For Years, CFPB Unlawfully Stalled Progress on Info Needed to Help Women-Owned, Minority-Owned & Small Businesses Access Credit
In Milestone Settlement, CFPB Agrees to Enforceable Deadlines and Court Status Reports on Progress Toward Collection & Disclosure of Small Business Lending Data
Oakland, CA — Today, in response to a legal challenge brought by small business owners and community development organizations, the Trump administration has finally agreed to stop flouting its legal obligation to facilitate enforcement of anti-discrimination laws that protect women-owned, minority-owned and small businesses from discriminatory financial institutions. Pursuant to a settlement agreement filed with the U.S. District Court for the Northern District of California, the Consumer Financial Protection Bureau will agree to concrete court-ordered deadlines for implementing Section 1071 of the Dodd-Frank Act, which requires the agency to collect and disclose data on discriminatory lending to America’s small businesses. After unlawfully delaying this requirement for years, the CFPB must also submit status reports updating the public on its progress. Today marks a milestone victory for addressing the credit barriers small business owners face across the country — particularly women and entrepreneurs of color.
The settlement agreement was reached in response to a lawsuit filed by Democracy Forward and Hagens Berman Sobol Shapiro LLP on behalf of small business owners from Waterloo, Iowa and Portland, Oregon, the California Reinvestment Coalition (CRC), and the National Association for Latino Community Asset Builders (NALCAB).
“It’s safe to say that, without this lawsuit, the Trump administration would be content to continue its unlawful refusal to protect women, minority and small business owners from discrimination,” said Democracy Forward Executive Director Anne Harkavy. “We are proud to have helped secure this milestone victory to protect all corners of America’s economy and will remain vigilant to ensure that the administration follows the law.”
“It’s a good day for California’s communities of color and the leaders in our communities who have been fighting for this important rule to advance. For nearly a decade since Dodd-Frank became law, our members throughout California have been on the frontlines pushing for this rule to move forward,” said California Reinvestment Coalition’s Executive Director, Paulina Gonzalez-Brito. “This settlement is a victory for impacted communities and small business owners of color striving to build wealth and a better life. CRC and our members look forward to engaging with the Consumer Bureau to ensure that the agreed upon timeline proceeds on schedule.”
“When the CFPB complies with this court order and collects data on small business lending, the marketplace will be more efficient and fair,” said NALCAB’s Executive Director Noel Andrés Poyo. “Transparency is the ultimate antidote to discriminatory and predatory lending.”
According to the agreement, the CFPB will:
By September 2020, outline its proposals for collecting the required data and publicly release those proposals for consideration of their effect on small businesses;
By October 2020, establish a Small Business Advocacy Review panel to provide input on its proposal. CFPB will take panelist suggestions from the small business plaintiff groups;
Negotiate deadlines with the plaintiffs for each stage of the rulemaking process to facilitate the data collection, including the deadline to issue the final data collection rule, and accept Court-ordered deadlines if the parties cannot agree; and
Submit status reports every 90 days detailing the CFPB’s progress toward implementing this data collection rule.
The joint settlement agreement was submitted to the Court on Wednesday, February 26, 2020 and is subject to final Court approval.
Section 1071 of Dodd-Frank was designed by Congress to facilitate enforcement of fair lending laws to curb discrimination, and to identify and remedy “credit deserts” where businesses are unable to obtain the credit they need to grow and serve their communities. Congress mandated that the CFPB issue rules to implement this data collection. Yet, in 2018, without any explanation, then-Acting CFPB Director Mick Mulvaney unlawfully suspended the required rulemaking process. Until today, Director Kathleen Kraninger had taken no meaningful steps to remedy this failure.
The administration’s unlawful delay is all the worse because the CFPB has admitted that current data is inadequate to fully understand, let alone remedy, the extent to which discriminatory lending harms business owners in “credit deserts.”
Democracy Forward is a nonprofit legal organization that scrutinizes Executive Branch activity across policy areas, represents clients in litigation to challenge unlawful actions, and educates the public when the White House or federal agencies break the law.