook requests for data—should not have been framed as binding obligations because they are unnecessary obligations beyond those already established in § 1002.107(c). However, unlike the anti-discouragement provisions, these provisions identify practices likely to help covered financial institutions comply with the 2023 final rule. The CFPB proposes revising these provisions to provide guidance to financial institutions rather than contributing unnecessary regulatory complexity in the form of additional obligations. The CFPB believes that providing this flexibility will advance the statutory purposes of the rule by helping financial institutions collect better quality data without requiring them to follow rigid practices that may in some instances impede rather than encourage data collection. The CFPB further believes that making these practices guiding principles, rather than requirements, better conforms with the existing regulatory text of § 1002.107(c), which requires covered lenders to “maintain procedures to collect such data at a time and in a manner that are reasonably designed to obtain a response” (emphasis added)

n some instances impede rather than encourage data collection. The CFPB further believes that making these practices guiding principles, rather than requirements, better conforms with the existing regulatory text of § 1002.107(c), which requires covered lenders to “maintain procedures to collect such data at a time and in a manner that are reasonably designed to obtain a response” (emphasis added).

For purposes of streamlining and simplifying the rule by removing unnecessary regulations, as discussed above, the Bureau proposes to remove provisions regarding or discussing a prohibition on the discouragement of applicants from providing data required under the rule, and proposes revising other provisions concerning the time and manner of collection to provide guidance rather than additional obligations.

The Bureau seeks comment on these proposed changes.

F. Section 1002.114—Effective Date, Compliance Date, and Special Transitional Rules

114(b) Compliance Date

The rule's compliance dates, as most recently amended by the 2025 compliance dates final rule, are set forth in current § 1002.114(b). That section looks to a financial institution's volume of covered credit transactions for small businesses to determine which of three compliance dates (currently July 1, 2026, January 1, 2027, and October 1, 2027) are applicable to a financial institution.

The CFPB proposes amending § 1002.114(b) to eliminate the system of tiered compliance dates in favor of creating a single compliance date. Mirroring the change to the rule's origination threshold set forth in proposed § 1002.105(b), proposed § 1002.114(b) would require that all covered financial institutions that originated at least 1,000 covered credit transactions for small businesses in each of calendar years 2026 and 2027 begin to comply with the rule starting on January 1, 2028

it is likely that more data would need to be deleted or modified, limiting its utility. Finally, if covered financial institutions were not given additional time to comply with the changes

proposed here, the Bureau is concerned that credit access and data quality might be affected in a manner that would not advance the purposes of the statute.

The CFPB seeks comment on these proposed changes. It also seeks comment on whether it would be appropriate to finalize this compliance date amendment in advance of finalizing the proposal's other changes, so that institutions currently covered by the 2023 rule could have earlier certainty as to the timing of their obligations, if any.

114(c) Special Transition Rules

In the 2023 final rule, financial institutions were instructed to determine their compliance tier based on their originations in 2022 and 2023. Subsequent changes to the rule added the time periods of 2023 and 2024, or 2024 and 2025, that financial institutions could choose to use instead. These alternatives are set out in existing § 1002.114(c)(3) and related commentary.

The CFPB is proposing revising § 1002.114(c)(3) and related commentary to require a financial institution to count its originations of covered credit transactions in each of calendar years 2026 and 2027 to determine whether it must comply with the rule on the proposed compliance date of January 1, 2028. This proposed change would simplify § 1002.114(c) and better align it with the proposed revisions to § 1002.114(b).

The CFPB believes that the range of options provided by current § 1002.114(c), intended to provide flexibility to potentially covered financial institutions, is no longer appropriate for a single compliance date with a single originations threshold. Further, proposed § 1002.114(c) would use calendar years closer to the new compliance date and would be a fairer time period to count originations

2(b)(2) calls for the CFPB to consider the potential benefits and costs of a regulation to consumers and covered persons, including the potential reduction of consumer access to consumer financial products or services, the impact on depository institutions and credit unions with $10 billion or less in total assets as described in section 1026 of the CFPA, and the impact on consumers in rural areas.

In the Dodd-Frank Act, which was enacted “[t]o promote the financial stability of the United States by improving accountability and transparency in the financial system,” Congress directed the Bureau to adopt regulations governing the collection of small business lending data. Under section 1071 of that Act, covered financial institutions must compile, maintain, and submit certain specified data points regarding applications for credit for small businesses, with particular attention to women-owned and minority-owned small businesses, along with “any additional data that the Bureau determines would aid in fulfilling the purposes of this section.” Under the 2023 final rule, covered financial institutions are required to collect and report the following data points: (1) a unique identifier, (2) application date, (3) application method, (4) application recipient, (5) credit type, (6) credit purpose, (7) amount applied for, (8) amount approved or originated, (9) action taken, (10) action taken date, (11) denial reasons, (12) pricing information, (13) census tract, (14) gross annual revenue, (15) NAICS code, (16) number of workers, (17) time in business, (18) minority-owned, women-owned, and LGBTQI+-owned business status, (19) ethnicity, race, and sex of principal owners, and (20) the number of principal owners.

Under the 2023 final rule, financial institutions are required to report data on small business credit applications if they originated at least 100 covered credit transactions in each of the two preceding calendar years

t the following data points: application method, application recipient, denial reasons, pricing information, number of workers, and LGBTQI+-owned business status. This proposed rule would make adjustments to some of the other data points (including minority-owned business status and ethnicity, race, and sex of principal owners) as well as the timing and methods to be used in the collection of data.

In addition, under this proposed rule, a financial institution would be required to report data if the financial institution originated at least 1,000 covered credit transactions in each of the two preceding calendar years, and one category of financial institutions (FCS lenders) would be excluded from coverage. The CFPB is also proposing to exclude merchant cash advances, credit transactions for agricultural purposes, and small dollar loans of $1,000 or less from the transactional scope of the rule. For the purposes of the proposed rule, a business would be a small business under this proposed rule if its gross annual revenue for its preceding fiscal year is $1 million or less. Finally, the proposed rule would change the compliance date provision to require a single compliance date for covered financial institutions.

A. Statement of Need

Congress directed the Bureau to adopt regulations governing the collection of small business lending data. Specifically, section 1071 of the Dodd-Frank Act amended ECOA to require financial institutions to compile, maintain, and submit to the Bureau certain data on applications for credit for small businesses, particularly

ata on applications for credit for small businesses, particularly

women-owned and minority-owned small businesses. Congress enacted section 1071 for the purpose of facilitating enforcement of fair lending laws and enabling communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses. The Bureau is issuing this proposed rule to reconsider portions of the 2023 final rule in order to more effectively fulfill its statutory purposes.

As discussed in parts I and III, the Bureau believes, in retrospect, that its approach in the 2023 final rule was not conducive to fulfilling the long-term statutory purposes of section 1071 of the Dodd-Frank Act. The Bureau now believes that a more incremental approach would limit, as much as possible, any disturbance to the provision of credit to small entities. The Bureau expects that a more gradual approach to adding data points or expanding coverage, if needed, would more effectively serve both the fair lending and community development purposes of the rule in the long run.

In particular, the Bureau believes it should focus on core lending products, core lending providers, and core data points, rather than take the more expansive approach of its 2023 final rule. To accomplish this, the Bureau proposes multiple changes from the 2023 final rule. Among the most consequential changes, the Bureau proposes to exempt several categories of credit from the definition of covered transactions, including sales-based financing, loans for agricultural purposes, and small dollar loans. The Bureau now believes that application data collected on these types of transactions would be of lower quality while imposing collection requirements on institutions that issue them. The Bureau also proposes to raise the number of loans that trigger reporting requirement to 1,000 and exempt FCS lenders from coverage of the rule to focus on core providers in the small business lending space

or service,” which means a financial product or service that is provided to consumers primarily for “personal, family, or household purposes.” 66 In rulemakings implementing section 1071, however, the only parties directly affected by the rule are small businesses (rather than individual consumers) and the financial institutions from which they seek credit (which may or may not be covered persons). Accordingly, a section 1022(b)(2)(A) analysis that considers only the costs and benefits to individual consumers and to covered persons would not meaningfully capture the costs and benefits of the rule.

66 12 U.S.C. 5481(4) through (6).

Below, the Bureau conducts the statutorily required analysis with respect to the proposed rule's effects on consumers and covered persons. Additionally, consistent with the approach in the 2023 final rule, the Bureau is electing to conduct this same analysis with respect to small businesses and the financial institutions that would be required to compile, maintain, and submit data under the proposed rule. This analysis relies on data that the Bureau has obtained from industry, other regulatory agencies, and publicly available sources. However, as discussed further below, the available data limit the Bureau's ability to quantify the potential costs, benefits, and impacts of the proposed rule.

The Bureau seeks comments on the basic approach discussed below and any

additional data sources that may be used to improve this approach.

1. Analysis With Respect to Consumers and Covered Persons

sons

The 2023 final rule implemented a data collection regime in which certain covered financial institutions must compile, maintain, and submit data with respect to applications for credit for small businesses. This proposed rule amends that implementation. The proposed rule would not directly impact consumers, including consumers in rural areas, as those terms are defined by the Dodd-Frank Act. However, some consumers may be impacted in their separate capacity as sole owners of small businesses covered by the proposed rule. Some covered persons, including some depository institutions or credit unions with $10 billion or less in total assets, would be affected under the proposed rule not in their capacity as covered persons ( i.e., as offerors or providers of consumer financial products or services) but in their separate capacity as financial institutions that offer small business credit covered by the proposed rule. The costs, benefits, and impact of the proposed rule on those entities are discussed below.

