The one provision of the Dodd-Frank Act that strikes fear in the heart of bankers is the requirement to collect and report HMDA-like information on business loans. The provision is supposed to be effective on July 21, 2011. But since we don’t even have proposed regulations yet, we have suspected for some time now that the provision will be delayed. Leonard Kennedy, the recently appointed General Counsel of the Consumer Financial Protection Bureau, has made it official. Nothing happens until regulations are in place. Apparently development of the new regulations will be a priority for the CFPB.
Under the new rules a lender must inquire whether the business is a women-owned, minority-owned, or small business. Any applicant for credit may refuse to provide any information requested in connection with any application for credit.
No loan underwriter or other officer or employee of a financial institution, or any affiliate of a financial institution, involved in making any determination concerning an application for credit shall have access to any information provided by the applicant pursuant to this new requirement. If a financial institution determines that a restricted party should have access to information provided by the applicant, the financial institution must provide notice to the applicant of the access of the underwriter to the information, along with notice that the financial institution may not discriminate on the basis of the information.
Information compiled and maintained, on a document that many in the industry are referring to as a BLAR,includes:
* the number of the application and the date on which the application was received;
* the type and purpose of the loan or other credit being applied for;
* the amount of the credit or credit limit applied for, and the amount of the credit transaction or the credit limit approved for such applicant;
* the type of action taken with respect to such application, and the date of such action;
* the census tract in which is located the principal place of business of the women-owned, minority-owned, or small business loan applicant;
* the gross annual revenue of the business in the last fiscal year of the women-owned, minority-owned, or small business loan applicant preceding the date of the application;
* the race, sex, and ethnicity of the principal owners of the business; and
* any additional to data that the Bureau determines would aid in fulfilling the purposes of this section.
The information will be reported annually to the Bureau. The Bureau will use the information to prepare a disclosure statement. It is all very HMDA like. It is going to happen soon, but is not going to happen in July.
