[Federal Register Volume 90, Number 116 (Wednesday, June 18, 2025)]
[Rules and Regulations]
[Pages 25874-25883]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-11244]
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CONSUMER FINANCIAL PROTECTION BUREAU
12 CFR Part 1002
[Docket No. CFPB-2025-0017]
RIN 3170-AB40
Small Business Lending Under the Equal Credit Opportunity Act
(Regulation B); Extension of Compliance Dates
AGENCY: Consumer Financial Protection Bureau.
ACTION: Interim final rule, request for public comment.
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SUMMARY: In light of court orders in ongoing litigation, the Consumer
Financial Protection Bureau (CFPB or Bureau) is amending Regulation B
to extend the compliance dates set forth in its 2023 small business
lending rule, as amended by a 2024 interim final rule, and to make
other date-related conforming adjustments.
DATES: This interim final rule is effective July 18, 2025. Comments
must be received on or before July 18, 2025.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2025-
0017 or RIN 3170-AB40, by any of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. A brief summary of
this document will be available at https://www.regulations.gov/docket/CFPB-2025-0017.
Email: 2025-IFR-SBLcompliance [email protected]. Include
Docket No. CFPB-2025-0017 or RIN 3170-AB40 in the subject line of the
message.
Mail/Hand Delivery/Courier: Comment Intake--Small Business
Lending Compliance Dates, c/o Legal Division Docket Manager, Consumer
Financial Protection Bureau, 1700 G Street NW, Washington, DC 20552.
Instructions: The CFPB encourages the early submission of comments.
All submissions should include the agency name and docket number or
Regulatory Information Number (RIN) for this rulemaking. Because paper
mail is subject to delay, commenters are encouraged to submit comments
electronically. In general, all comments received will be posted
without change to https://www.regulations.gov.
All submissions, including attachments and other supporting
materials, will become part of the public record and subject to public
disclosure. Proprietary information or sensitive personal information,
such as account numbers or Social Security numbers, or names of other
individuals, should not be included. Submissions will not be edited to
remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: Dave Gettler, Paralegal Specialist,
Office of Regulations, at 202-435-7700 or https://reginquiries.consumerfinance.gov/. If you require this document in an
alternative electronic format, please contact
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
In 2010, Congress passed the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act). Section 1071 of that Act \1\
amended the Equal Credit Opportunity Act (ECOA) \2\ to require that
financial institutions collect and report to the CFPB certain data
regarding applications for credit for women-owned, minority-owned, and
small businesses. Section 1071's statutory purposes are to (1)
facilitate enforcement of fair lending laws, and (2) enable
communities, governmental entities, and creditors to identify business
and community development needs and opportunities of women-owned,
minority-owned, and small businesses.
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\1\ Public Law 111-203, tit. X, section 1071, 124 Stat. 1376,
2056 (2010), codified at ECOA section 704B, 15 U.S.C. 1691c-2.
\2\ 15 U.S.C. 1691 et seq.
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Section 1071 directs the CFPB to prescribe such rules and issue
such guidance as may be necessary to carry out, enforce, and compile
data pursuant to section 1071. On March 30, 2023, the CFPB issued a
final rule to implement section 1071 by adding subpart B to Regulation
B (2023 final rule). The 2023 final rule was published in the Federal
Register on May 31, 2023.\3\ Further details about section 1071 and
this rulemaking can be found in the preamble to the 2023 final rule. On
June 25, 2024, the CFPB issued an interim final rule (2024 interim
final rule) to extend the rule's compliance dates in accordance with
orders issued by the United States District Court for the Southern
District of Texas.\4\ The 2024 interim final rule was published in the
Federal Register on July 3, 2024.\5\
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\3\ 88 FR 35150 (May 31, 2023).
\4\ Texas Bankers Ass'n v. CFPB, No. 7:23-cv-00144 (S.D. Tex.).
\5\ 89 FR 55024 (July 3, 2024). See also Order Granting-in-Part
and 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), ECF No. 25,
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), ECF No. 69, https://files.consumerfinance.gov/f/documents/cfpb_pi_second_order_texas_bankers.pdf.
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Challenges to the 2023 final rule filed by some lenders remain
ongoing in three jurisdictions; each of those courts have stayed the
rule's compliance deadlines for some market participants. Specifically,
the United States Court of Appeals for the Fifth Circuit has stayed the
rule and tolled the compliance deadlines for plaintiffs and intervenors
in that case, until further order of the court.\6\ The United States
District Court for the Eastern District of Kentucky has stayed the
deadlines for plaintiffs to comply with the rule until further order of
the court.\7\ And the United States District Court for the Southern
District of Florida has stayed the rule and tolled the rule's
compliance deadlines with
[[Page 25875]]
respect to plaintiff and its members for the length of time that the
Fifth Circuit stay order is in effect, subject to modification at any
time by the court.\8\ As the CFPB has noted in that litigation, it
intends to initiate a new Section 1071 rulemaking and anticipates
issuing a notice of proposed rulemaking as expeditiously as reasonably
possible.\9\
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\6\ Unpublished Order, Texas Bankers Ass'n v. CFPB, No. 24-40705
(5th Cir. Feb. 2, 2025).
\7\ Opinion & Order, Monticello Banking Co. et al. v. CFPB et
al., No. 6:23-cv-00148-KKC (E.D. Ky. Mar. 11, 2025).
\8\ Opinion & Order, Revenue Based Finance Coalition v. CFPB et
al., No. 1:23-cv-24882-DSL (S.D. Fla. May 6, 2025).
\9\ See Defendants' Response to Plaintiff's Unopposed Motion to
Stay, ECF No. 75, Revenue Based Finance Coalition v. CFPB et al.,
No. 1:23-cv-24882-DSL (S.D. Fla. Apr. 3, 2025).
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Summary of the Interim Final Rule
In this interim final rule, the CFPB is extending the compliance
dates set forth in the 2023 final rule, as amended by the 2024 interim
final rule, by approximately one year, and making conforming
adjustments. Thus, covered financial institutions must begin collecting
data as follows:
Table 1--Compliance Dates and Filing Deadlines
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Original Revised compliance
compliance date in date in the 2024 New compliance New first filing
Compliance tier the 2023 final interim final date deadline
rule rule
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Highest volume lenders (Tier 1). October 1, 2024... July 18, 2025..... July 1, 2026...... June 1, 2027.
Moderate volume lenders (Tier 2) April 1, 2025..... January 16, 2026.. January 1, 2027... June 1, 2028.
Smallest volume lenders (Tier 3) January 1, 2026... October 18, 2026.. October 1, 2027... June 1, 2028.
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Covered financial institutions are permitted to continue using
their small business originations from 2022 and 2023 to determine their
compliance tier, or they may instead use their originations from 2023
and 2024, or from 2024 and 2025. Covered financial institutions are
permitted to begin collecting protected demographic data required under
the 2023 final rule 12 months before their new compliance date, in
order to test their procedures and systems. As illustrated above, the
deadline for submitting small business lending data will remain June 1
following the calendar year for which data are collected. Finally, the
CFPB is updating its grace period policy statement to reflect the
revised compliance dates.
