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ELFA Advocates for EF on CFPB Proposals for Section 1071 of Dodd-Frank

December 18, 2020, 07:25 AM

The Equipment Leasing and Finance Association has responded to the Consumer Financial Protection Bureau’s (CFPB) proposals regarding Section 1071.  

The association has remained actively engaged with the CFPB to make sure Section 1071 of Dodd-Frank doesn’t make it more burdensome for members and their customers to do business together. Section 1071, once in force, will require commercial financiers to collect certain demographic information about their customers.

The CFPB had issued the new proposals in coordination with their panel meetings required by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). This represents the most detailed look that the public has had at the approach that the CFPB is utilizing with regard to Section 1071 since it was passed a decade ago.

Of note, the proposals would exempt true leases, but cover most other small business finance transactions by commercial finance companies. There are some exemptions in the proposals, but for the most part, these will only exempt the smallest finance companies. While fair lending rules have always applied to commercial finance, if the data collection proposals were to be enacted in anything approximating the SBREFA proposals, this new level of regulation would be a watershed moment in the commercial finance space, especially for non-bank commercial finance companies.

ELFA’s comments took a three-step approach. First, the comments attempted to gain meaningful exemptions, then, if exemptions couldn’t be utilized, the association advocated for simple rules (e.g., a bright-line revenue test to define small business) and, lastly, ELFA pushed for an indemnification of finance companies from having to verify demographic information provided by their customers such as the ethnicity of business’s owners.

The full CFPB proposal can be found here, and ELFA’s comment letter can be found here.

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