2. Benefits to Impacted Financial Institutions

The proposed rule would modify the 2023 final rule with respect to which financial institutions and transactions are covered, and which data points are required to be collected and reported. Many financial institutions that would not be covered by the proposed rule will still be impacted by the proposed rule because they would have been covered under the 2023 final rule (as amended). The Bureau analyzes the impacts of the proposed rule relative to the baseline (1) on covered institutions and (2) on institutions that would no longer be covered and calls the combined group of institutions “impacted financial institutions.” The main expected benefit of the proposed rule to impacted financial institutions comes in the form of cost savings. The Bureau calculates these cost savings by estimating the change in compliance costs between the proposed rule and the baseline

vered institutions and (2) on institutions that would no longer be covered and calls the combined group of institutions “impacted financial institutions.” The main expected benefit of the proposed rule to impacted financial institutions comes in the form of cost savings. The Bureau calculates these cost savings by estimating the change in compliance costs between the proposed rule and the baseline.

In order to precisely quantify the cost savings for impacted financial institutions, the Bureau would need representative data and information on the operational costs that financial institutions would incur to gather and report 1071 data, on one-time costs for financial institutions to update or create reporting infrastructure to implement requirements of the proposed rule, and on the level of complexity of financial institutions' business models and compliance systems. Furthermore, the Bureau would need this information under both the baseline and the proposed rule. Currently, the Bureau does not believe that data on section 1071 reporting costs with this level of granularity are systematically available from any source. The Bureau has made reasonable efforts to gather data on section 1071 reporting costs and primarily uses the same methodology that it used to analyze the 2023 final rule, unless otherwise noted. The Bureau continues to believe that its analysis here and in the 2023 final rule constitutes the most comprehensive assessment to date of the compliance costs associated with implementing section 1071 reporting by financial institutions and provides the most accurate estimates of costs given available information. However, the Bureau recognizes that these estimates may not fully quantify the costs to each covered financial institution, especially given the wide variation of section 1071 reporting costs among financial institutions.

The Bureau categorizes costs required to comply with the baseline and the proposed rule into “one-time” and “ongoing” costs

rate estimates of costs given available information. However, the Bureau recognizes that these estimates may not fully quantify the costs to each covered financial institution, especially given the wide variation of section 1071 reporting costs among financial institutions.

The Bureau categorizes costs required to comply with the baseline and the proposed rule into “one-time” and “ongoing” costs. Similarly, the Bureau reports cost savings in these terms. “One-time” costs refer to expenses that the financial institution incur initially and only once to implement changes required in order to comply with the requirements of this rule. “Ongoing” costs are expenses incurred as a result of the ongoing reporting requirements of the rule, which the Bureau considers on an annualized basis. In considering the costs and impacts of the 2023 final rule, the Bureau has engaged in a series of efforts to estimate the cost of compliance by covered entities. The Bureau conducted a One-Time Cost Survey, discussed in more detail in part IX.E.1 of the 2023 final rule, 67 to learn about the one-time implementation costs associated with implementing section 1071 and adapted ongoing cost calculations from previous rulemaking efforts. The Bureau evaluated the one-time costs of implementing the procedures necessary and the ongoing costs of annually reporting under the proposed rule in part IV.F.1 below. The Bureau recognizes that costs vary by institution due to many factors, such as size, operational structure, and product complexity, and that this variance exists on a continuum that is impossible to fully represent. In order to conduct a consideration of impacts that is both practical and meaningful in light of these challenges, the Bureau has chosen an approach that focuses on three representative types of financial institutions. For each type, the Bureau has produced reasonable estimates of the costs of compliance given the limitations of the available data. Part IV.E.1 below provides additional details on this approach

the data to do so and because the Bureau is not able to assess how effective the 2023 final rule would be in achieving those benefits. The same difficultly holds for the change in benefits associated with the proposed rule. As discussed further below, as a data reporting rule, most provisions of the baseline and the proposed rule will benefit small businesses in indirect ways, rather than directly.

Similar issues arise in attempting to quantify the decrease in benefits to impacted financial institutions. Certain benefits to impacted financial institutions are difficult to quantify. For example, the Bureau believes that the data collected under both the baseline and this proposed rule will reduce the compliance burden of fair lending reviews for lower risk financial institutions that are likely to be in compliance with ECOA by reducing the “false positive” rates during fair lending prioritization by regulators. However, the Bureau does not have the information to quantify such benefits.

In light of these data limitations, the discussion below generally provides a qualitative consideration of the reduction of benefits under the proposed rule relative to the baseline. General economic principles, together with the limited data available, provide insight into the loss of benefits. Where possible, the Bureau makes quantitative estimates based on these principles and the data that are available. Quantifying these benefits is difficult because the size of each effect cannot be known in advance. Given the number of small business credit transactions and the size of the small business credit market, however, small changes in behavior can have substantial aggregate effects.

In addition, financial institutions that remain covered under the proposed rule may incur adjustment costs. This would occur when institutions have already made efforts to implement the provisions of the 2023 final rule and would incur additional costs to modify their existing implementation to comply with this proposed rule

hange in coverage as a result of the proposed rule, the Bureau uses publicly available data for financial institutions divided into two groups: depository ( i.e., banks, savings associations, and credit unions) and nondepository institutions. The Bureau employs the methodology used in the 2023 final rule to estimate the change in coverage as a result of the proposed rule and relies on updated data.

With respect to depository institutions, the Bureau relies on National Credit Union Administration (NCUA) Call Reports to estimate coverage for credit unions, including for those that are not federally insured, and Federal Financial Institutions Examination Council (FFIEC) Call Reports and the CRA data to estimate coverage for banks and savings associations. For the purposes of the analysis in this part IV.D, the Bureau estimates the number of depository institutions that would have been required to report small business lending data in 2023, based on the estimated number of originations of covered products for each institution in 2022 and 2023. 68 The Bureau accounts for mergers and acquisitions in 2022 and 2023 by assuming that any depository institutions that merged in those years report as one institution.

68 In the proposed rule, an institution would be required to report for a given year if it originated at least 1,000 covered originations in each of the preceding two years. For the purposes of estimating the impacts of the proposed rule, the Bureau assumes that a financial institution would be required to report information from the year 2023 if the institution made at least 1,000 loans in 2022 and 2023. The Bureau makes this simplifying assumption for two reasons. First, the Bureau does not rely on data from 2020 or 2021 to avoid the years where small business lending would have been most affected by the COVID-19 pandemic. Second, the Bureau requires CRA data to estimate coverage and those data are only available through 2023

ear 2023 if the institution made at least 1,000 loans in 2022 and 2023. The Bureau makes this simplifying assumption for two reasons. First, the Bureau does not rely on data from 2020 or 2021 to avoid the years where small business lending would have been most affected by the COVID-19 pandemic. Second, the Bureau requires CRA data to estimate coverage and those data are only available through 2023.

The NCUA Call Report captures the number and dollar value of originations on all loans over $50,000 to members for commercial purposes, regardless of any indicator about the borrowing business's size. For the purposes of estimating the impacts of the proposed rule, the Bureau uses the annual number of originated commercial loans to members reported by credit unions as a proxy for the annual number of originated covered credit transactions under the rule. 69 These are the best data available to the Bureau for estimating the number of credit unions that may be covered by the proposed rule. However, the Bureau acknowledges that the true number of covered credit unions may be different than what is presented here. For example, this proxy would overestimate the number of credit unions that will be covered if some commercial loans to members are not covered because the member is taking out a loan for a business that is not small under the definition of a small business in the proposed rule. Alternatively, this proxy would underestimate the number of credit unions covered by the proposed rule if credit unions originate a substantial number of covered credit transactions with origination values under $50,000 that are not counted in the data.

69 For this analysis, the Bureau includes all types of commercial loans to members except construction and development loans, loans secured by multifamily residential property, loans secured by farmland, and loans to finance agricultural production and other loans to farmers

ever, the Bureau acknowledges that the true number of covered banks and savings associations may be different than what is presented here. The Bureau acknowledges that it does not have sufficient information to meaningfully account for how the proposed change to the small business definition and the proposed minimum loan size threshold might affect the impacts of the rule.

70 See Fed. Fin. Insts. Examination Council, Community Reinvestment Act Reporting Criteria, https://www.ffiec.gov/data/cra/reporting-criteria (last visited Oct. 4, 2025).

71 For a discussion of the small business lending proxy, see Jacob Goldston & Yan Y. Lee, Measurement of Small Business Lending Using Call Reports: Further Insights From the Small Business Lending Survey (Fed. Deposit Ins. Corp. Staff Rept. No. 2020-04, July 2020), https://www.fdic.gov/analysis/cfr/staff-studies/2020-04.pdf.

Although banks and savings associations reporting under the CRA are required to report the number of originations of small loans to businesses and farms, the Bureau is not aware of any comprehensive dataset that contains originations made by banks and savings associations with assets below the CRA reporting threshold. To fill this gap, the Bureau simulated plausible values for the annual number and dollar value of originations for each bank and savings association that falls below the CRA reporting threshold for 2022 and 2023. 72 The Bureau generated simulated originations in order to account for the uncertainty around the exact number and value of originations for these banks and savings associations. To simulate these values, the Bureau assumes that these banks have the same relationship between outstanding and originated small loans to businesses and farms as banks and savings associations above the CRA reporting threshold. First, the Bureau estimated the relationship between originated number and balances and outstanding numbers and balances of small loans to businesses and farms for CRA reporters

(SAs) Subject to Reporting 167-176 banks and SAs (3.64%-3.84% of all banks and SAs). Credit Unions Subject to Reporting 5 credit unions (0.11% of all credit unions). Share of Total Small Business Credit by Depository Institutions (Number of Loans Originated) Captured 91.9%-92.8%. Share of Total Small Business Credit by Depository Institutions (Dollar Value of Loans Originated) Captured 60.3%-62.0%. The Bureau also estimates the number of institutions that would have been covered under the baseline but are no longer covered by the proposed rule, using the same methodology discussed above. A depository institution would have been covered at the end of 2023 by the 2023 final rule if that institution had over 100 small business and small farm loan originations in 2022 and 2023, accounting for mergers. The Bureau estimates that the number of depository institutions required to report under the 2023 final rule but that would not be required to report under the proposed rule is between approximately 1,421 to 1,570 institutions as shown in Table 2 below.

