[House Report 118-279]
[From the U.S. Government Publishing Office]


118th Congress }                                              { Report
                        HOUSE OF REPRESENTATIVES
 1st Session   }                                              { 118-279

======================================================================

 
 DISAPPROVING THE RULE SUBMITTED BY THE CONSUMER FINANCIAL PROTECTION 
  BUREAU RELATING TO ``SMALL BUSINESS LENDING UNDER THE EQUAL CREDIT 
                    OPPORTUNITY ACT (REGULATION B)''

                                _______
                                

 November 28, 2023.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. McHenry, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                      [To accompany H.J. Res. 66]

    The Committee on Financial Services, to whom was referred 
the joint resolution (H.J. Res. 66) disapproving the rule 
submitted by the Consumer Financial Protection Bureau relating 
to ``Small Business Lending Under the Equal Credit Opportunity 
Act (Regulation B)'', having considered the same, reports 
favorably thereon without amendment and recommends that the 
joint resolution do pass.

                          PURPOSE AND SUMMARY

    Introduced on July 14, 2023, by Representative Roger 
Williams, H.J. Res 66, a joint resolution disapproving the rule 
submitted by the Consumer Financial Protection Bureau relating 
to ``Small Business Lending Under the Equal Credit Opportunity 
Act (Regulation B),'' would rescind the CFPB's final rule, 
implementing Section 1071 of the Dodd-Frank Act, to mandate the 
collection and reporting of demographic data on small business 
loan applicants.

                  BACKGROUND AND NEED FOR LEGISLATION

    On March 30, 2023, the CFPB issued a final rule to 
implement Section 1071 of the Dodd-Frank Act, ``Small Business 
Data Collection.''\1\ The final rule will expand data 
collection requirements for financial institutions in the small 
business lending market. Under the rule, any lender who 
originates at least 100 loans in each of the two preceding 
calendar years to small businesses with a gross revenue of up 
to $5 million from the previous fiscal year will be required to 
collect certain data related to borrowers' demographic 
information.\2\ Lenders will be required to report on as many 
as 81 data fields,\3\ including application and credit 
information as well as an applicant's minority-owned business 
status, women-owned business status, LGBTQI+-owned business 
status, and information on ethnicity, race, and sex of the 
principal owners.\4\ The CFPB will implement the rule in 
phases: (1) Lenders who originate at least 2,500 small business 
loans annually must collect data beginning on October 1, 2024; 
(2) Lenders who originate at least 500 loans annually must 
collect data beginning April 1, 2025; and (3) Lenders who 
originate at least 100 loans annually must collect data 
beginning January 1, 2026.\5\
---------------------------------------------------------------------------
    \1\CFPB, ``Final Rule: Small Business Lending under the Equal 
Credit Opportunity Act (Regulation B),'' (Mar. 30, 2023). https://
www.consumerfinance.gov/rules-policy/final-rules/small-business-
lending-under-the-equal-credit-opportunity-act-regulation-b/.
    \2\CFPB, ``Executive Summary of the Small Business Lending Rule,'' 
(Mar. 30, 2023). https://files.consumerfinance.gov/f/documents/
cfpb_sbl_executive-summary.pdf.
    \3\Texas Bankers Association, ``TBA files suit to block CFPB's Sec. 
1071 Final Rule,'' (Apr. 26, 2023). https://www.texasbankers.com/TBA/
News_Releases/2023-04-26-TBA-files-suit-to-block-CFPBs-Sec.-1071-Final-
Rule.aspx; CFPB, ``Small Business Lending Rule: Data Points Chart 
(Version 1),'' (Mar. 30, 2023). https://files.consumerfinance.gov/f/
documents/cfpb_small-business-lending-data-points-chart.pdf.
    \4\Id.
    \5\Id.
---------------------------------------------------------------------------
    The CFPB incorporated some industry feedback into the final 
rule. The changes include removing the requirement for lenders 
to make their own determinations of an applicant's race or 
ethnicity, or any other demographic information; and not 
requiring loans reportable under the Home Mortgage Disclosure 
Act (HMDA) to be reported under the new rule. However, covered 
entities subject to the final rule remain concerned with the 
short timeframe to create sufficient compliance systems; the 
ability of the CFPB to protect small businesses' data; and the 
consequences of increased compliance burden on the availability 
of and access to affordable small business credit.
    On October 26, 2023, the U.S. District Court for the 
Southern District of Texas issued a nationwide injunction 
prohibiting the CFPB from implementing or enforcing its final 
rule on Small Business Lending under the Equal Credit 
Opportunity Act (Regulation B).\6\ The District Court explained 
that, given the Fifth Circuit's opinion on the 
unconstitutionality of the CFPB's funding structure, 
implementation of the Small Business Lending Rule should be 
enjoined pending the Supreme Court's decision.\7\ The District 
Court further directed the CFPB to extend the time for 
compliance should the Supreme Court reverse the Fifth Circuit's 
decision.
---------------------------------------------------------------------------
    \6\https://texasbankers.informz.net/texasbankers/data/images/
Nationwide%20Injuction%20
Granted.pdf.
    \7\The U.S. District Court for the Southern District of Texas is 
part of the U.S. Court of Appeals for the Fifth Circuit and is 
therefore bound by the Fifth Circuit's prior decision. The District 
Court did not independently consider the funding argument previously 
held unconstitutional by the Fifth Circuit.
---------------------------------------------------------------------------