The CFPB seeks comment on this interim final rule.
II. Legal Authority
The CFPB adopted the 2023 final rule pursuant to its authority
under section 1071, which directs the CFPB to adopt rules governing the
collection and reporting of small business lending data. Some aspects
of the 2023 final rule were also adopted under the CFPB's more general
rulemaking authorities in ECOA. The CFPB's legal authorities are
discussed in detail in the 2023 final rule.\10\
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\10\ See, e.g., 88 FR 35150, 35173-74 (May 31, 2023).
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The CFPB is adopting this interim final rule to extend the 2023
final rule's compliance dates, as previously amended by the 2024
interim final rule. ECOA section 704B(g)(1) grants the CFPB general
rulemaking authority for section 1071.
III. Administrative Procedure Act
The Administrative Procedure Act does not require notice and
opportunity for public comment if an agency for good cause finds that
notice and public comment are impracticable, unnecessary, or contrary
to the public interest.\11\ The CFPB finds that prior notice and public
comment are unnecessary because this interim final rule addresses
compliance date stays issued by three courts for many but not all
covered financial institutions and makes other date-related conforming
adjustments. Covered financial institutions need to know the new
compliance dates promptly so they can appropriately plan their
implementation efforts; further delay in finalizing these dates would
be contrary to the public interest. The CFPB already solicited and
received comment on the substance of the provisions that it is now
amending, during its 2020 consultation with representatives of small
businesses pursuant to the Small Business Regulatory Enforcement
Fairness Act,\12\ in its 2021 proposed rule,\13\ and in its 2024
interim final rule.\14\
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\11\ 5 U.S.C. 553(b)(B).
\12\ CFPB, Small Business Advisory Review Panel for Consumer
Financial Protection Bureau Small Business Lending Data Collection
Rulemaking, Outline of Proposals Under Consideration and
Alternatives Considered (Sept. 15, 2020), https://files.consumerfinance.gov/f/documents/cfpb_1071-sbrefa_outline-of-proposals-under-consideration_2020-09.pdf; and 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://files.consumerfinance.gov/f/documents/cfpb_1071-sbrefa-report.pdf.
\13\ 86 FR 56356 (Oct. 8, 2021).
\14\ 89 FR 55024 (July 3, 2024).
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IV. Discussion of the Final Rule
As discussed above, three courts have stayed the compliance dates
set forth in the 2024 interim final rule for the plaintiffs and
intervenors in those cases. However, compliance dates have not been
stayed for those who are not plaintiffs or intervenors in those cases.
To facilitate consistent compliance across all covered financial
institutions, the CFPB is extending the compliance dates set forth in
the 2024 interim final rule by approximately one year. The CFPB
believes that this length of time should be sufficient to extend beyond
the court-ordered stays and for the CFPB to issue a new proposal to
reconsider certain aspects of the 2023 final rule.
The CFPB is extending the compliance dates by approximately one
year (roughly 350 days), rather than a full year, for the reasons
suggested by a commenter on the 2024 interim final rule requesting that
the initial compliance dates begin on the first day of a calendar
month. The commenter stated that a beginning-of-the-month start date
would make the transition to collecting data less burdensome, from an
operational and systems perspective. Other stakeholders have similarly
requested that data collection commence at the beginning of a calendar
quarter. The CFPB agrees that these compliance dates would be sensible.
The CFPB is thus adopting new initial compliance dates of July 1, 2026,
January 1, 2027, and October 1, 2027.
A. Changes to Compliance Date Provisions
The 2023 final rule's compliance dates, as amended by the 2024
interim final rule, are set forth in Sec. 1002.114(b). That section
looks to a financial institution's volume of covered credit
transactions for small businesses in each of calendar years 2022 and
2023, or 2023 and 2024, to determine the applicable compliance date.
The 2023 final rule, as amended by the 2024 interim final rule,
provided that covered financial institutions that originated at
[[Page 25876]]
least 2,500 covered transactions in both years were required to comply
with the requirements of the 2023 final rule beginning July 18, 2025
(sometimes referred to as Tier 1 institutions). Covered financial
institutions not in Tier 1 that originated at least 500 covered
transactions in both years were required to comply beginning January
16, 2026 (Tier 2), and covered financial institutions not in Tier 1 or
Tier 2 that originated at least 100 covered transactions in both years
were required to comply beginning October 18, 2027 (Tier 3). The rule
also provided that a financial institution that did not originate at
least 100 covered transactions in both 2022 and 2023 (or in 2023 and
2024) but that subsequently originates at least 100 such transactions
in two consecutive calendar years must comply with the rule in
accordance with Sec. 1002.105(b), but in any case no earlier than
October 18, 2027.
In this interim final rule, the CFPB is extending each of the
compliance dates set forth in Sec. 1002.114(b) by approximately one
year. Thus, Tier 1 institutions now have a compliance date of July 1,
2026, Tier 2 institutions now have a compliance date of January 1,
2027, and Tier 3 institutions now have a compliance date of October 1,
2027. Likewise, institutions that did not originate at least 100
covered transactions in 2022 and 2023 but subsequently do in two
consecutive calendar years are not required to comply with the rule
until October 1, 2027 at the earliest. The CFPB is making corresponding
updates throughout the commentary accompanying Sec. 1002.114(b) and
(c), which provide additional guidance and examples regarding
compliance dates.
B. Voluntary Early Collection of Protected Demographic Data
Section 1002.114(c) addresses several transitional issues. Section
1002.114(c)(1) permits a covered financial institution to collect
protected demographic information required under the 2023 final rule
from small business applicants beginning 12 months prior to its
compliance date. As this provision does not list any compliance dates
specifically, no revisions are needed. Thus, a Tier 1 institution is
permitted to begin collecting protected demographic information on or
after July 1, 2025; a Tier 2 institution may begin on or after January
1, 2026; and a Tier 3 institution may begin on or after October 1,
2026, in order to test their procedures and systems for compiling and
maintaining this information in advance of actually being required to
collect and subsequently report it to the CFPB.\15\
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\15\ Under this provision, financial institutions will have
time--beginning 12 months prior to their compliance date--to adjust
any procedures or systems that may result in the inaccurate
compilation or maintenance of applicants' protected demographic
information, the collection of which is required by section 1071 but
otherwise generally prohibited under ECOA and Regulation B.
(Financial institutions could of course collect the other
information required by the 2023 final rule at any time, without
needing express permission in Regulation B to do so, as is needed
for collecting protected demographic information.) See 88 FR 35150,
35449-50 (May 31, 2023).
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C. Alternative Period for Counting Covered Originations To Determine
Compliance Tier
The CFPB is revising Sec. 1002.114(c)(3) (adopted in the 2024
interim final rule), which now permits (but does not require) a
financial institution to use its originations of covered credit
transactions in each of calendar years 2023 and 2024, or 2024 and 2025,
rather than those in 2022 and 2023, to determine its compliance date.