Table 2—Estimated Depository Institutions Covered Under Baseline but No Longer Covered by Proposed Rule [In 2023, based on 2022-2023 data] Coverage category Estimated coverage Institutions No Longer Covered 1,421-1,570 depository institutions (15.3%-16.9% of all depository institutions). Banks and Savings Associations (SAs) No Longer Covered 1,301-1,450 banks and SAs (28.4%-31.6% of all banks and SAs). Credit Unions No Longer Covered 120 credit unions (2.6% of all credit unions). Share of Total Small Business Credit by Depository Institutions (Number of Loans Originated) by DIs No Longer Covered 5.0%-5.7%. Share of Total Small Business Credit by Depository Institutions (Dollar Value of Loans Originated) by DIs No Longer Covered 24.1%-26.1%. The Bureau does not have sufficient information to meaningfully estimate the change in the number of nondepositories relative to the analysis conducted for the 2023 final rule

epository Institutions (Number of Loans Originated) by DIs No Longer Covered 5.0%-5.7%. Share of Total Small Business Credit by Depository Institutions (Dollar Value of Loans Originated) by DIs No Longer Covered 24.1%-26.1%. The Bureau does not have sufficient information to meaningfully estimate the change in the number of nondepositories relative to the analysis conducted for the 2023 final rule. For the purposes of the analysis of the impacts of this proposed rule, the Bureau assumes that the number of nondepository institutions that are active in the small business lending market has not changed since the 2023 final rule, except for Farm Credit System members, for which the Bureau relies on data from the Farm Credit Administration. See part II.D of the 2023 final rule for more detail on how the Bureau arrived at these estimates. 75 Consistent with the assumptions in the 2023 final rule, the Bureau also assumes that only online lenders and merchant cash advance providers originate more than 1,000 loans each year and the remaining nondepositories originate between 150 and 999 loans each year. Since merchant cash advances would not be covered credit transactions under the proposed rule, no merchant cash advance providers would be required to report. Based on these assumptions, the Bureau concludes that only online lenders would still be required to report under the proposed rule.

75 See 88 FR 35153.

The Bureau estimates that the 2023 final rule would have covered about 610 nondepository institution, consisting of: about 30 online lenders; about 140 nondepository Community Development Financial Institutions (CDFIs); about 70 merchant cash advance providers; about 240 commercial finance companies; about 70 governmental lending entities; and 60 Farm Credit System members. 76 The Bureau estimates that, of these nondepositories, only the 30 online lenders will continue to be covered under the proposed rule and the remaining will be impacted by the proposed rule because they are no longer covered

itutions (CDFIs); about 70 merchant cash advance providers; about 240 commercial finance companies; about 70 governmental lending entities; and 60 Farm Credit System members. 76 The Bureau estimates that, of these nondepositories, only the 30 online lenders will continue to be covered under the proposed rule and the remaining will be impacted by the proposed rule because they are no longer covered.

76 Farm Credit Admin., Number of FCS banks and associations by type and district as of January 1, 2024, https://www.fca.gov/template-fca/bank/20240101NumberAssocs.pdf (last visited Oct. 1, 2025).

The Bureau seeks comments on these estimates of coverage and changes in coverage. In particular, the Bureau seeks additional data and information that it could use to improve its estimates of nondepository institution coverage.

E. Methodology for Generating Costs and Benefits Estimates

In part IX.E of the 2023 final rule, the Bureau explained its methodology for generating estimates of one-time and ongoing costs associated with complying with the 2023 final rule. As discussed in the previous section, many financial institutions that were covered by the 2023 final rule would no longer be covered by this proposed rule. Thus, the proposed rule would confer a benefit in the form of cost savings for most impacted institutions. The Bureau also expects that institutions that continue to be covered will face a reduction in compliance costs from the proposed rule relative to the baseline. Generally, the Bureau estimates the benefits of the proposed rule by comparing the compliance costs under the baseline to those under the proposed rule. To generate cost estimates under the baseline and this proposed rule, the Bureau uses the same methodology as the 2023 final rule, unless otherwise noted. Throughout this section, the Bureau reproduces crucial parts of the methodology discussion where necessary but references the 2023 final rule for additional detail and background

pliance costs under the baseline to those under the proposed rule. To generate cost estimates under the baseline and this proposed rule, the Bureau uses the same methodology as the 2023 final rule, unless otherwise noted. Throughout this section, the Bureau reproduces crucial parts of the methodology discussion where necessary but references the 2023 final rule for additional detail and background.

The Bureau expects that compliance costs vary with the complexity of a financial institution's compliance operations. Consistent with the 2023 final rule and for the purposes of this proposed rule, the Bureau categorizes impacted financial institutions (FIs) into Types A, B, and C in increasing order of compliance operations complexity. Based on its prior methodology, the Bureau assumes that this complexity is correlated with the number of small business loan applications received, and therefore categorizes institutions based on application volume. The Bureau assumes that Type A FIs receive fewer than 300 applications per year, Type B FIs receive between 300 and 2,000 applications per year, and Type C FIs receive more than 2,000 applications per year. The Bureau assumes that, for Type A and B FIs, one out of two small business applications will result in an origination. Thus, the Bureau assumes that Type A FIs originate fewer than 150 covered credit transactions per year and Type B FIs originate between 150 and 999 covered credit transactions per year. The Bureau assumes that Type C FIs originate one out of three small business applications and at least 1,000 covered credit transactions per year. 77

77 The Bureau chose the 1:2 and 1:3 application to origination ratios based on two sources of information

iginate fewer than 150 covered credit transactions per year and Type B FIs originate between 150 and 999 covered credit transactions per year. The Bureau assumes that Type C FIs originate one out of three small business applications and at least 1,000 covered credit transactions per year. 77

77 The Bureau chose the 1:2 and 1:3 application to origination ratios based on two sources of information. First see Biz2Credit, Small Business Loan Approval Rates Rebounded in May 2020: Biz2Credit Small Business Lending Index (May 2020), https://cdn.biz2credit.com/appfiles/biz2credit/pdf/report-may-2020.pdf, which shows that, in December of 2019, large banks approved small business loans at a rate of 27.5 percent, while small banks and credit unions had approval rates of 49.9 percent and 40.1 percent. Additionally, the Bureau's supervisory data supports a 33 percent approval rate as a conservative measure among these estimates for complex financial institutions (Type C FIs).

The Bureau recognizes that the proposed changes, as discussed in subsequent sections, will remove most Types A and B financial institutions from coverage. However, the Bureau maintains both these categorizations and assumptions in order to estimate compliance at baseline and compare it to coverage under the proposals.

The Bureau understands that compliance costs vary across financial institutions due to many factors, such as size, operational structure, and product complexity, and that this variance exists on a continuum that is very difficult or impossible to fully represent. Due to data limitations, the Bureau is unable to capture many of the ways in which compliance costs vary by institution,

and therefore uses these representative financial institution types with the above assumptions for its analysis. In order to aggregate costs to a market level, the Bureau must map financial institutions onto its types using discrete volume categories

ible to fully represent. Due to data limitations, the Bureau is unable to capture many of the ways in which compliance costs vary by institution,

For the hiring costs discussion in part IV.F.1.i and ongoing costs discussion in part IV.F.1.ii below, the Bureau discusses costs in the context of representative institutions for ease of exposition. The Bureau assumes that a representative Type A FI receives 100 small business credit applications per year, a representative Type B FI receives 400 small business credit applications per year, and a representative Type C FI receives 6,000 small business credit applications per year. The Bureau further assumes that a representative Type A FI originates 50 covered credit transactions per year, a representative Type B FI originates 200 covered credit transactions per year, and a representative Type C FI originates 2,000 covered credit transactions per year.

1. Methodology for Estimating One-Time Compliance Costs

The one-time compliance cost estimation methodology for the proposed rule described in this section is the same methodology that the Bureau used in the 2023 final rule, unless otherwise noted.

The Bureau has identified the following nine categories of one-time costs that will likely be incurred by financial institutions to develop the infrastructure to collect and report data under the baseline and the proposed rule:

1. Preparation/planning.

2. Updating computer systems.

3. Testing/validating systems.

4. Developing forms/applications.

5. Training staff and third parties (such as brokers).

6. Developing policies/procedures.

7. Legal/compliance review.

8. Post-implementation review of compliance policies and procedures.

9. Hiring costs

t and report data under the baseline and the proposed rule:

1. Preparation/planning.

2. Updating computer systems.

3. Testing/validating systems.

4. Developing forms/applications.

5. Training staff and third parties (such as brokers).

6. Developing policies/procedures.

7. Legal/compliance review.

8. Post-implementation review of compliance policies and procedures.

9. Hiring costs. 78

78 The Bureau added this category in response to comments on the 2021 proposed rule; it was not part of the 2020 survey discussed below.

The Bureau also conducted a survey in 2020 regarding one-time implementation costs for section 1071 compliance targeted at financial institutions who extend small business credit. 79 The survey collected information on the number of employee hours and non-salary expenses required to implement a section 1071 rule. The Bureau developed the survey instrument based on guidance from industry on the potential types of one-time costs institutions might incur if required to report under a rule implementing section 1071 and tested the survey instrument on a small set of financial institutions, incorporating their feedback prior to implementation. The Bureau worked with several major industry trade associations to recruit their members to respond to the survey. A total of 105 financial institutions responded to the survey.

79 The One-Time Cost Survey was released on July 22, 2020; the response period closed on October 16, 2020. The OMB control number for this collection is 3170-0032. CFPB, Survey: Small Business Compliance Cost Survey (July 22, 2020), https://files.consumerfinance.gov/f/documents/cfpb_1071-survey_2020-10.pdf.

Estimates from the 2020 survey respondents continue to form the basis of the Bureau's estimates for one-time compliance costs in assessing the impact of this proposed rule

sed on October 16, 2020. The OMB control number for this collection is 3170-0032. CFPB, Survey: Small Business Compliance Cost Survey (July 22, 2020), https://files.consumerfinance.gov/f/documents/cfpb_1071-survey_2020-10.pdf.