                                HEARING

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearing was used to develop H.J. Res. 66: The Subcommittee on 
Financial Institutions and Monetary Policy of the Committee on 
Financial Services held a hearing on March 9, 2023, titled 
``Consumer Financial Protection Bureau: Ripe for Reform.''
    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearing was used to develop H.J. Res. 66: The Committee on 
Financial Services held a hearing on June 14, 2023, titled 
``The Semi-Annual Report of the Bureau of Consumer Financial 
Protection.''

                        COMMITTEE CONSIDERATION

    The Committee on Financial Services met in open session on 
July 27, 2023, and ordered H.J. Res. 66 to be reported 
favorably to the House as amended by a recorded vote of 29 ayes 
to 21 nays (Record vote no. FC-95), a quorum being present. 
Before the question was called to order the bill favorably 
reported, the Committee adopted an amendment in the nature of a 
substitute offered by Mr. Williams by voice vote.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the order to report legislation and amendments thereto. H.J. 
Res. 66 was ordered reported favorably to the House as amended 
by a recorded vote of 29 ayes to 21 nays (Record vote no. FC-
95), a quorum being present.


                      COMMITTEE OVERSIGHT FINDINGS

    Pursuant to clause 3(c) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee, based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    PERFORMANCE GOALS AND OBJECTIVES

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the goal of H.J. Res. 66 is to 
rescind the CFPB's final rule, implementing Section 1071 of the 
Dodd-Frank Act, to mandate the collection and reporting of 
demographic data on small business loan applicants.

                 CONGRESSIONAL BUDGET OFFICE ESTIMATES

    The Committee has requested but not received from the 
Director of the Congressional Budget Office a cost estimate. 
However, pursuant to clause 3(d)(1) of House rule XIII, the 
Committee will adopt as its own the cost estimate by the 
Director of the Congressional Budget Office once it has been 
prepared.

             NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, 
                          AND TAX EXPENDITURES

    The Committee has requested but not received from the 
Director of the Congressional Budget Office an estimate. 
However, pursuant to clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, once an estimate has been 
prepared by the Director of the Congressional Budget Office, as 
required by section 402 of the Congressional Budget Act of 
1973, the Committee will adopt as its own the estimate of new 
budget authority, entitlement authority, or tax expenditures or 
revenues contained in the cost estimate.