Financial institutions may use whichever set of dates they prefer
(i.e., 2022 and 2023, or 2023 and 2024, or 2024 and 2025). Existing
comment 114(b)-4 provides examples illustrating how a financial
institution uses its originations in 2022 and 2023, or in 2023 and
2024, to determine its compliance tier.
D. Determining Compliance Dates for Financial Institutions That Do Not
Collect Information Sufficient To Determine Small Business Status
Section 1002.114(c)(2) provides that a financial institution that
is unable to determine the number of covered credit transactions it
originated in 2022 and 2023 for purposes of determining its compliance
tier is permitted to use any reasonable method to estimate its
originations to small businesses for either or both of 2022 and 2023.
Existing comment 114(c)-5 lists several reasonable methods a financial
institution may use to estimate its originations.
Pursuant to revised Sec. 1002.114(c)(3), which permits a financial
institution to use its originations of covered credit transactions in
each of calendar years 2023 and 2024, or 2024 and 2025, to determine
its compliance date, financial institutions are likewise permitted to
use any reasonable method to estimate their originations for either or
both of 2023 and 2024, or 2024 and 2025. Existing comment 114(c)-6
provides examples of ways financial institutions may estimate their
originations.
E. Deadline for Annual Data Submissions
Section 1002.109(a)(1) provides that covered financial institutions
must submit their small business lending application registers to the
CFPB on or before June 1 following the calendar year for which the data
are compiled and maintained. As this provision does not list any
compliance dates specifically, no revisions are needed. Thus, Tier 1
institutions will make their first data submission by June 1, 2027;
Tier 2 and Tier 3 by June 1, 2028.
V. Effective Date
The CFPB is adopting an effective date of 30 days after the
publication of this interim final rule in the Federal Register
consistent with section 553(d) of the Administrative Procedure Act.\16\
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\16\ 5 U.S.C. 553(d).
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VI. Grace Period Policy Statement
In the 2023 final rule, the CFPB adopted a 12-month grace period
during which the CFPB--for covered financial institutions under its
supervisory and enforcement jurisdiction--would not intend to assess
penalties for errors in data reporting, and would intend to conduct
examinations only to diagnose compliance weaknesses, to the extent that
these institutions engaged in good faith compliance efforts. The Grace
Period Policy Statement set forth in the 2023 final rule explained the
CFPB's reasons for adopting such a grace period along with how the CFPB
intended to implement such a grace period.\17\ The CFPB updated the
Grace Period Policy Statement in the 2024 interim final rule.\18\
Additionally, on April 30, 2025, the CFPB announced that it will not
prioritize enforcement or supervision actions with regard to entities
outside the stay imposed by the Fifth Circuit in Texas Bankers Ass'n v.
CFPB, discussed in part I above.\19\
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\17\ See 88 FR 35150, 35458-59 (May 31, 2023).
\18\ 89 FR 55024, 55026 (July 3, 2024).
\19\ CFPB, Press Release, CFPB Keeps Its Enforcement and
Supervision Resources Focused on Pressing Threats to Consumers (Apr.
30, 2025), https://www.consumerfinance.gov/about-us/newsroom/cfpb-keeps-its-enforcement-and-supervision-resources-focused-on-pressing-threats-to-consumers/.
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The CFPB is again updating its Grace Period Policy Statement to
reflect the new compliance dates set forth in this interim final rule,
for the avoidance of any doubt as to its intentions regarding a grace
period when the rule goes into effect.\20\ The following discussion
[[Page 25877]]
explains how the CFPB intends to exercise its supervisory and
enforcement discretion for the first 12 months of data collected after
a covered financial institution's initial compliance date.
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\20\ This is a general statement of policy under the
Administrative Procedure Act. 5 U.S.C. 553(b). It articulates
considerations relevant to the CFPB's exercise of its authorities.
It does not impose any legal requirements, nor does it confer rights
of any kind. It also does not impose any new or revise any existing
recordkeeping, reporting, or disclosure requirements on covered
entities or members of the public that would be collections of
information requiring approval by the Office of Management and
Budget under the Paperwork Reduction Act. 44 U.S.C. 3501 through
3521.
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With respect to covered financial institutions subject to the
CFPB's supervisory or enforcement jurisdiction that make good faith
efforts to comply with the 2023 final rule, the CFPB intends to provide
a grace period to reflect the new compliance dates as follows:
Table 2--Grace Period
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Financial institutions covered by the Dates covered by the grace
grace period period
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Financial institutions with a The data collected in 2026
compliance date specified in Sec. (from July 1, 2026 through
1002.114(b)(1) (i.e., Tier 1 December 31, 2026) as well as
institutions), as well as any a portion of data collected in
financial institutions that make a 2027 (from January 1, 2027
voluntary submission for the first through June 30, 2027).
time for data collected in 2026.
Financial institutions with a The data collected in 2027
compliance date specified in Sec. (from January 1, 2027 through
1002.114(b)(2) (i.e., Tier 2 December 31, 2027).
institution), as well as any financial
institutions that make a voluntary
submission for the first time for data
collected in 2027.
Financial institutions with a The data collected in 2027
compliance date specified in Sec. (from October 1, 2027 through
1002.114(b)(3) (i.e., Tier 3 December 31, 2027) as well as
institution), as well as any financial a portion of data collected in
institutions that make a voluntary 2028 (from January 1, 2028
submission for the first time for data through September 30, 2028).
collected in 2028.
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As discussed in the 2023 final rule and the 2024 interim final
rule, the CFPB believes that a 12-month grace period for each
compliance tier will give institutions time to diagnose and address
unintentional errors without the prospect of penalties for inadvertent
compliance issues, and may ultimately assist other covered financial
institutions, especially those in later compliance tiers, in
identifying best practices. The CFPB views this grace period as
enabling deliberate and thoughtful compliance with the rule, while
still providing important data regarding small business lending as soon
as is practical.
During the grace period, if the CFPB identifies errors in a
financial institution's initial data submissions, it does not intend to
require data resubmission unless data errors are material. Further, the
CFPB does not intend to assess penalties with respect to unintentional
and good faith errors in the initial data submissions. Any examinations
of these initial data submissions will be diagnostic and will help to
identify compliance weaknesses. However, errors that are not the result
of good faith compliance efforts by financial institutions, especially
attempts to discourage applicants from providing data, will remain
subject to the CFPB's supervisory and enforcement authority.
The CFPB believes that the grace period covering the initial data
submissions will provide financial institutions an opportunity to
identify any gaps in their implementation of the 2023 final rule and
make improvements in their compliance management systems for future
data submissions. In addition, a grace period will permit the CFPB to
help financial institutions identify errors and, thereby, self-correct
to avoid such errors in the future. The CFPB can also use data
collected during the grace period to alert financial institutions of
common errors and potential best practices in data collection and
submissions under the rule.
VII. CFPA Section 1022(b) Analysis
A. Overview
In developing this interim final rule, the CFPB has considered the
potential benefits, costs, and impacts as required by section
1022(b)(2) of the Consumer Financial Protection Act of 2010 (CFPA).\21\
Section 1022(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 addition, section 1022(b)(2)(B) directs the CFPB to consult
with appropriate prudential regulators or other Federal agencies,
regarding consistency with the objectives those agencies administer.
