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We are in the process of reviewing our covered transactions to determine which data tier we might fall into and are using our past CRA LARs as a starting point. We would like to know if we can exclude loans where the revenues were not considered or unknown and have not been updated or revised since the loan was made? In the case of these applications in question the revenue was reported on the LAR as Unknown and not 0.
Thoughts?
The final rule’s definition of “small business” incorporates, in part, the Small Business Administration’s (SBA) definition of “small business concern.” Pursuant to the final rule, a “small
business” is a small business concern that had $5 million or less in gross annual revenue for its preceding fiscal year…. A financial institution is permitted to rely on an applicant’s representations regarding gross
annual revenue (which may or may not include affiliate revenue) for purposes of determining small business status. However, if a financial institution verifies applicant-provided gross annual
revenue information or if an applicant provides updated gross annual revenue information, the financial institution must use the verified or updated information to determine small business
status
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I would caution excluding loans just because you didn’t consider the GAR. The CFPB clearly stated what ever process you use to determine the FIs tier should not circumvent collection of information (or tier determination). The expectation is that you use a reasonable methodology to determine what tier your FI would fall into. IMO, just because it wasn’t’ collected or asked for would not fall into reasonableness. However, it would need to be a Management or BOD decision as to the practices you use to determine the FI tier.
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Thank you. I have also been asked if the bank can exclude line increases on credit cards reported on the 2022 CRA LAR. There have been discussions surrounding interpretation of the 1071 Summary vs the 1071 final rule.
Thoughts?
Line increases were included in both the proposal and the final rule as being a trigger for the data collection. As such, I would not remove them from your origination count when determining the tier. In the final rule line increase is now a collection point in the credit purpose category. Additionally, being CRA reportable does not exclude loans from 1071 reporting. The only exception they gave in the final rule is for HMDA reportable loans. CRA reportable loans will be on both the CRA and Small Business Data Collection LARs.
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