                       FEDERAL MANDATES STATEMENT

    The Committee has requested but not received from the 
Director of the Congressional Budget Office an estimate of the 
Federal mandates pursuant to section 423 of the Unfunded 
Mandates Reform Act. The Committee will adopt the estimate once 
it has been prepared by the Director.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         EARMARK IDENTIFICATION

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    DUPLICATION OF FEDERAL PROGRAMS

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
Federal program, including any program that was included in a 
report to Congress pursuant to section 21 of the Public Law 
111-139 or the most recent Catalog of Federal Domestic 
Assistance.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

    This joint resolution states that Congress disapproves the 
rule submitted by the Consumer Financial Protection Bureau 
relating to ``Small Business Lending Under the Equal Credit 
Opportunity Act (Regulation B)'' (88 Fed. Reg. 35150), and such 
rule shall have no force or effect.

                             MINORITY VIEWS

    This resolution would nullify the Consumer Financial 
Protection Bureau's (CFPB) recently finalized small business 
lending rule, implementing Section 1071 of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank). Section 
1071 was led by Ranking Member Waters and Rep. Velazquez. The 
CFPB rule implementing this section seeks to: provide 
transparency in an opaque lending marketplace; promote 
competition among lenders that would drive down costs; and 
provide new lending opportunities for small businesses, 
especially women-owned, LGBTQ-owned businesses and businesses 
owned by people of color. The passage of this Congressional 
Review Act resolution would not only reverse this rule, it 
would further restrict the CFPB's ability to issue any future 
rules to promote small business lending market transparency.
    The CFPB finalized its rule implementing Section 1071 in 
March 2023.\1\ The rule requires lenders to collect and report 
information about the small business credit applications they 
receive, including geographic and demographic data (that's 
self-reported by business owners on a voluntary basis), lending 
decisions, and the price of credit. The rule will work in 
tandem with the Community Reinvestment Act, which requires 
certain financial institutions to meet the needs of the 
communities they serve. The increased transparency will benefit 
small businesses, family farms, financial institutions, and the 
broader economy. Since its finalization, Section 1071 has come 
under attack in both district courts and Congress. In May 2023, 
plaintiffs filed a lawsuit in a Texas federal district court 
challenging the validity of the rule and a motion seeking a 
preliminary injunction.\2\ Community lenders and small business 
advocates alike have underlined the importance of CFPB's small 
lending rules to creating a more transparent and fair 
marketplace for lenders and small businesses.\3\
---------------------------------------------------------------------------
    \1\CFPB, Small business lending rulemaking (Accessed June 8, 2023).
    \2\John L. Culhane, Jr., Richard J. Andreano, Jr. & Michael Gordon, 
Plaintiffs challenging Section 1071 final rule seek preliminary 
injunction; Ballard Spahr to hold June 15 webinar, Ballard Spahr 
(accessed Jun, 8, 2023).
    \3\Accion Opportunity Fund, CEO Luz Urrutia's Congressional 
Testimony on Lending Transparency (Mar. 2023); and NCRC, NCRC and Over 
150 Organizations Unite in Support of Section 1071 of Dodd-Frank, 
Rejecting Congressional Repeal Efforts (Jul. 25, 2023).
---------------------------------------------------------------------------
    The CFPB's 1071 rule is expected to result in increased 
lending to underserved businesses, including farms, as was 
observed in the implementation of similar sunshine statutes 
like the Home Mortgage Disclosure Act (HMDA). HMDA data has 
helped regulators to identify discriminatory practices, like 
modern-day redlining. Congress drafted Section 1071 of Dodd-
Frank following the 2008 financial crisis to provide similar 
transparency to the small business lending market. In the early 
days of the pandemic, we saw how the biggest banks prioritized 
their concierge clients in the first round of the Paycheck 
Protection Program (PPP), leaving millions of small businesses, 
especially those owned by women and people of color, out of the 