The CFPB has accordingly consulted with the appropriate prudential
regulators and other Federal agencies regarding consistency with any
prudential, market, or systemic objectives administered by these
agencies.
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\21\ 12 U.S.C. 5512(b)(2).
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In this interim final rule, the CFPB is extending by approximately
one year the compliance dates set forth in the 2023 final rule, as
amended by the 2024 interim final rule, and making several conforming
adjustments. Thus, covered financial institutions with the highest
volume of small business originations (Tier 1) must begin collecting
data by July 1, 2026; moderate-volume institutions (Tier 2) by January
1, 2027; and the smallest volume institutions (Tier 3) by October 1,
2027. Covered financial institutions are permitted to continue using
their small business originations from 2022 and 2023 to determine their
compliance tier, or instead they may use their originations from 2023
and 2024, or 2024 and 2025.
The CFPB expects covered institutions to benefit from the extension
of the compliance dates, but expects that the impacts of this interim
final rule on covered institutions will be small relative to the
overall impacts of the 2023 final rule, as amended by the 2024 interim
final rule, that it modifies. The CFPB additionally expects this
interim final rule to have minimal impacts on small businesses, due to
the long-term nature of the benefits of the 2023 final rule and an
expectation that the 2023 final rule will have a limited effect on the
cost of small business credit.
B. Data Limitation and Quantification of Benefits, Costs, and Impacts
The discussion below relies on information the CFPB has obtained
from industry, other regulatory agencies, and publicly available
sources. The CFPB provides estimates, to the extent possible, of the
potential benefits, costs, and impacts to consumers and covered persons
of this interim final rule given the limitations of available data.
[[Page 25878]]
To estimate the number of depository institutions covered by the
interim final rule, the CFPB relies in part on data from publicly
available sources, such as the Federal Financial Institutions
Examination Council's Reports on Condition of Income (Call Reports),
the National Credit Union Administration's Call Reports, and data
reported under the Community Reinvestment Act. As described in detail
in part IX.E of the 2023 final rule, information on the cost of
compliance is derived from the CFPB's previous Home Mortgage Disclosure
Act rulemaking activities and a One-time Cost Survey the CFPB
administered in 2020 as part of its small business lending rule
development process.
There are limitations, such as limited comprehensive data on non-
depository institutions potentially subject to the 2023 final rule and
thus this interim final rule, and limited data on which to quantify
benefits of the interim final rule with precision. The CFPB supplements
the data sources described above with general economic principles and
the CFPB's expertise in consumer financial markets. The CFPB
qualitatively describes potential benefits, costs, and impacts where
the ability to provide quantitative estimates are impacted by these
limitations.
C. Baseline for Analysis
In evaluating the potential benefits, costs, and impacts of this
interim final rule, the CFPB takes as a baseline Regulation B as
amended by the 2023 final rule and the 2024 interim final rule. Part IV
above summarizes the provisions of the 2023 final rule, as amended by
the 2024 interim final rule, that are being revised (again) in this
interim final rule. The CFPB's analysis of the potential costs,
benefits, and impacts of this interim final rule are relative to the
compliance dates from the 2024 interim final rule and other
requirements of the 2023 final rule.
D. Potential Benefits and Costs to Covered Persons and Small Businesses
1. Potential Benefits and Costs to Covered Persons
Based on the methodology used to determine coverage in the 2023
final rule,\22\ the CFPB expects about 100 financial institutions to be
required to report in Tier 1, about 450 to be required to report in
Tier 2, and about 2,000 to be required to report in Tier 3.
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\22\ The CFPB continues to use the estimates from the 2023 final
rule, which are based on data from 2017 through 2019.
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By extending the compliance dates by approximately one year for all
covered institutions, financial institutions will benefit by the delay
in the expected costs of compliance with the 2023 final rule. The
benefit from the compliance date extension will differ depending on
whether the cost was expected to be ``one-time'' or ``ongoing.'' Part
IX.E of the 2023 final rule described two categories of cost that the
CFPB expected covered financial institutions to incur. ``One-time''
costs refer to expenses that the financial institution will incur
initially and only once to implement changes required to comply with
the requirements of the rule. ``Ongoing'' costs are expenses incurred
because of the ongoing reporting requirements of the rule, accrued on
an annual basis.
The CFPB expects covered financial institutions to experience an
annual ongoing cost of compliance in perpetuity. Therefore, extending
the compliance dates potentially saves financial institutions
approximately one year's worth of expected annual compliance costs. In
the 2023 rule, the CFPB detailed its methodology and estimates of this
annual ongoing cost for institutions of different levels of complexity
in their processes for collecting, checking, and reporting data on
applications for small business credit. These ``types'' were Type A
(least complex), Type B (medium complexity), and Type C (most complex)
and were related to small business credit application volume. The 2023
final rule gave estimates of compliance costs for representative
institutions of each type as well as the market-level estimate for all
complying institutions. The CFPB estimated that, per application for
small business credit, Type A institutions would incur $83 in annual
ongoing costs, Type B institutions would incur $100, and Type C
institutions would incur $46.
The CFPB has estimated that about 100 financial institutions will
be required to report in Tier 1, about 450 will be required to report
in Tier 2, and about 2,000 will be required to report in Tier 3. The
CFPB assumes that ongoing costs savings will be evenly spread over the
months of the year. Thus, half of ongoing cost savings for Tier 1 will
occur in 2025 and half will occur in 2026, that all the ongoing costs
savings for Tier 2 will occur in 2026, and that Tier 3 will observe one
sixth of ongoing cost savings in 2026 and five sixth of ongoing cost
savings in 2027. Based on these assumptions, per application cost
estimates, and the CFPB's estimated application volumes for all
institutions, the expected cost savings will be about $92 million in
2025, about $190 million in 2026, and about $75 million in 2027, not
accounting for discounting for future years. The present discounted
value of the total cost savings, discounting back to 2024, is about
$313 million using a 3 percent discount rate or about $337 million
using a 7 percent discount rate.\23\ Further amortizing these savings
over three years implies an annualized cost savings of about $119
million using either a 3 percent or a 7 percent discount rate.
---------------------------------------------------------------------------
\23\ We calculate these numbers primarily for the purpose of
accounting for savings under Executive Order 14192. To make rules
issued in different years readily comparable, accounting under
Executive Order 14192 uses discounting relative to a common year,
2024.
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This interim final rule does not change the nominal value of the
one-time costs that will be incurred by covered institutions but does
potentially delay the realization of those costs approximately one year
into the future for institutions in each compliance tier. Thus, the new
one-time costs are the baseline one-time costs discounted by
approximately one year to the extent they have not already been
incurred. The present value of the benefit associated with the interim
final rule's impact on one-time costs is the difference between the
baseline one-time costs and the new discounted costs. The CFPB lacks
data to quantify the extent to which one-time costs will be delayed by
this rule.