Estimates from the 2020 survey respondents continue to form the basis of the Bureau's estimates for one-time compliance costs in assessing the impact of this proposed rule. The survey was broadly designed to ask about the one-time costs of reporting data under a regime that only included mandatory data points, used a reporting structure similar to HMDA, used the Regulation B definition of an “application,” and used the respondent's own internal small business definition. 80 Therefore, the Bureau assumes that the tasks listed above are associated with implementing both the 2023 final rule and the proposed rule for institutions covered by each rule.

80 For more information about the 2020 survey and its respondents, see part IX.E.1 of the 2023 final rule.

The Bureau assumes that the number of employee hours required to implement each task has not changed but that the wages have changed to reflect labor market developments. The Bureau assumes that each task may require junior, mid-level, and senior staff hours to implement. For junior staff, the Bureau uses $18.51, the 10th percentile hourly wage estimate for “loan officers” according to the 2024 Occupational Employment Statistics compiled by the Bureau of Labor Statistics. 81 For mid-level staff, the Bureau uses $41.35, the estimated mean hourly wage estimate for “loan officers.” For senior staff, the Bureau uses $70.09, the 90th percentile hourly wage estimate for “loan officers.” To account for non-monetary compensation, the Bureau also scaled these hourly wages up by 43 percent. 82

81 See U.S. Bureau of Labor Stat., U.S. Dep't of Labor, Occupational Employment and Wage Statistics (May 2024), https://www.bls.gov/oes/current/oes132072.htm

e estimate for “loan officers.” For senior staff, the Bureau uses $70.09, the 90th percentile hourly wage estimate for “loan officers.” To account for non-monetary compensation, the Bureau also scaled these hourly wages up by 43 percent. 82

81 See U.S. Bureau of Labor Stat., U.S. Dep't of Labor, Occupational Employment and Wage Statistics (May 2024), https://www.bls.gov/oes/current/oes132072.htm.

82 The June 2025 Employer Costs for Employee Compensation from the Bureau of Labor Statistics documents that wages and salaries are, on average, about 70 percent of employee compensation for private industry workers. The Bureau inflates the hourly wage to account for 100 percent of employee compensation ((100/70)−1) * 100 = 43 percent). Press Release, U.S. Bureau of Labor Stat., U.S. Dep't of Labor, USDL-25-1358, Employer Costs for Employee Compensation—June 2025 (Sept. 12, 2025), https://www.bls.gov/news.release/pdf/ecec.pdf.

Finally, the Bureau assumes that the non-salary expenses necessary to implement each one-time task have only changed according to inflation, as measure the by the Consumer Price Index. 83

83 The Bureau uses the CPI-U from the Bureau of Labor Statistics and adjusts non-salary expenses to account for inflation between December 2019 and June 2025. That is, the Bureau inflates non-salary expenses by 26 percent. See U.S. Bureau of Labor Stat., U.S. Dep't of Labor, Databases, Tables & Calculators by Subject, Consumer Price Index for All Urban Consumers (CPI-U) (Oct. 4, 2025), https://data.bls.gov/timeseries/CUUR0000SA0.

For hiring costs, the Bureau also assumes that a covered financial institution would need to hire enough full-time equivalent workers (FTEs) to cover the estimated number of staff hours necessary to comply with the either 2023 final rule or the proposed rule on an annual, ongoing basis

r the proposed rule. Other parts of their implementation may need to be changed to comply the proposed rule, and thus the institution may incur the same one-time cost again. For example, an institution that already started designing data collection forms may have to change the design. The Bureau includes incurring these expenses again as part of its calculation for institutions that remain covered.

The Bureau does not have the requisite information to empirically estimate how much of the one-time costs, under the baseline, any institution is likely to have incurred. Therefore, the Bureau has decided to make a simple assumption. The Bureau assumes that all institutions will have incurred 25 percent of their non-hiring, one-time costs, at baseline, in preparation to comply with the 2023 final rule. For financial institutions that were covered under the 2023 final rule but would not be covered under the proposed rule, the Bureau assumes that the proposed rule will save the remaining 75 percent of the non-hiring, one-time costs, at baseline, plus their hiring costs.

For institutions that are covered under the baseline and would be covered under the proposed rule, the Bureau assumes that 25 percent of one-time, non-hiring costs under the baseline have already been incurred and are, likewise, sunk. Therefore, the one-time cost savings for these institutions are the one-time hiring and non-hiring costs under the proposed rule minus the one-time hiring costs and 75 percent of the non-hiring costs under the baseline.

The Bureau seeks comments on its methodology for estimating one-time costs. In particular, the Bureau seeks comments on whether financial institutions that would have been covered under the 2023 final rule have already spent resources to implement the 2023 final rule and, if so, on what they have spent those resources

ion uses the hourly compensation of a loan officer multiplied by the amount of time required for the activity. The Bureau uses a mean hourly wage of $41.35 for loan officers, based on data from the Bureau of Labor Statistics. 86 To account for non-monetary compensation, the Bureau scales this hourly wage by 43 percent to arrive at a total hourly compensation of $59.07 for use in these calculations. 87 As an example of a time calculation, the Bureau assumes that transcribing the data points that would be required under the baseline would require approximately 11 minutes per application for a Type A FI. The calculation multiplied the number of minutes by the number of applications and the hourly compensation to arrive at the total cost, on an annual basis, of transcribing data. As another example, the Bureau assumes that ongoing training for loan officers to comply with a financial institution's 1071 policies and procedures would take about two hours per loan officer per year. The cost calculation multiplies the number of hours by the number of loan officers and by the hourly compensation.

85 In this table, the term “variable” means the compliance cost depends on the number of applications. The term “fixed” means the compliance cost does not depend on the number of applications (even if there are other factors upon which it may vary).

86 These data reflect the mean hourly wage for “loan officers” according to the 2024 Occupational Employment Statistics compiled by the Bureau of Labor Statistics. See U.S. Bureau of Labor Stat., U.S. Dep't of Labor, Occupational Employment and Wages Statistics (May 2024), https://www.bls.gov/oes/current/oes132072.htm.

87 The June 2025 Employer Costs for Employee Compensation from the Bureau of Labor Statistics documents that wages and salaries are, on average, about 70 percent of employee compensation for private industry workers. The Bureau inflates the hourly wage to account for 100 percent of employee compensation ((100/70)−1) * 100 = 43 percent). Press Release, U.S

uired by loan officers to prepare for 1071-related compliance examinations.

Table 4 shows where and how the Bureau assumes Type B FIs and Type C FIs differ from Type A FIs for the purposes of evaluating ongoing cost. Table 4 shows the activities where the assumptions differ from those in Table 3. Type B FIs and Type C FIs use more automated procedures, which result in different cost calculations. For example, for Type B FIs and Type C FIs, transferring data to the data entry system and geocoding applications are done automatically by business application data management software licensed annually by the financial institution. The relevant address is submitted for geocoding via batch processing, rather than done manually for each application. The additional ongoing geocoding costs reflect the time spent by loan officers on “problem” applications—that is, a percentage of overall applications that the geocoding software misses—rather than time spent on all applications. However, Type B FIs and Type C FIs have the additional ongoing cost of a subscription to a geocoding software or service as well as a data management software that represents an annual fixed cost of reporting 1071 data. This is an additional ongoing cost that the less complex Type A FIs would not have incurred. The Bureau expects that Type A FIs will use free geocoding software available from the FFIEC or the Bureau, which may include a new batch

function that could be developed by either the FFIEC or the Bureau.

Additionally, audit procedures differ between the three representative institution types. The Bureau expects a Type A FI would not conduct an internal audit but would pay for an annual external audit. A Type B FI would be expected to conduct a simple internal audit for data checks and also pay for an external audit on an annual basis. Type C FIs would have a sophisticated internal audit process in lieu of an external audit.

Table 4—Differences in Ongoing Cost Calculations for Type B FIs and Type C FIs Versus Type A FIs No

l rule where appropriate. In particular, the proposed changes eliminating several data points are the biggest source of changes to the assumptions relative to the 2023 final rule. Because fewer data point would be collected under the proposed rule than under the 2023 final rule, the Bureau assumes that tasks which depend on the number of data points would see a reduction in required employee hours. The Bureau has also updated the assumed fixed cost of software and audits to account for inflation. Table 5 also shows the number of hours assumed in the baseline scenario, for comparison.

Table 5 provides the total number of hours the Bureau assumes are required for each task that requires labor. For example, the Bureau assumes that transcribing data for 100 applications will require 14 hours of labor. The table also shows the assumed fixed cost of software and audits, as well as areas where the Bureau assumes there would be cost savings due to use of technology. In several cases, the activity described in a row does not apply to financial institutions of a certain type and is therefore entered in the table as not applicable (N/A).

Table 5—Major Assumptions for the Representative Type A FIs, Type B FIs, and Type C FIs, 88 Under the Proposed Rule and the Baseline 89 No. Activity Type A FI Type B FI Type C FI 1 Transcribing data 14 hours total (19 baseline) 26 hours total (38 baseline) 414 hours total (571 baseline). 2 Resolving reportability questions 8 hours total (11 baseline) 17 hours total (23 baseline) 25 hours total (34 baseline). 3 Transfer to 1071 data management software 14 hours total (19 baseline) N/A N/A. 4 Complete geocoding data 7 hours total; reduction in time cost relative to HMDA for software with batch processing 10 hours total (0.5 hours per “problem” loan × 5% of loans that are “problem”) N/A

esolving reportability questions 8 hours total (11 baseline) 17 hours total (23 baseline) 25 hours total (34 baseline). 3 Transfer to 1071 data management software 14 hours total (19 baseline) N/A N/A. 4 Complete geocoding data 7 hours total; reduction in time cost relative to HMDA for software with batch processing 10 hours total (0.5 hours per “problem” loan × 5% of loans that are “problem”) N/A. 5 Standard annual edit and internal checks 13 hours total; reduction for online submission platform (18 baseline) 259 hours total; reduction for online submission platform (357 baseline) 537 hours total; reduction for online submission platform (741 baseline). 6 Researching questions 4 hours total (6 baseline) 8 hours total (11 baseline) 12 hours total (17 baseline). 7 Resolving question responses 1 hour total 1 hour total 1 hour total. 8 Checking post-submission edits 1 hour total 3 hours total (5 baseline) 13 hours total (18 baseline). 9 Filing post-submission documents <1 hour total <1 hour total <1 hour total. 10 1071 data management system/geocoding software N/A $10,080 $17,199. 11 Training 24 hours total 120 hours total 800 hours total. 12 Internal audit N/A 8 hours total 2,304 hours total. 13 External audit $4,410 $6,300 N/A. 14 Exam preparation <1 hour total 80 hours total 480 hours total. 15 Exam assistance 2 hours total 12 hours total 80 hours total. The Bureau requests comment on the assumptions presented in this section.