program. Recent research from the Fed found that Black-owned 
small businesses were 9% less likely to receive a PPP loan 
compared to White-owned firms. Make no mistake, if we had this 
CFPB small business data rule in place before the pandemic, we 
would have had much more data on who was receiving support and 
who wasn't, and who was lending to diverse small businesses and 
who wasn't. Going forward, Congress would be better positioned 
and equipped with data to craft legislation to more fairly 
support small business lending.
    CFPB's 1071 rule is an important step towards transparency 
and fairness in small business lending. We appreciate that the 
CFPB is phasing this rule in, giving community banks and credit 
unions adequate time to prepare to comply with the rule. The 
arguments that this rule will stop small business lending are a 
red herring. Again, financial institutions have complied with 
HMDA for decades, and yet they continue to make mortgage loans. 
Greater transparency will promote competition and ensure that 
all businesses have a fair chance to thrive. We must protect 
the financial needs of small businesses and hold financial 
institutions accountable for their lending practices.
    During the markup, Rep. Casten opened a parliamentary 
inquiry about the resolution and noted that this resolution 
does not comply with typical Congressional Review Act 
procedures for fast-track consideration in the Senate because 
H.J. Res. 66 was introduced on May 31st, but the papers for the 
rule that it seeks to overturn was not referred to the Senate 
Banking Committee until June 12th. According to information 
staff received from the Senate Parliamentarian's office and 
Congressional Research Service, even if the House were to pass 
H.J. Res. 66, the Senate would be unable to take up the measure 
under fast-track consideration. While we strongly oppose this 
measure, it would add insult to injury for the House to take 
valuable floor time to pass H.J. Res. 66, only to have to take 
additional floor time to pass a different measure approved by 
the Senate for the measure to advance to the President's desk.
    Finally, more than 150 organizations oppose H.J. Res. 66, 
including: National Community Reinvestment Coalition (NCRC), 
20/20 Vision, Access Plus Capital, Accountable.US, African 
American Alliance of CDFI CEOs, Alliance 85, Inc., American 
Economic Liberties Project, Americans for Financial Reform, 
Anacostia Economic Development Corporation, ANHD--The, 
Association for Neighborhood & Housing Development, Avenue CDC, 
BBIF, Inc., Birmingham Business Resource Center, Bridgeport 
Neighborhood Trust, Brotherhood and Sisterhood International, 
Building Alabama Reinvestment, CAARMA, California Capital, 
Financial Development Corporation, California Community 
Economic Development Association, CAMEO--California Association 
for Micro Enterprise Opportunity, Camino Financial, Inc., CASA 
of Oregon, Cash Community Development Organization, Catapult 
Pittsburgh, Catholic charities usa, CDC Small Business Finance, 
Ceiba, Center for Responsible Lending, Centre for Homeownership 
& Economic Development Corporation, Centro Cultural, Chicago 
Community Loan Fund, CHWC Inc., City of Gary, IN, City of 
Tampa, CLARIFI, Coalition for Non Profit Housing and Economic 
Development, Coastal Enterprises, Inc., Community Enterprise 
Investments, Inc., Community Growth Fund, Community Housing 
Development Corporation, Community Link, Community Reinvestment 
Alliance of South Florida, Consumer Action, Consumer Federation 
of America, Delaware Community Reinvestment Action Council, 
Inc., Demand Progress, Divine Direction, Economic Action 
Maryland, Economic Growth Corporation, Empire Justice Center, 
ExploreUSTV and Travel, Fair Finance Watch, Fair Housing Center 
of Metropolitan Detroit, Fair Housing Center of Southwest 
Michigan, Famicos Foundation, Family Resources of New Orleans, 
FHCNA, First Community Capital, Frayser Community Development 
Corporation, Gen-Wealth Empowerment, Georgia Advancing 
Communities Together, Inc., Greater Cincinnati Microenterprise 
Initiative, Habitat For Humanity of Michigan, Hawai`i Alliance 
for Community-Based Economic Development, HEAL Food Alliance, 
Henderson and Company, Home Ownership Center of Greater 
Cincinnati, Homes on the Hill, CDC, Housing and Education 
Alliance, Inc. (HEA), Housing, Education and Economic 
Development, Housing Justice Center, Housing Options & Planning 
Enterprises, Inc., HousingWorks RI, I Give Back USA, IGNITE! 