The CFPB additionally expects that the compliance date extension
and the associated flexibility in years of origination data that can be
used to determine coverage would confer a benefit to covered
institutions with the additional time to prepare for compliance
relative to the baseline.
With the extension of the compliance dates by approximately one
year, this interim final rule delays the realization of these potential
benefits to covered financial institutions. As enumerated in the 2023
final rule, benefits include more efficient fair lending review
prioritization by regulators and the institutions' own use of small
business lending data to better understand small business credit demand
and the supply by their competitors.
2. Potential Benefits and Costs to Small Businesses
As with the 2023 final rule, this interim final rule will not
directly impact consumers, as that term is defined by the Dodd-Frank
Act. Some consumers will be impacted in their separate capacity as sole
owners of small businesses covered by the rule. The CFPB has elected to
consider the costs to small businesses from this
[[Page 25879]]
interim final rule as it did in the 2023 final rule.
In part IX.F of the 2023 final rule, the CFPB described how small
businesses would benefit from the impact of the rule on the enforcement
of fair lending laws and on community development. In an environment
with limited data sources on small business credit, the CFPB expects
data collected under the rule to enable communities, governmental
entities, and creditors to identify business and community development
needs and opportunities for women-owned, minority-owned, and small
businesses. The CFPB also expects data collected under the 2023 final
rule to facilitate fair lending enforcement by Federal, State, and
local enforcement agencies. Due to limitations on data and methodology,
the CFPB mostly described these benefits qualitatively.
To the extent small businesses benefit in the above ways from the
2023 final rule, the extension of the compliance dates reduces the
benefits accruing to small businesses by delaying the realization of
these benefits. While compliance dates are extended by approximately
one year, covered financial institutions will be required to file data
one year later than expected under the 2024 interim final rule (i.e.,
Tier 1 by June 1, 2027 rather than June 1, 2026 and Tiers 2 and 3 by
June 1, 2028 rather than June 1, 2027). The CFPB expects that the
benefits of the 2023 final rule will primarily begin with the
publication of the data. Thus, small businesses' and financial
institutions' realizations of the benefits arising from the 2023 final
rule will likewise be delayed by at least one year, reducing the real
net present value of these expected future benefits. The CFPB is unable
to readily quantify the costs associated with delaying future benefits
because the CFPB does not have the data to quantify all the benefits of
the 2023 final rule.
The 2023 final rule also described that the CFPB expects financial
institutions to pass on a portion of their annual ongoing costs to
small business borrowers in the form of higher rates or fees. While, in
general, the CFPB expects the magnitude of any pass-through to be a
small portion of the total cost of the average loan to a small business
applicant, extended compliance dates could benefit small business
borrowers by delaying these increased costs.
3. Distribution of Small Business Impacts
The differences in the impacts of this interim final rule between
different types of small businesses is likely to be small with
approximately one year added to each of the compliance dates. Most of
the distribution of benefits and costs are likely to be derived from
whether small businesses are serviced by lenders in different
compliance tiers and the difference in present discounted values.
E. Potential Impacts on Depository Institutions and Credit Unions With
$10 Billion or Less in Total Assets, as Described in CFPA Section 1026
Using the methodology described in the 2023 final rule, the CFPB
estimates that between 1,700 and 1,900 banks, savings associations, and
credit unions with $10 billion or less in total assets will be affected
by this interim final rule. The CFPB believes that the impacts of the
interim final rule on these small depository institutions will be
similar to those impacts on covered financial institutions as a whole,
discussed above. These institutions would incur benefits from
approximately one year in annual ongoing costs and the postponement of
approximately one year of one-time costs. They would also potentially
benefit from additional time to develop software and other resources
used to comply with the 2023 final rule.
F. Potential Impacts on Small Businesses' Access to Credit and on Small
Businesses in Rural Areas
The CFPB does not expect this interim final rule to have a
significant impact on small businesses' access to credit. In the 2023
final rule, the CFPB described how the likeliest effect of the rule on
access to credit would be a small increase in interest rates or fees.
This interim final rule shifts this potential effect by approximately
one year without any additional provisions that would affect credit
access.
In part IX.H of the 2023 final rule, the CFPB described how
existing data sources limited its ability to precisely estimate the
number of financial institutions who serve rural areas who are covered
under the 2023 final rule. The CFPB expects that 65 to 70 percent of
rural bank and savings associations branches and 14 percent of rural
credit union branches would be affected by this interim final rule
using the methodology set forth in the 2023 final rule.
Small businesses in rural areas are expected to experience similar
costs and benefits of small businesses more broadly. Small businesses
in rural areas would experience a reduction in benefits via a
postponement of the benefits of the 2023 final rule on fair lending
enforcement and community development. These small businesses would
also experience a benefit by the postponement of expected small
increases in interest rates and fees.
VIII. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act does not require an initial or final
regulatory flexibility analysis in a rulemaking where a general notice
of proposed rulemaking is not required.\24\ As discussed in part III
above, the CFPB has determined that prior notice and comment is
unnecessary for this interim final rule. As an additional basis, the
CFPB's Acting Director certifies that this interim final rule will not
have a significant economic impact on a substantial number of small
entities, and so an initial or final regulatory flexibility analysis is
also not required for that reason.\25\ The rule will not impose
significant costs on creditors, including small entities, for the
reasons described in the section 1022(b) analysis in part VII above.
---------------------------------------------------------------------------
\24\ 5 U.S.C. 603(a), 604(a).
\25\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------
IX. Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA), Federal agencies
are generally required to seek approval from the Office of Management
and Budget (OMB) for information collection requirements prior to
implementation. Under the PRA, the CFPB may not conduct or sponsor,
and, notwithstanding any other provision of law, a person is not
required to respond to an information collection unless the information
collection displays a valid control number assigned by OMB. The interim
final rule amends 12 CFR part 1002 (Regulation B), which implements the
small business lending rule. The CFPB's OMB control number for
Regulation B is 3170-0013; its current expiration date is August 31,
2025.
The interim final rule does not add to or change the collection
requirements of the 2023 final rule; rather, it only changes the
initial compliance dates and makes other date-related conforming
adjustments. The CFPB has therefore determined that the interim final
rule does not contain any new or substantively revised information
collection requirements as defined by the PRA.
X. Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the CFPB will submit a report containing this interim final rule and
other required information to the U.S. Senate, the U.S. House of
Representatives, and the
[[Page 25880]]
Comptroller General of the United States prior to the interim final
rule taking effect. The Office of Information and Regulatory Affairs
(OIRA) has designated this interim final rule as a ``major rule'' as
defined by 5 U.S.C. 804(2). As discussed in part III above, the CFPB
finds that there is good cause for the interim final rule to take
effect without prior notice and comment. Accordingly, this interim
final rule may take effect at such time as the CFPB determines.\26\
---------------------------------------------------------------------------
\26\ 5 U.S.C. 805(2).