88 As discussed above, the representative Type A, Type B, and Type C FIs are assumed to receive, respectively, 100, 400 and 6,000 applications.

89 Row numbers correspond to row numbers in previous tables.

3. Methodology for Generating Market-Level Estimates of Costs and Benefits

To generate small business lending market-level impacts estimates, the Bureau relies on the same estimates of small business lending originations described in part IV.D. above, which is the same as the methodology used in the 2023 final rule, unless otherwise noted

t, under the proposal, these institutions would receive a benefit that is 75 percent of their non-hiring one-time costs plus their estimated hiring costs at baseline. For institutions that would continue to report under the proposed rule, they would experience a benefit in the form of reduced one-time hiring costs.

To generate market-level estimates, the Bureau sums the changes over institutions. The Bureau reports market-level impacts separately for covered and no longer covered institutions and for whether or not the one-time costs will yield a cost or a benefit. As with coverage estimates, the Bureau presents a range for market-level estimates. The range reflects the uncertainty associated with the estimate of costs for banks and savings associations below the CRA reporting threshold. The Bureau has documented how it calculates these ranges as part of the 2023 final rule rulemaking process in its Supplemental estimation methodology for institutional coverage and market-level cost estimates in the small business lending rulemaking. 91

91 See CFPB, Supplemental estimation methodology for institutional coverage and market-level cost estimates in the small business lending rulemaking (Mar. 30, 2023), https://www.consumerfinance.gov/data-research/research-reports/supplemental-estimation-methodology-institutional-coverage-market-level-cost-estimates-small-business-lending-rulemaking/.

The Bureau is unaware of institution-level data on originations by nondepository institutions that are comprehensive enough to estimate costs using the same method as that for depository institutions. Therefore, to generate market-level estimates for nondepository institutions, the Bureau relies on the estimates of the number of nondepository institutions discussed in part IV.D and several key assumptions, which it also relied on for estimating the impacts of the 2023 final rule

stitutions that are comprehensive enough to estimate costs using the same method as that for depository institutions. Therefore, to generate market-level estimates for nondepository institutions, the Bureau relies on the estimates of the number of nondepository institutions discussed in part IV.D and several key assumptions, which it also relied on for estimating the impacts of the 2023 final rule. The Bureau assumes that fintech lenders and merchant cash advance providers are Type C FIs because they generally have more automated systems and originate more loans. 92 The Bureau assumes that the remaining nondepository institutions are Type B FIs. The Bureau assumes that each nondepository receives the same number of applications as the representative institution for each type, as described above. Hence, the Bureau assumes that fintech lenders and merchant cash advance providers each receive 6,000 applications per year and all other nondepository institutions receive 400 applications per year. As in the 2023 final rule and above, the Bureau also assumes that all nondepository institutions have the same one-time costs as each other. The Bureau calculates changes in one-time and ongoing costs in a similar manner to the methods described above and presents market-level estimates for nondepository institutions that remain covered and that are no longer covered by the proposed rule.

92 The Bureau includes merchant cash advance providers in the estimates of the baseline but not in the estimates of the proposed rule. The Bureau assumes that merchant cash advance providers are Type C for the purposes of estimating their impacts from not being covered by the proposed rule.

The Bureau seeks comments on its methodology for estimating impacts of the proposed rule.

F. Potential Benefits and Costs to Impacted Financial Institutions and Small Businesses

1. Benefits to Impacted Financial Institutions

ed rule. The Bureau assumes that merchant cash advance providers are Type C for the purposes of estimating their impacts from not being covered by the proposed rule.

The Bureau seeks comments on its methodology for estimating impacts of the proposed rule.

F. Potential Benefits and Costs to Impacted Financial Institutions and Small Businesses

1. Benefits to Impacted Financial Institutions

i. One-Time Cost Savings of Impacted Financial Institutions

Using the methodology described in part IV.E.1 above, Table 6 shows the estimated total expected one-time costs of the proposed rule for the first eight cost categories for financial institutions covered by the proposed rule or under the baseline, as well as a breakdown by the eight component categories that comprise the one-time costs for Type A DIs, Type B DIs, Type C DIs, and Non-DIs. 93 The final cost category, hiring costs, is discussed later in this section. The Bureau notes that the estimated costs presented in Table 6 differ slightly from the estimated costs presented in the 2023 final rule. This difference is due to inflation adjustments for non-salary expenses and updated wage rates.

93 The estimated one-time costs by cost category for each FI type is the sum of the wages multiplied by the estimated staff hours plus the non-salary expenses. For example, the Bureau expects that for preparation and planning for the final rule, on average, a Type A DI will pay senior staff $100.13 × 38 hours (= $3,804.94), mid-level staff $59.07 × 43 hours (= $2,540.01), and junior staff $26.44 × 21 hours (= $555.24). The total estimated cost is $6,900.19 rounded to $6,900, because a Type A DI is not expected to pay non-salary expenses for preparation and planning.

Table 6—Estimated One-Time Costs by Cost Category and FI Type No

seline and, as a result, may have to hire fewer employees.

The Bureau estimates that there are financial institutions covered under the baseline that would no longer be covered under this proposed rule. These institutions will see a benefit in the form of savings on one-time compliance costs, since the Bureau assumes they would not incur additional one-time costs as a result of the proposed rule. Also, as discussed in part IV.E.1, the Bureau expects that these financial institutions will have already incurred 25 percent of the baseline non-hiring costs preparing to comply with the 2023 final rule. The full amount of savings by institutions that would no longer be covered are 75 percent of the non-hiring costs and the full amount of the hiring costs. The Bureau assumes that financial institutions that are covered under both the baseline and the proposed rule would still incur one-time costs to implement changes to comply with the proposed rule but may see a reduction in one-time hiring costs due to, potentially, needing fewer new employees to comply with the proposed rule relative to the baseline.

In the discussion about ongoing cost in part IV.F.3.ii below, the Bureau explains how it estimates the number of staff hours per application required to comply with the proposed rule or under the baseline. Under the proposed rule, the Bureau estimates a Type C FI, the only type that will be covered, requires 0.78 hours per application. Under the baseline, the Bureau estimates that a Type A FI requires 1.1 hours per application, a Type B FI requires 1.66 hours per application, and a Type C FI requires 0.84 hours per application.

For the purposes of exposition, the Bureau presents the estimated number of FTEs for representative financial institutions. For the market-level estimates, the Bureau estimates the number of staff hours required based on the estimated number of applications each depository institution receives

cash advance provider would receive cost savings of $99,600.

As mentioned above, the Bureau realizes that one-time costs vary by institution due to many factors, and that this variance exists on a continuum that is very difficult or impossible to fully represent. The Bureau focuses on representative types of financial institutions in order to generate practical and meaningful estimates of costs. As a result, the Bureau expects that individual financial institutions could have slightly different one-time costs or cost savings than the average estimates presented here.

Summing across institutions as described in part IV.E.3, the Bureau estimates that the total one-time hiring and non-hiring cost savings for depository institutions that would no longer be covered under the proposed rule would be between $68,900,000 and $76,700,000. Using a 7 percent discount rate and a 10-year amortization window, the annualized one-time cost savings for depository institutions that are no longer covered under the proposed rule would be between $9,800,000 and $10,900,000. 96 The Bureau estimates that the total hiring and non-hiring one-time cost savings for nondepository institutions that would no longer be covered under the proposed rule would be about $14,900,000. Using a 7 percent discount rate and a 10-year amortization window, the annualized one-time cost savings for nondepository institutions that are no longer covered under the rule would be about $2,100,000. The Bureau estimates that some covered institutions would receive cost savings from needing to hire fewer staff under the proposed rule. The estimated total market value of these one-time hiring cost savings would be between $3,900,000 and $4,300,000. Using a 7 percent discount rate and a 10-year amortization window, the annualized one-time cost savings for such institutions would be between $560,000 and $610,000. Covered institutions would also incur one-time adjustment costs, which are discussed in part IV.F.3

tandard annual edit and internal checks 544 11,863 29,825 6 Researching questions 294 587 881 7 Resolving question responses 0 0 0 8 Checking post-submission edits 7 28 112 9 Filing post-submission documents 15 15 15 10 1071 Data Management software/geocoding software 0 10,080 17,199 11 Training 1,425 7,124 47,492 12 Internal audit 0 473 136,097 13 External audit 4,410 6,300 0 14 Exam preparation 15 4,726 28,354 15 Exam assistance 124 744 4,962 Total 9,580 45,253 299,700 Per application 96 113 50 The Bureau estimates that, at baseline, a representative low complexity Type A FI would incur around $9,580 in total annual ongoing costs, or about $96 in total cost per application processed (assuming 100 applications per year). The Bureau estimates that a representative middle complexity Type B FI, which is somewhat automated, would incur approximately $45,253 in total annual ongoing costs, or around $113 per application (assuming a representative 400 applications per year). The Bureau estimates a representative high complexity Type C FI, would incur $299,700 of total annual ongoing costs, or $50 per application (assuming a representative 6,000 applications per year).

To estimate the expected ongoing costs for an institution that would remain covered under the proposal, the Bureau used the assumptions in Table 5 above, which characterize the decrease in the number of employee hours necessary for compliance occurring as a result of the proposed changes. Table 8 below reproduces Table 16 from the 2023 final rule 98 accounting for the expected effects of the proposed rule.

