Dodd-Frank 1071
Is your financial institution prepared to comply with Dodd-Frank 1071?
Section 1071 of the Dodd-Frank Act aims to improve transparency and enhance fair lending enforcement by requiring lenders to collect and report a wide range of data related to small business loan applications. The Consumer Financial Protection Bureau (CFPB) approved the finalized rule on March 30, 2023, and due to a phased implementation schedule, the nation's largest lenders must comply significantly earlier than their smaller counterparts.
In this article:
- Understanding Dodd-Frank 1071
- Axiom: Your Partner in Dodd-Frank 1071 Compliance
- Dodd-Frank 1071 FAQ
- Regulatory & Compliance Lawyers for Financial Services
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Understanding Dodd-Frank 1071
Under Dodd-Frank 1071, lenders must collect and disclose certain information regarding loan applications submitted by women-owned, minority-owned, or LGBTQI+-owned small businesses, including geographic and demographic data concerning principal owners, lending decisions, and the price of credit.
Phased implementation of the finalized rule begins in October 2024 as follows:
- Lenders that originate at least 2,500 small business loans annually must begin collecting data on October 1, 2024.
- Lenders that originate at least 500 loans annually must do so starting on April 1, 2025.
- Lenders that originate at least 100 loans annually must start collecting data on January 1, 2026.
A wide range of entities that engage in small business lending are subject to Dodd-Frank 1071, including credit unions and banks, as well as online lenders, platform lenders, community development financial institutions, lenders offering equipment and vehicle financing, farm credit system lenders, commercial finance companies, merchant cash advance providers, government lending agencies and non-profit lenders. Covered credit transactions include any extension of business credit under Regulation B of the Equal Credit Opportunity Act (ECOA), such as closed-end loans, lines of credit, business credit cards, online credit products, merchant cash advances, and credit products used for agricultural purposes.
Dodd-Frank 1071 currently defines a small business as one with $5 million or less in gross annual revenue in its prior fiscal year. However, the CFPB intends to adjust the $5 million threshold for inflation every five years.
Axiom: Your Partner in Dodd-Frank 1071 Compliance
The complexities of Dodd-Fank 1071, combined with its formidable data collection requirements, will impose a significant compliance burden on impacted lending institutions at a time when many in-house legal departments face increasing pressure to reduce expenses.
Axiom can help.
With over 20 years of experience meeting the unique resourcing needs of modern legal departments, we are dedicated to helping our clients work smarter and remain agile in the face of today's rapidly evolving regulatory landscape. With access to an extensive network of highly skilled legal professionals, we’re ready to match you with one or more regulatory and compliance lawyers capable of providing the flexible, law-firm quality legal support and guidance needed to seamlessly navigate the intricacies of Dodd-Frank 1071.
- Regulatory Compliance Advisory: Providing comprehensive guidance on interpreting and adhering to the newly finalized rule.
- Policy and Procedure Development: Crafting robust policies and procedures tailored to comply with Dodd-Frank 1071.
- Data Privacy and Security: Establishing protocols to safeguard the confidentiality of collected demographic and transactional information.
- Training and Education: Playbook creation to leverage when educating staff members involved in the data collection process.
- Implementation Support: Assisting with the practical implementation of the rule's requirements.
- Fair Lending Legal Analysis: Legal review and analysis of fair lending pricing methodology.
When you partner with Axiom, you never have to compromise your highest standards.
Axiom legal professionals boast an average of 15 years’ experience and include seasoned veterans of the Fortune 500 and Am Law 200, as well as many graduates of a U.S. News & World Report Top 50 Law School.
Our deep and diverse bench of legal talent enables us to create tailored solutions that align with your organization's distinct priorities, culture, and goals. You can engage your Axiom attorney on either a full- or part-time basis, onsite or remotely, and for as long as they’re needed, whether that's a few days, a few months, or even a year or more. While your in-house team will oversee their day-to-day work, our team will partner with you throughout onboarding to ensure our attorney meets your expectations from day one.
Dodd-Frank 1071 FAQ
Dodd-Frank 1071 refers to a specific section of the Dodd-Frank Wall Street Reform and Consumer Protection Act that mandates covered financial institutions to collect and report data on applications for credit for small businesses. This initiative is aimed at enhancing transparency in lending practices and ensuring compliance with fair lending laws.
Implementing Section 1071 is a requirement for covered financial institutions, which include banks, credit unions, and other lenders that meet certain criteria defined by regulatory authorities. These institutions are required to collect, maintain, and report specific data related to small business lending.
Financial institutions are required to collect and report several pieces of information regarding credit applications from small businesses. This data includes, but is not limited to, the amount of credit applied for, the type of credit, the purpose of the credit, and demographic information about the business owner.
To comply with Section 1071, financial institutions are required to establish data collection and reporting systems that align with the regulatory requirements. They need to ensure accurate and comprehensive data gathering on small business loan applications and be prepared to submit this data to the relevant regulatory bodies. Institutions should also stay informed about any updates or changes to the compliance requirements.
If your organization needs assistance with compliance, Axiom can help.
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If your organization needs assistance implementing and executing a compliance framework for Dodd-Frank 1071, we’re ready to help. Axiom’s financial services lawyers and regulatory compliance lawyers have deep experience in finance, regulations, compliance, securities, and more.