---------------------------------------------------------------------------
XI. Regulatory Review
Under Executive Order 12866, as amended by Executive Order 14215 to
cover the CFPB, OIRA has deemed the regulatory action to be
``economically significant.'' This action is considered an Executive
Order 14192 deregulatory action. For the purposes of Executive Order
14192, we estimate annualized cost savings over a perpetual time
horizon, discounted to the year 2024, to make impacts more comparable
with other rules. Thus, we estimate that this rule will generate $20.5
million in annualized costs savings, assuming a 7 percent discount rate
and accounting for the lack of savings in 2024.
List of Subjects in 12 CFR Part 1002
Banks, Banking, Civil rights, Consumer protection, Credit, Credit
unions, Marital status discrimination, National banks, Penalties.
Authority and Issuance
For the reasons set forth in the preamble, the CFPB amends
Regulation B, 12 CFR part 1002, as follows:
PART 1002--EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)
0
1. The authority citation for part 1002 continues to read as follows:
Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1691b. Subpart B is
also issued under 15 U.S.C. 1691c-2.
0
2. Section 1002.114 is amended by:
0
a. In paragraph (b)(1), removing ``July 18, 2025'' and adding in its
place ``July 1, 2026'';
0
b. In paragraph (b)(2), removing ``January 16, 2026'' and adding in its
place ``January 1, 2027'';
0
c. In paragraphs (b)(3) and (4), removing ``October 18, 2026'' and
adding in its place ``October 1, 2027''; and
0
d. Revising paragraph (c)(3).
The revision reads as follows:
Sec. 1002.114 Effective date, compliance date, and special
transitional rules.
* * * * *
(c) * * *
(3) Alternative time period for determining compliance dates. A
financial institution is permitted to use its originations of covered
credit transactions in each of calendar years 2023 and 2024, or 2024
and 2025, in lieu of calendar years 2022 and 2023 as specified in
paragraphs (b) and (c)(2) of this section.
0
3. In supplement I to part 1002, under Section 1002.114--Effective
Date, Compliance Date, and Special Transition Rules, revise 114(b)
Compliance Date and 114(c) Special Transition Rules to read as follows:
Supplement I to Part 1002--Official Interpretations
* * * * *
Section 1002.114--Effective Date, Compliance Date, and Special
Transition Rules
114(b) Compliance Date
1. Application of compliance date. The applicable compliance date
in Sec. 1002.114(b) is the date by which the covered financial
institution must begin to compile data as specified in Sec. 1002.107,
comply with the firewall requirements of Sec. 1002.108, and begin to
maintain records as specified in Sec. 1002.111. In addition, the
covered financial institution must comply with Sec. 1002.110(c) and
(d) no later than June 1 of the year after the applicable compliance
date. For instance, if Sec. 1002.114(b)(2) applies to a financial
institution, it must comply with Sec. Sec. 1002.107 and 1002.108, and
portions of Sec. 1002.111, beginning January 1, 2027, and it must
comply with Sec. 1002.110(c) and (d), and portions of Sec. 1002.111,
no later than June 1, 2028.
2. Initial collections pursuant to Sec. 1002.114(b). i. When the
compliance date of July 1, 2026, specified in Sec. 1002.114(b)(1)
applies to a covered financial institution, the financial institution
is required to collect data for covered applications during the period
from July 1, 2026, to December 31, 2026. The financial institution must
compile data for this period pursuant to Sec. 1002.107, comply with
the firewall requirements of Sec. 1002.108, and maintain records as
specified in Sec. 1002.111. In addition, for data collected during
this period, the covered financial institution must comply with
Sec. Sec. 1002.109 and 1002.110(c) and (d) by June 1, 2027.
ii. When the compliance date of January 1, 2027, specified in Sec.
1002.114(b)(2) applies to a covered financial institution, the
financial institution is required to collect data for covered
applications during the period from January 1, 2027, to December 31,
2027. The financial institution must compile data for this period
pursuant to Sec. 1002.107, comply with the firewall requirements of
Sec. 1002.108, and maintain records as specified in Sec. 1002.111. In
addition, for data collected during this period, the covered financial
institution must comply with Sec. Sec. 1002.109 and 1002.110(c) and
(d) by June 1, 2028.
iii. When the compliance date of October 1, 2027, specified in
Sec. 1002.114(b)(3) or (4) applies to a covered financial institution,
the financial institution is required to collect data for covered
applications during the period from October 1, 2027, to December 31,
2027. The financial institution must compile data for this period
pursuant to Sec. 1002.107, comply with the firewall requirements of
Sec. 1002.108, and maintain records as specified in Sec. 1002.111. In
addition, for data collected during this period, the covered financial
institution must comply with Sec. Sec. 1002.109 and 1002.110(c) and
(d) by June 1, 2028.
3. Informal names for compliance date provisions. To facilitate
discussion of the compliance dates specified in Sec. 1002.114(b)(1),
(2), and (3), in the official commentary and any other documents
referring to these compliance dates, the Bureau adopts the following
informal simplified names. Tier 1 refers to the cohort of covered
financial institutions that have a compliance date of July 1, 2026,
pursuant to Sec. 1002.114(b)(1). Tier 2 refers to the cohort of
covered financial institutions that have a compliance date of January
1, 2027, pursuant to Sec. 1002.114(b)(2). Tier 3 refers to the cohort
of covered financial institutions that have a compliance date of
October 1, 2027, pursuant to Sec. 1002.114(b)(3).
4. Examples. The following scenarios illustrate how to determine
whether a financial institution is a covered financial institution and
which compliance date specified in Sec. 1002.114(b) applies. Unless
otherwise indicated, in each example the financial institution has
chosen to use its originations in 2022 and 2023 (rather than 2023 and
2024, or 2024 and 2025, as permitted by Sec. 1002.114(c)(3)) to
determine its initial compliance tier.
i. Financial Institution A originated 3,000 covered credit
transactions for small businesses in calendar year 2022, and 3,000 in
calendar year 2023. Financial Institution A is in Tier 1 and has a
compliance date of July 1, 2026.
ii. Financial Institution B originated 2,000 covered credit
transactions for small businesses in calendar year 2022,
[[Page 25881]]
and 3,000 in calendar year 2023. Because Financial Institution B did
not originate at least 2,500 covered credit transactions for small
businesses in each of 2022 and 2023, it is not in Tier 1. Because
Financial Institution B did originate at least 500 covered credit
transactions for small businesses in each of 2022 and 2023, it is in
Tier 2 and has a compliance date of January 1, 2027.
iii. Financial Institution C originated 400 covered credit
transactions to small businesses in calendar year 2022, and 1,000 in
calendar year 2023. Because Financial Institution C did not originate
at least 2,500 covered credit transactions for small businesses in each
of 2022 and 2023, it is not in Tier 1, and because it did not originate
at least 500 covered credit transactions for small businesses in each
of 2022 and 2023, it is not in Tier 2. Because Financial Institution C
did originate at least 100 covered credit transactions for small
businesses in each of 2022 and 2023, it is in Tier 3 and has a
compliance date of October 1, 2027.
iv. Financial Institution D originated 90 covered credit
transactions to small businesses in calendar year 2022, 120 in calendar
year 2023, and 90 in calendar years 2024, 2025, 2026, and 2027. Because
Financial Institution D did not originate at least 100 covered credit
transactions for small businesses in each of 2022 and 2023, it is not
in Tier 1, Tier 2, or Tier 3. Because Financial Institution D did not
originate at least 100 covered credit transactions for small businesses
in subsequent consecutive calendar years, it is not a covered financial
institution under Sec. 1002.105(b) and is not required to comply with
the rule in 2026, 2027, or 2028.
v. Financial Institution E originated 120 covered credit
transactions for small businesses in each of calendar years 2022, 2023,
2024, 2025, and 90 in 2026. Because Financial Institution E did not
originate at least 2,500 or 500 covered credit transactions for small
businesses in each of 2022 and 2023, it is not in Tier 1 or Tier 2.