98 88 FR 35150, 35510-11.

Table 8—Estimated Ongoing Costs per Compliance Task and FI Type, Under the Proposed Rule No

ions in Table 5 above, which characterize the decrease in the number of employee hours necessary for compliance occurring as a result of the proposed changes. Table 8 below reproduces Table 16 from the 2023 final rule 98 accounting for the expected effects of the proposed rule.

98 88 FR 35150, 35510-11.

Table 8—Estimated Ongoing Costs per Compliance Task and FI Type, Under the Proposed Rule No. Activity Type A FI Type B FI Type C FI 1 Transcribing data $879 $1,631 $24,472 2 Resolving reportability questions 171 343 514 3 Transfer to 1071 Data Management Software 879 0 0 4 Complete geocoding data 148 591 300 5 Standard annual edit and internal checks 520 10,803 25,219 6 Researching questions 231 462 693 7 Resolving question responses 0 0 0 8 Checking post-submission edits 5 21 83 9 Filing post-submission documents 15 15 15 10 1071 Data Management System/geocoding software 0 10,080 17,199 11 Training 1,429 7,143 47,623 12 Internal audit 0 473 136,097 13 External audit 4,410 6,300 0 14 Exam preparation 15 4,726 28,354 15 Exam assistance 127 764 5,092 Total 8,829 43,351 285,660 Per application 88 108 48 For institutions that would remain covered under the proposed rule, the Bureau estimates that a representative low complexity Type A FI would incur around $8,829 in total annual ongoing costs, or about $88 in total cost per application processed (assuming 100 applications per year). The Bureau estimates that a representative middle complexity Type B FI, which is somewhat automated, would incur approximately $43,351 in ongoing costs per year, or around $108 per application (assuming a 400 applications per year). The Bureau estimates a representative high complexity Type C FI would incur $285,660 of annual ongoing costs, or $48 per application (assuming 6,000 applications per year).

Under the proposed changes, some FIs would no longer be required to collect and report small business application data because they have more than 100 but fewer than 1,000 covered credit transactions

e would benefit FIs by reducing such costs. FIs that would no longer be covered under the proposed rule would no longer be expected to incur any reputational risks or costs of responding to analyses as their data would no longer be submitted or published. For entities that remain covered, the reduction in the number of data points, particularly pricing data, reduce expected reputational risks.

2. Benefits to Small Businesses

The Bureau believes that any direct costs to small businesses from completing additional fields on small business credit applications would be minimal (particularly since the only applicant-provided data the Bureau is proposing to remove is the number of workers and LGBTQI+-owned business status; the remaining fields are data generated by the financial institution) and therefore small businesses would not benefit from the proposed rule changes in this way. Instead, the Bureau expects that small businesses will primarily benefit in the form of cost savings from financial institutions passed through to small businesses in the form of lower fees or interest rates.

In the 2023 final rule, the Bureau discussed how, based on economic theory and evidence from the Bureau's own survey, financial institutions would most likely react to compliance costs by raising prices and fees. In particular, the Bureau expected that ongoing variable costs would be passed through in their entirety. The proposed rule would eliminate ongoing variable costs for institutions that would no longer be covered and would reduce ongoing variable costs for institutions that remain covered.

ng variable costs for institutions that remain covered.

The Bureau estimates that the per application ongoing variable cost, at baseline, is $34 for Type A FIs, $28 for Type B FIs, and $8 for Type C FIs. According to the analysis above, this is the expected benefit that would accrue to applicants at institutions that were covered at baseline but would no longer be covered under the proposed rule. For institutions that would continue to report under the proposed rule, the difference between the ongoing variable cost at baseline and under the proposed rule is $7 for Type A FIs, $2 for Type B FIs, and $1 for Type C FIs. This difference is what the Bureau expects to be passed on to applicants at financial institutions that would continue to be covered under the proposed rule.

The Bureau requests comment on these and other potential benefits to small businesses as a result of the proposed rule.

3. Costs to Impacted Financial Institutions

At baseline, the Bureau expects that data collected under the 2023 final rule would benefit covered financial institutions in two ways. The first is that the Bureau expects that the collected data would reduce some compliance burden by reducing the number of “false positives” during fair lending review prioritization by regulators. As discussed above, this proposed rule would reduce the number of covered entities and the types of covered transactions, thereby reducing the total amount of information collected in accordance with the rule. To the extent that institutions experience this benefit at baseline, the Bureau expects that this proposed rule could reduce those benefits, and thus financial institutions may incur a cost.

At baseline, the Bureau also expects that financial institutions could benefit from transparency resulting from the collection of small business application information under the 2023 final rule

th the rule. To the extent that institutions experience this benefit at baseline, the Bureau expects that this proposed rule could reduce those benefits, and thus financial institutions may incur a cost.

At baseline, the Bureau also expects that financial institutions could benefit from transparency resulting from the collection of small business application information under the 2023 final rule. Financial institutions might use the public data (such as number of applications, pricing data, denial rates, and information on the types of credit) to better understand the demand for small business credit products and the conditions under which they are being supplied by other financial institutions. Collecting data on fewer applications, from fewer financial institutions, and for fewer types of loans under this proposed rule could impose costs on financial institutions by reducing this benefit. A bank, for example, may lose the opportunity to learn more detailed information about the merchant cash advance market, which they might view as a competitor. Financial institutions of all sizes may lose insight into the lending activities of smaller competitors who fall below the reporting threshold.

Finally, the Bureau estimates that some covered institutions would incur adjustment costs to implement changes to comply with the proposed rule. The Bureau describes these costs for the representative Type C DIs because only Type C institutions, those with 1,000 or more loan originations per year, would be covered under the proposed rule. The Bureau assumes that the representative Type C DI would receive the same number of applications reportable under the baseline and the proposed rule. As discussed in part IV.F.1, a Type C DI would need to spend about $85,400 to implement the non-hiring one-time

costs to implement changes necessary to comply with either the baseline or the proposed rule

uld be covered under the proposed rule. The Bureau assumes that the representative Type C DI would receive the same number of applications reportable under the baseline and the proposed rule. As discussed in part IV.F.1, a Type C DI would need to spend about $85,400 to implement the non-hiring one-time

costs to implement changes necessary to comply with either the baseline or the proposed rule. As discussed above, the Bureau assumes that an institution that would remain covered under the proposed rule has already spent, on average, about 25 percent of non-hiring one-time costs to implement changes that will not be compliant with the proposed rule. Thus, a Type C DI would incur the full cost of implementing the proposed rule but, effectively, would only receive 75 percent of the cost savings from no longer needing to comply with the baseline. The Bureau estimates that the representative Type C DI would incur total one-time costs of $21,250 to implement changes to comply with the proposed rule. Based on a similar calculation for Type C nondepository institutions, the Bureau also estimates that the representative Type C nondepository that would still be covered under the proposed rule would incur total one-time costs of $28,500 to implement changes to comply with the proposed rule.

Summing across institutions as described in part IV.E.3, the Bureau estimates that the total one-time adjustment costs for covered depository and nondepository institutions will be between $4,700,000 and $5,000,000. Using a 7 percent discount rate and a 10-year amortization window, the annualized one-time costs for covered institutions will be about $700,000.

The Bureau requests comment on these and other potential costs to impacted financial institutions arising as a result of the proposed rule.

4. Costs to Small Businesses

In the 2023 final rule, the Bureau described several benefits that would accrue to small businesses from the small business lending data collection and publication

e-time costs for covered institutions will be about $700,000.

The Bureau requests comment on these and other potential costs to impacted financial institutions arising as a result of the proposed rule.

4. Costs to Small Businesses

In the 2023 final rule, the Bureau described several benefits that would accrue to small businesses from the small business lending data collection and publication. These benefits relate to the rule's two purposes: fair lending enforcement and community development. Several provisions of this proposed rule would change the amount and types of information that would be collected and disclosed. Therefore, to the extent the Bureau expected small businesses to benefit from the collection as described in the 2023 final rule, changes that reduce or alter the amount or types of information provided would impose a cost on small businesses by reducing these expected benefits.

Several proposed changes reduce the number of financial institutions that would report data or change the composition of institutions reporting. The Bureau is proposing that the threshold number of originations of covered transactions for two consecutive years be raised to 1,000, which, as shown above, would substantially lower the number of depository and non-depository institutions collecting and reporting small business credit application data. The Bureau is also proposing that several types of transactions be exempt from coverage, relative to the baseline, including transactions from FCS lenders, merchant cash advances and agricultural loans. These types of transactions and lenders would thus be removed from the data collection and reporting. The Bureau is also proposing a minimum transaction size of $1,000 for covered transactions, which would remove smaller transactions from the data relative to the baseline

es two categories of alternatives considered: other methods for defining a covered financial institution and limiting the data points to those mandated by section 1071. The Bureau uses the methodologies discussed in parts IV.D and IV.E to estimate the impacts of these alternatives.

First, the Bureau considered multiple reporting thresholds for purposes of defining a covered financial institution. In particular, the Bureau considered whether to exempt financial institutions with fewer than 200, 500, or 2,000 originations in each of the two preceding calendar years instead of 1,000 originations, as proposed herein. The Bureau presents estimates for depository institutions because it does not have sufficient information to estimate how these differences in thresholds would impact nondepository institutions. Annualized values are calculated using a 7 percent discount rate and a 10-year amortization window.

Under a 200-origination threshold, the Bureau estimates that about 700 to 800 depository institutions would be covered and between 900 to 1,000 would no longer be covered. That is, the Bureau expects that between 500 to 600 additional depository institutions would be covered under a 200-origination threshold compared to the proposed 1,000-origination threshold. The Bureau estimates that an additional 3.2 to 3.7 percentage points of small business loans originated by depository institutions would be covered under a 200-origination threshold and that an additional 15 to 17 percentage points of the dollar value of such loans would be covered.

and that an additional 15 to 17 percentage points of the dollar value of such loans would be covered.