Alabama, Interfaith Center on Corporate Responsibility, Jewish 
Community Action, JOVIS, Latino Economic Development Center, 
Latino Leadership Council, Latino Policy Council, Legacy 
Foundation, Legal Aid Society of San Diego, LINC UP Nonprofit 
Housing Corporation, Local First Arizona, Local Initiatives 
Support Corporation (LISC), Logan Heights Community Development 
Corporation, Main Street Alliance, Massachusetts Action for 
Justice, Massachusetts Affordable Housing Alliance, Memorial 
CDC, Metro Milwaukee Fair Housing Council, Metro North 
Community Development Corporation, Metropolitan Milwaukee Fair 
Housing Council, Metropolitan St. Louis Equal Housing and 
Opportunity Council, MS Communities United for Prosperity 
(MCUP), MY Project USA, National Association for Latino 
Community Asset Builders, National Association of American 
Veterans, Inc., National Coalition for Asian Pacific American 
Community Development (National CAPACD), Native Community 
Capital, National NeighborWorks Association, National Urban 
League, NCRC CDF, Neighborhood Improvement Association, 
NeighborWorks Southern Colorado, New Future Foundation, New 
Hope Community Development, New Jersey Citizen Action, New 
Jersey Institute for Social Justice, New Mexico Community 
Capital, New York StateWide Senior Action Council, Nichols 
Temple AME Ministries, North Carolina Housing Coalition, Inc., 
Northwest Indiana Reinvestment Alliance, Olive Hill Community 
Economic Development Corporation, Inc, Opportunity Finance 
Network, Over-the-Rhine Community Housing, Philadelphia 
Association of Community Development Corporations, Pima County 
Community Land Trust, Pittsburgh Community Reinvestment Group, 
Prosperity Indiana, Public Citizen, Public Good Law Center, 
REBOUND, Inc., Reinvestment Partners, Responsible Business 
Lending Coalition, Revolving Door Project, Rise Economy, River 
Cities Development Services, River City Housing, Inc., 
Roosevelt, Southwest Community Development Corporation, San 
Joaquin Valley Housing Collaborative, SaverLife, Self-Help 
Enterprises, SLEHCRA, Small Business Majority, South Dallas 
Fair Park Innercity Community Development Corporation, South 
Florida Community Development Coalition, Southern Dallas 
Progress Community Development Corporation, Southwest CDC, 
Southwest Economic Solutions, Southwest Georgia United, 
Southwest Neighborhood Housing Services, The Food Trust, The 
Greenlining Institute, The National Council of Asian Pacific 
Americans (NCAPA), The Sacramento Environmental Justice 
Coalition, Tierra del Sol Housing Corporation, Town of Apex, 
Ubuntu Institute of Learning, UIC Law School, Universal Housing 
Solutions CDC, Urban Economic Development Association of 
Wisconsin (UEDA), Urban Land Conservancy, Utah Housing 
Coalition, Vermont Slauson LDC, Washington Area Community 
Investment Fund, Welfare Reform Liaison Project, Inc., 
Wisconsin Black Chamber of Commerce, Inc, With Action, 
Woodstock Institute, Working In Neighborhoods, and Working 
Solutions CDFI.\4\
---------------------------------------------------------------------------
    \4\NCRC, NCRC and Over 150 Organizations Unite in Support of 
Section 1071 of Dodd-Frank, Rejecting Congressional Repeal Efforts 
(Jul. 25, 2023).
---------------------------------------------------------------------------
    For these reasons, we oppose H.J. Res. 66.
            Sincerely,
                                   Maxine Waters,
                                           Ranking Member, Committee on 
                                               Financial Services.
                                   Nydia M. Velazquez.
                                   Brad Sherman.
                                   Gregory W. Meeks.
                                   David Scott.
                                   Stephen F. Lynch.
                                   Al Green.
                                   Emanuel Cleaver, II.
                                   Jim Himes.
                                   Bill Foster.
                                   Joyce Beatty.
                                   Juan Vargas.
                                   Vicente Gonzalez.
                                   Sean Casten.
                                   Ayanna Pressley.
                                   Rashida Tlaib.
                                   Sylvia R. Garcia.
                                   Nikema Williams.
                                   Brittany Pettersen.