Because Financial Institution E originated at least 100 covered credit
transactions for small businesses in each of 2022 and 2023, it is in
Tier 3 and has a compliance date of October 1, 2027. However, because
Financial Institution E did not originate at least 100 covered credit
transactions for small businesses in both 2025 and 2026, it no longer
satisfies the definition of a covered financial institution in Sec.
1002.105(b) at the time of the compliance date for Tier 3 institutions
and thus is not required to comply with the rule in 2027.
vi. Financial Institution F originated 90 covered credit
transactions for small businesses in calendar year 2022, and 120 in
2023, 2024, 2025, and 2026. Because Financial Institution F did not
originate at least 100 covered credit transactions for small businesses
in each of 2022 and 2023, it is not in Tier 1, Tier 2, or Tier 3.
Because Financial Institution F originated at least 100 covered credit
transactions for small businesses in subsequent calendar years, Sec.
1002.114(b)(4), which cross-references Sec. 1002.105(b), applies to
Financial Institution F. Because Financial Institution F originated at
least 100 covered credit transactions for small businesses in each of
2025 and 2026, it is a covered financial institution under Sec.
1002.105(b) and is required to comply with the rule beginning October
1, 2027. Alternatively, if Financial Institution F chooses to use its
originations in calendar years 2023 and 2024 (or 2024 and 2025) to
determine its compliance tier pursuant to Sec. 1002.114(c)(3), it
would be in Tier 3 and likewise required to comply with the rule
beginning October 1, 2027.
vii. Financial Institution G originated 90 covered credit
transactions for small businesses in each of calendar years 2022, 2023,
2024, 2025, 2026, and 2027, and 120 in each of 2028 and 2029. Because
Financial Institution F did not originate at least 100 covered credit
transactions for small businesses in each of 2022 and 2023, it is not
in Tier 1, Tier 2, or Tier 3. Because Financial Institution G
originated at least 100 covered credit transactions for small
businesses in subsequent calendar years, Sec. 1002.114(b)(4), which
cross-references Sec. 1002.105(b), applies to Financial Institution G.
Because Financial Institution G originated at least 100 covered credit
transactions for small businesses in each of 2028 and 2029, it is a
covered financial institution under Sec. 1002.105(b) and is required
to comply with the rule beginning January 1, 2030.
viii. Financial Institution H originated 550 covered credit
transactions for small businesses in each of calendar years 2022 and
2023, 450 in 2024, and 550 in 2025 and 2026. Because Financial
Institution H originated at least 500 covered credit transactions for
small businesses in each of 2022 and 2023, it would be in Tier 2 and
have a compliance date of January 1, 2027. However, Sec.
1002.114(c)(3) permits financial institutions to use their originations
in 2023 and 2024 (or 2024 and 2025), rather than in 2022 and 2023, to
determine compliance tier. If Financial Institution H elects to use its
originations in 2023 and 2024, it would be in Tier 3 and required to
comply with the rule beginning October 1, 2027.
114(c) Special Transition Rules
1. Collection of certain information prior to a financial
institution's compliance date. Notwithstanding Sec. 1002.5(a)(4)(ix),
a financial institution that chooses to collect information on covered
applications as permitted by Sec. 1002.114(c)(1) in the 12 months
prior to its initial compliance date as specified in Sec.
1002.114(b)(1), (2) or (3) need comply only with the requirements set
out in Sec. Sec. 1002.107(a)(18) and (19), 1002.108, and 1002.111(b)
and (c) with respect to the information collected. During this 12-month
period, a covered financial institution need not comply with the
provisions of Sec. 1002.107 (other than Sec. Sec. 1002.107(a)(18) and
(19)), Sec. 1002.109, Sec. 1002.110, Sec. 1002.111(a), or Sec.
1002.114.
2. Transition rule for applications received prior to a compliance
date but final action is taken after a compliance date. If a covered
financial institution receives a covered application from a small
business prior to its initial compliance date specified in Sec.
1002.114(b), but takes final action on or after that date, the
financial institution is not required to collect data regarding that
application pursuant to Sec. 1002.107 nor to report the application
pursuant to Sec. 1002.109. For example, if a financial institution is
subject to a compliance date of July 1, 2026, and it receives an
application on June 27, 2026, but does not take final action on the
application until July 25, 2026, the financial institution is not
required to collect data pursuant to Sec. 1002.107 nor to report data
to the Bureau pursuant to Sec. 1002.109 regarding that application.
3. Has readily accessible the information needed to determine small
business status. A financial institution has readily accessible the
information needed to determine whether its originations of covered
credit transactions were for small businesses as defined in Sec.
1002.106 if, for instance, it in the ordinary course of business
collects data on the precise gross annual revenue of the businesses for
which it originates loans, it obtains information sufficient to
determine whether an applicant for business credit had gross annual
revenues of $5 million or less, or if it collects and reports similar
data to Federal or State government agencies pursuant to other laws or
regulations.
4. Does not have readily accessible the information needed to
determine small business status. A financial institution does not have
readily accessible the information needed to determine whether its
originations of covered credit transactions were for small businesses
as defined in Sec. 1002.106 if it
[[Page 25882]]
did not in the ordinary course of business collect either precise or
approximate information on whether the businesses to which it
originated covered credit transactions had gross annual revenue of $5
million or less. In addition, even if precise or approximate
information on gross annual revenue was initially collected, a
financial institution does not have readily accessible this information
if, to retrieve this information, for example, it must review paper
loan files, recall such information from either archived paper records
or scanned records in digital archives, or obtain such information from
third parties that initially obtained this information but did not
transmit such information to the financial institution.