Under a 200-origination threshold, the Bureau estimates that the total one-time cost savings across all impacted depository institutions would decrease by between $25,000,000 to $29,000,000 relative to the proposed rule, with an annualized decrease in savings of between $3,600,000 and $4,100,000. The Bureau estimates that total one-time costs incurred by covered depository institutions would increase by between $6,000,000 to $7,000,000, with an annualized increase in costs of between $800,000 to $900,000. The Bureau estimates that the total ongoing costs savings across all impacted depository institutions would decrease by between $35,000,000 to $41,000,000 under this alternative.

Under a 500-origination threshold, the Bureau estimates that between 300 to 400 depository institutions would be covered and between 1,300 to 1,400 would no longer be covered. That is, the Bureau expects that around 200 additional depository institutions would be covered under a 500-origination threshold compared to the proposed 1,000-origination threshold. The Bureau estimates that an additional 1.3 to 1.7 percentage points of small business loans originated by depository institutions would be covered under a 500-origination threshold and that an additional 6.4 to 7.3 percentage points of the dollar value of such loans would be covered.

Under a 500-origination threshold, the Bureau estimates that the total one-time cost savings across all impacted depository institutions would decrease by between $8,000,000 to $10,000,000 under a 500-origination threshold relative to the proposed rule, with an annualized decrease in savings of between $1,200,000 and $1,400,000. The Bureau estimates that total one-time costs incurred by covered depository institutions would increase by between $1,000,000 to $1,400,000, with an annualized increase in costs of about $100,000 to $200,000

0,000. The Bureau estimates that total one-time costs incurred by covered depository institutions would decrease by about $1,500,000 to $2,000,000, with an

annualized decrease in costs of between $200,000 and $300,000. The Bureau estimates that the total ongoing costs savings across all impacted depository institutions would increase by between $22,000,000 to $25,000,000 under this alternative.

Second, the Bureau considered the costs and benefits for limiting its data collection to the data points specifically enumerated in 15 U.S.C. 1691c-2(e)(2)(A) through (G). In addition to those data points, the statute also requires financial institutions to collect and report any additional data that the Bureau determines would aid in fulfilling the purposes of section 1071. In addition to the data points specifically enumerated in 15 U.S.C. 1691c-2(e)(2)(A) through (G), the proposal keeps three data points from the 2023 final rule that relied on the authority in 1691c-2(e)(2)(H). These are the number of principal owners, three-digit NAICS industry code of the business, and the time in business. The Bureau has considered the impact of instead proposing only the collection of those data points enumerated in 1691c-2(e)(2)(A) through (G).

Requiring the collection and reporting of only the data points enumerated in 15 U.S.C. 1691c-2(e)(2)(A) through (G) would result in a reduction in the fair lending benefit of the data compared to the 2023 final rule. For example, not collecting time in business or industry information would obscure possible fair lending risk by covered financial institutions. As mentioned in part IV.F.3 above, several of the data points the Bureau maintaining in this proposed rule under the 1691c-2(e)(2)(H) authority are critical to conducting more accurate and complete fair lending analyses

ess than $10 billion in assets would experience some one-time costs to comply with the proposed rule relative to the baseline, with such estimated total costs to be between $1,600,000 and $1,800,000.

H. Potential Impact on Small Businesses in Rural Areas

The Bureau expects that small businesses in rural areas will directly experience many of the costs of the rule described above in part IV.F.4. This includes a reduction in benefits derived from more efficient fair lending enforcement and community development generated by data collection under the small business lending rule. The proposed rule would increase the threshold number of loan originations above which institutions have to report data, which would lead to fewer lenders in rural areas reporting data on small business credit application in rural areas. The Bureau's presents estimates of this change in coverage below. The proposed rule also would exempt agricultural credit from the types of covered transactions. Many banks and credit unions in rural areas provide credit for farming and livestock production since they are primary industries and are responsible for much employment in these areas. Small businesses, communities, governmental entities will lose insight into these areas of credit provision as a consequence of the proposed rule. However, as explained in part IV.F.4 above, the Bureau believes that data collected for certain loan types, including agricultural loans, would have been of poor quality and, therefore, the costs from eliminating them would be limited.

The source data from CRA submissions that the Bureau uses to estimate institutional coverage and market estimates provide information on the county in which small business borrowers are located. However, approximately 86 percent of banks did not report CRA data in 2023, and as a result the Bureau does not believe the reported data are robust enough to estimate the locations of the small business borrowers for the banks that do not report CRA data

from ongoing variable costs on to small businesses in the form of lower interest rates or fees but would not do so with one-time or fixed costs. The Bureau expects that this pass through from covered financial institutions would also apply to small businesses in rural areas. As described above, the variable cost savings per application is $7 for Type A FIs, $2 for Type B FIs, and $1 for Type C FIs. This is the savings that the Bureau expects would pass on to small business applicants regardless of where they are located.

V. Regulatory Flexibility Act Analysis

The Regulatory Flexibility Act (RFA) 102 generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of any rule subject to notice-and-comment rulemaking requirements. These analyses must “describe the impact of the proposed rule on small entities.” 103 An IRFA or FRFA is not required if the agency certifies that the rule would not have a significant economic impact on a substantial number of small entities. 104 The Bureau also is subject to certain additional procedures under the RFA involving the convening of a panel to consult with small business representatives prior to proposing a rule for which an IRFA is required. 105 The Bureau has not certified that the proposed rule would not have a significant economic impact on a substantial number of small entities within the meaning of the RFA.

102 5 U.S.C. 601 et seq.

103 5 U.S.C. 603(a). For purposes of assessing the impacts of the proposed rule on small entities, “small entities” is defined in the RFA to include small businesses, small not-for-profit organizations, and small government jurisdictions. 5 U.S.C. 601(6). A “small business” is determined by application of SBA regulations and reference to the NAICS classifications and size standards. 5 U.S.C. 601(3). A “small organization” is any “not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” 5 U.S.C. 601(4)

hief Counsel for Advocacy of the Small Business Administration (SBA) consulted with affected small entities and with the Administrator of the Office of Information and Regulatory Affairs within the Office of Management and Budget regarding the extent to which the CFPB reached out to affected small entities with respect to the potential impacts of the rule and took their concerns into consideration. The SBA's Chief Counsel for Advocacy noted that the CFPB had, in 2020, convened a review panel in accordance with 5 U.S.C. 609(b). The Chief Counsel for Advocacy concluded that reconvening a review panel for the present NPRM would not advance the effective participation of small entities in the rulemaking process. Pursuant to 5 U.S.C. 609(e), a written finding that contains the reasons for his conclusion will be submitted into the rulemaking record by the Chief Counsel for Advocacy.

As part of the initial proposed regulation implementing Section 1071 of the ECOA, the CFPB along with the Small Business Administration, Office of Advocacy and the Office of Information and Regulatory Affairs convened a SBREFA Panel in 2020, 107 because the agency believed the rule was likely to have a significant impact on a substantial number of small entities. The panel gathered feedback from 20 small entity representatives (SERs) and offered suggestions about how the future rule could minimize the

impact on small entities while still achieving their statutory objectives.

107 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 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 SERs had several suggestions at this early stage on how to minimize the impact of data collection on small entities. The first of these was to exclude small lenders from the requirement to collect data. Several different methods of exemptions were proposed including using a number of small business loans, value of small business loans, and basing the exemption on the size of the lender rather than their small business loan portfolio specifically. The second was to use a single definition for a small business loan applicant based on revenue, rather than the SBA size standards, which vary based on industry. The SERs disagreed on what the revenue cutoff for a small business loan applicant should be with some arguing for a low value of less than $1 million while others preferred a higher value of $8 million. Finally, SERs recommended limiting the number of discretionary data points, noting that some of the required collections would be difficult to produce at the application stage.

Besides its involvement in the SBREFA panel, the Office of Advocacy has provided further feedback on the implementation of Section 1071 of the Dodd-Frank Act. In January 2022, Advocacy documented concerns that were raised by small entities, including community banks, credit unions, non-depository lenders, and automobile dealerships. They saw the 2021 NPRM as potentially increasing the cost of credit for small businesses and discouraging lending to small, minority-, and women-owned businesses. The Office of Advocacy believed that the CFPB had underestimated compliance costs in 2021, particularly the costs related to new systems, training, and reporting requirements. Advocacy believed that $5 million or less in gross annual revenue was too expansive a definition of small business loan applicant

for small businesses and discouraging lending to small, minority-, and women-owned businesses. The Office of Advocacy believed that the CFPB had underestimated compliance costs in 2021, particularly the costs related to new systems, training, and reporting requirements. Advocacy believed that $5 million or less in gross annual revenue was too expansive a definition of small business loan applicant. It recommended minimizing adverse effects by considering alternative thresholds and definitions. SERs also expressed concerns about the burden of collecting extra data, potential privacy breaches (especially in smaller communities), and the risk of misinterpretation or reputational harm if unique loan pricing is disclosed without proper context. In response to Advocacy's comment letter, the CFPB made a substantial change to the filing threshold for data collection, in the 2023 final rule, raising it from 25 small business loans to 100. 108 Since the final rule was published, the CFPB has twice extended the compliance deadline, first in July of 2024, 109 and again in June of 2025. 110 The SBA's Office of Advocacy commented on the latter of these, supporting the extension and encouraging the CFPB to modify the rule by reiterating the concerns it had previously gathered from small entities.

108 88 FR 35150 (May 31, 2023).

109 89 FR 55024 (July 3, 2024).

110 90 FR 25874 (June 18, 2025).