5. Reasonable method to estimate the number of originations. The
reasonable methods that financial institutions may use to estimate
originations for 2022 and 2023 (or for 2023 and 2024, or 2024 and 2025,
pursuant to Sec. 1002.114(c)(3)) include, but are not limited to, the
following:
i. A financial institution may comply with Sec. 1002.114(c)(2) by
determining the small business status of covered credit transactions by
asking every applicant, prior to the closing of approved transactions,
to self-report whether it had gross annual revenue for its preceding
fiscal year of $5 million or less, during the period October 1 through
December 31, 2023. The financial institution may annualize the number
of covered credit transactions it originates to small businesses from
October 1 through December 31, 2023, by quadrupling the originations
for this period, and apply the annualized number of originations to
both calendar years 2022 and 2023. Pursuant to Sec. 1002.114(c)(3), a
financial institution is permitted to use its originations in 2023 and
2024 (or 2024 and 2025), rather than 2022 and 2023, to determine its
compliance tier. Thus, for example, a financial institution may ask
applicants to self-report revenue information during the period of
October 1 through December 31, 2024, and then may annualize the number
of covered credit transactions it originated to small businesses during
that period and apply the annualized number of originations to both
calendar years 2023 and 2024.
ii. A financial institution may comply with Sec. 1002.114(c)(2) by
assuming that every covered credit transaction it originates for
business customers in calendar years 2022 and 2023 (or in 2023 and
2024, or 2024 and 2025) is to a small business.
iii. A financial institution may comply with Sec. 1002.114(c)(2)
by using another methodology provided that such methodology is
reasonable and documented in writing.
6. Examples. The following scenarios illustrate the potential
application of Sec. 1002.114(c)(2) to a financial institution's
compliance date under Sec. 1002.114(b). Unless otherwise indicated, in
each example the financial institution has chosen to estimate its
originations for 2022 and 2023 (rather than 2023 and 2024 or 2024 or
2025 as permitted by Sec. 1002.114(c)(3)) to determine its initial
compliance tier.
i. Prior to October 1, 2023, Financial Institution A did not
collect gross annual revenue or other information that would allow it
to determine the small business status of the businesses for whom it
originated covered credit transactions in calendar years 2022 and 2023.
Financial Institution A chose to use the methodology set out in comment
114(c)-5.i and as of October 1, 2023, began to collect information on
gross annual revenue as defined in Sec. 1002.107(a)(14) for its
covered credit transactions originated for businesses. Using this
information, Financial Institution A determined that it had originated
750 covered credit transactions for businesses that were small as
defined in Sec. 1002.106. On an annualized basis, Financial
Institution A originated 3,000 covered credit transactions for small
businesses (750 originations * 4 = 3,000 originations per year).
Applying this annualized figure of 3,000 originations to both calendar
years 2022 and 2023, Financial Institution A is in Tier 1 and has a
compliance date of July 1, 2026.
ii. Prior to July 1, 2023, Financial Institution B collected gross
annual revenue information for some applicants for business credit, but
such information was only noted in its paper loan files. Financial
Institution B thus does not have reasonable access to information that
would allow it to determine the small business status of the businesses
for whom it originated covered credit transactions for calendar years
2022 and 2023. Financial Institution B chose to use the methodology set
out in comment 114(c)-5.i, and as of October 1, 2023, Financial
Institution B began to ask all businesses for whom it was closing
covered credit transactions if they had gross annual revenues in the
preceding fiscal year of $5 million or less. Using this information,
Financial Institution B determined that it had originated 350 covered
credit transactions for businesses that were small as defined in Sec.
1002.106. On an annualized basis, Financial Institution B originated
1,400 covered credit transactions for small businesses (350
originations * 4 = 1,400 originations per year). Applying this
estimated figure of 1,400 originations to both calendar years 2022 and
2023, Financial Institution B is in Tier 2 and has a compliance date of
January 1, 2027.
iii. Prior to April 1, 2023, Financial Institution C did not
collect gross annual revenue or other information that would allow it
to determine the small business status of the businesses for whom it
originated covered credit transactions in calendar years 2022 and 2023.
Financial Institution C chose its own methodology pursuant to comment
114(c)-5.iii, basing it in part on the methodology specified in comment
114(c)-5.i. Starting on April 1, 2023, Financial Institution C began to
ask all business applicants for covered credit transactions if they had
gross annual revenue in their preceding fiscal year of $5 million or
less. Using this information, Financial Institution C determined that
it had originated 100 covered credit transactions for businesses that
were small as defined in Sec. 1002.106. On an annualized basis,
Financial Institution C originated approximately 133 covered credit
transactions for small businesses ((100 originations * 365 days)/275
days = 132.73 originations per year). Applying this estimate of 133
originations to both calendar years 2022 and 2023, Financial
Institution C is in Tier 3 and has a compliance date of October 1,
2027.
iv. Financial Institution D did not collect gross annual revenue or
other information that would allow it to determine the small business
status of the businesses for whom it originated covered credit
transactions in calendar years 2022 and 2023. Financial Institution D
determined that it had originated 3,000 total covered credit
transactions for businesses in each of 2022 and 2023. Applying the
methodology specified in comment 114(c)-5.ii, Financial Institution D
assumed that all 3,000 covered credit transactions originated in each
of 2022 and 2023 were to small businesses. On that basis, Financial
Institution D is in Tier 1 and has a compliance date of July 1, 2026.
v. Financial Institution E did not collect gross annual revenue or
other information that would allow it to determine the small business
status of the businesses for whom it originated covered credit
transactions in calendar years 2022 and 2023. Financial Institution E
determined that it had originated 700 total covered credit transactions
for businesses in each of 2022 and 2023. Applying the
[[Page 25883]]
methodology specified in comment 114(c)-5.ii, Financial Institution E
assumed that all such transactions in each of 2022 and 2023 were
originated for small businesses. On that basis, Financial Institution E
is in Tier 2 and has a compliance date of January 1, 2027.
vi. Financial Institution F does not have readily accessible gross
annual revenue or other information that would allow it to determine
the small business status of the businesses for whom it originated
covered credit transactions in calendar years 2022 and 2023. Financial
Institution F determined that it had originated 80 total covered credit
transactions for businesses in 2022 and 150 total covered credit
transactions for businesses in 2023. Applying the methodology set out
in comment 114(c)-5.ii, Financial Institution F assumed that all such
transactions originated in 2022 and 2023 were originated for small
businesses. On that basis, Financial Institution E is not in Tier 1,
Tier 2 or Tier 3, and is subject to the compliance date provision
specified in Sec. 1002.114(b)(4).
vii. Financial Institution G does not have readily accessible gross
annual revenue or other information that would allow it to determine
the small business status of the businesses for whom it originated
covered credit transactions in calendar years 2022, 2023, 2024, or
2025. Financial Institution G chose to use the methodology set out in
comment 114(c)-5.i, and as of October 1, 2025, Financial Institution G
began to ask all businesses for whom it was closing covered credit
transactions if they had gross annual revenue in the preceding fiscal
year of $5 million or less. Using this information, Financial
Institution G determined that it had originated 700 covered credit
transactions during that period for businesses that were small as
defined in Sec. 1002.106. On an annualized basis, Financial
Institution G originated 2,800 covered credit transactions for small
businesses (700 originations * 4 = 2,800 originations per year).
Applying this estimated figure of 2,800 originations to both calendar
years 2024 and 2025, Financial Institution G is in Tier 1 and has a
compliance date of July 1, 2026.
* * * * *
Russell Vought,
Acting Director, Consumer Financial Protection Bureau.
[FR Doc. 2025-11244 Filed 6-17-25; 8:45 am]
BILLING CODE 4810-AM-P