B. Initial Regulatory Flexibility Analysis

Under RFA section 603(a), an initial regulatory flexibility analysis (IRFA) “shall describe the impact of the proposed rule on small entities.” 111 Section 603(b) of the RFA sets forth the required elements of the IRFA. Section 603(b)(1) requires the IRFA to contain a description of the reasons why action by the agency is being considered. 112 Section 603(b)(2) requires a succinct statement of the objectives of, and the legal basis for, the proposed rule

y analysis (IRFA) “shall describe the impact of the proposed rule on small entities.” 111 Section 603(b) of the RFA sets forth the required elements of the IRFA. Section 603(b)(1) requires the IRFA to contain a description of the reasons why action by the agency is being considered. 112 Section 603(b)(2) requires a succinct statement of the objectives of, and the legal basis for, the proposed rule. 113 The IRFA further must contain a description of and, where feasible, an estimate of the number of small entities to which the proposed rule will apply. 114 Section 603(b)(4) requires a description of the projected reporting, recordkeeping, and other compliance requirements of the proposed rule, including an estimate of the classes of small entities that will be subject to the requirement and the types of professional skills necessary for the preparation of the report or record. 115 In addition, the Bureau must identify, to the extent practicable, all relevant Federal rules which may duplicate, overlap, or conflict with the proposed rule. 116 Furthermore, the Bureau must describe any significant alternatives to the proposed rule which accomplish the stated objectives of applicable statutes and which minimize any significant economic impact of the proposed rule on small entities. 117 Finally, as amended by the Dodd-Frank Act, RFA section 603(d) requires that the IRFA include a description of any projected increase in the cost of credit for small entities, a description of any significant alternatives to the proposed rule which accomplish the stated objectives of applicable statutes and which minimize any increase in the cost of credit for small entities (if such an increase in the cost of credit is projected), and a description of the advice and recommendations of representatives of small entities relating to the cost of credit issues. 118

111 5 U.S.C. 603(a).

112 5 U.S.C. 603(b)(1).

113 5 U.S.C. 603(b)(2).

114 5 U.S.C. 603(b)(3).

115 5 U.S.C. 603(b)(4).

116 5 U.S.C. 603(b)(5).

117 5 U.S.C. 603(c)

e cost of credit for small entities (if such an increase in the cost of credit is projected), and a description of the advice and recommendations of representatives of small entities relating to the cost of credit issues. 118

111 5 U.S.C. 603(a).

112 5 U.S.C. 603(b)(1).

113 5 U.S.C. 603(b)(2).

114 5 U.S.C. 603(b)(3).

115 5 U.S.C. 603(b)(4).

116 5 U.S.C. 603(b)(5).

117 5 U.S.C. 603(c).

118 5 U.S.C. 603(d)(1); Dodd-Frank Act section 1100G(d)(1), 124 Stat. 2112.

The Bureau publishes the following IRFA for public comment.

1. Description of the Reasons Why Agency Action Is Being Considered

Section 1071 of the Dodd-Frank Act amended 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 (1) to facilitate enforcement of fair lending laws, and (2) to enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses. On May 31, 2023, the Bureau published a final rule in the Federal Register to implement section 1071, and the Bureau subsequently extended the rule's compliance dates (most recently in October 2025).

In this proposed rule, the Bureau proposes to reconsider certain provisions of the 2023 final rule to focus on core lending products, lenders, small businesses, and data points. Based on reactions to the 2023 final rule, including continued feedback from stakeholders and the ongoing litigation, the Bureau now believes that a better, longer-term approach to advance the statutory purposes of section 1071 would be 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

For the purposes of assessing the impacts of the proposed rule on small entities, “small entities” is defined in the RFA to include small businesses, small nonprofit organizations, and small government jurisdictions. 120 A “small business” is determined by application of SBA regulations in reference to the North American Industry Classification System (NAICS) classification and size standards. 121 Under such standards, the Bureau identified several categories of small entities that may be affected by the proposed provisions: depository institutions; fintech lenders and MCA providers; commercial finance companies; nondepository CDFIs; Farm Credit System members; and governmental lending entities. The NAICS codes covered by these categories are described below.

120 5 U.S.C. 601(6).

121 The current SBA size standards are found on SBA's website, Small Bus. Admin., Table of size standards (Dec. 26, 2024), https://www.sba.gov/document/support-table-size-standards.

Table 9 provides the Bureau's estimate of the number and types of entities that may be affected by the proposed rule. The first column provides the category of institution type, the second column provides the NAICS codes associated with that category, the third column provides the SBA small entity threshold for that institution category. The second to last column presents the estimated total number of entities in that category that would be affected by the proposed rule and the final column presents the estimate total number of small entities in that category that would be affected by the proposed rule. See part II.D in the 2023 final rule and part IV.D above for additional information on how the Bureau arrived at the estimates presented below

last column presents the estimated total number of entities in that category that would be affected by the proposed rule and the final column presents the estimate total number of small entities in that category that would be affected by the proposed rule. See part II.D in the 2023 final rule and part IV.D above for additional information on how the Bureau arrived at the estimates presented below.

Table 9—Estimated Number of Affected Entities and Small Entities by Category Category NAICS Small entity threshold Estimated total affected financial institutions Estimated total of small affected financial institutions Depository Institutions 522110, 522130, 522180, 522210 $850 million in assets 1,700 800 Online Lenders and MCA providers 522299, 522291, 522320, 518210 $40 million (NAICS 518210); $47 million (NAICS 522299, 522291, 522320) 100 90 Commercial Finance Companies 513210, 532411, 532490, 522220, 522291 $40 million (NAICS 532490); $45.5 million (NAICS 532411); $47 million (NAICS 513210, 522291, and 522220) 240 216 Nondepository CDFIs 522390, 523910, 813410, 522310 $9.5 million (NAICS 813410); $15 million (NAICS 522310); $28.5 million (NAICS 522390); $47 million (NAICS 523910) 140 132 Farm Credit System members 522299 $47 million 60 31 Governmental Lending Entities NA Population below 50,000 70 0 The following paragraphs describe the categories of entities that the Bureau expects would be affected by the proposed rule.

Depository institutions (banks and credit unions): The Bureau estimates that there are about 1,700 banks, savings associations, and credit unions engaged in small business lending that would be affected by the proposed rule. 122 The Bureau estimates that about 170 banks, savings associations, and credit unions would be required to report under the proposed rule. The Bureau estimates that about 1,530 banks, savings associations, and credit unions would have been required to report under the 2023 final rule but would not be required to report under the proposed rule

s lending that would be affected by the proposed rule. 122 The Bureau estimates that about 170 banks, savings associations, and credit unions would be required to report under the proposed rule. The Bureau estimates that about 1,530 banks, savings associations, and credit unions would have been required to report under the 2023 final rule but would not be required to report under the proposed rule. These entities potentially fall into four different industry categories, including “Commercial Banking” (NAICS 522110), “Credit Unions” (NAICS 522130), “Savings Institutions and Other Depository Credit Intermediation” (NAICS 522180), and “Credit Card Issuing” (NAICS 522210). All these industries have a size standard threshold of $850 million in assets. The Bureau estimates that about 5 of the institutions that would be covered by the proposed rule are small entities according to this threshold. The Bureau

estimates that about 795 of the institutions that would no longer be covered by the proposed rule are small entities.

122 The Bureau notes that the category of depository institutions also includes CDFIs that are also depository institutions.

Online lenders and MCA providers: The Bureau estimates that there are about 30 online lenders and about 70 MCA providers engaged in small business lending that would be affected by the proposed rule. The online lenders would be covered by the proposed rule and the MCA providers would have been covered by the 2023 final rule but would no longer be covered by the proposed rule. These companies span multiple industries, including “International, Secondary Market, and All Other Nondepository Credit Intermediation” (NAICS 522299), “Consumer Lending” (NAICS 522291), “Financial Transactions, Processing, Reserve, and Clearinghouse Activities” (NAICS 522320), and “Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services” (NAICS 518210)

oposed rule. These companies span multiple industries, including “International, Secondary Market, and All Other Nondepository Credit Intermediation” (NAICS 522299), “Consumer Lending” (NAICS 522291), “Financial Transactions, Processing, Reserve, and Clearinghouse Activities” (NAICS 522320), and “Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services” (NAICS 518210). All these industries have a size standard threshold of $40 million in sales (NAICS 518210) or $47 million in sales (all other NAICS). The Bureau assumes that about 25 of these online lenders are small entities and about 65 MCA providers are small entities.

Commercial finance companies: The Bureau estimates that about 240 commercial finance companies, including captive and independent financing, engaged in small business lending would be affected by the proposed rule. The Bureau assumes that all these entities would have been covered by the 2023 final rule but would not be covered by the proposed rule. These companies span multiple industries, including “Software Publishers” (NAICS 513210), “Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing” (NAICS 532411), “Other Commercial and Industrial Machinery and Equipment Rental and Leasing” (NAICS 532490), “Sales financing” (NAICS 522220) and “Consumer Lending” (NAICS 522291). These industries have size standard thresholds that range from $40 million to $47 million. The Bureau assumes that about 90 percent, or 216, of these commercial finance companies are small according to these size standards.

90 percent, or 216, of these commercial finance companies are small according to these size standards.

Nondepository CDFIs: The Bureau estimates that there are 140 nondepository CDFIs engaged in small business lending that would be affected by the proposed rule. The Bureau assumes that all these entities would have been covered by the 2023 final rule but would not be covered by the proposed rule. CDFIs generally fall into “Other Activities Related to Credit Intermediation” (NAICS 522390), “Miscellaneous Intermediation” (NAICS 523910), “Civic and Social Organizations” (NAICS 813410), and “Mortgage and Nonmortgage Loan Brokers” (NAICS 522310). These industries have size standard thresholds that range from $9.5 million in sales to $47 million in sales. The Bureau assumes that about 95 percent, or 132, nondepository CDFIs are small entities.

Farm Credit System members: The Bureau estimates that there are 60 members of the Farm Credit System (banks and associations) engaged in small business lending that would be affected by the proposed rule. 123 The Bureau assumes that all these entities would have been covered by the 2023 final rule but would not be covered by the proposed rule. These institutions are in the “All Other Nondepository Credit Intermediation” (NAICS 522298) industry. The size standard for this industry is $47 million in revenue. The Bureau estimates that 31 members of the Farm Credit System are small entities.

123 Farm Credit Admin., Number of FCS banks and associations by type and district as of January 1, 2024,

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