Dodd-Frank Requires CFPB to Collect and Disclose Data on Small Business Lending — Information Critical For Enforcing Fair Lending Laws
Trump Administration Unlawfully Halted Rulemaking Mandating this Data Collection
Defiance of Dodd-Frank Harms Communities that Face Barriers to Accessing Credit
Washington D.C.— Today, on behalf of the California Reinvestment Coalition (CRC), Democracy Forward sued the Trump administration for defying the Dodd-Frank Act by unlawfully failing to collect and disclose data on lending to women-owned, minority-owned and small businesses. Dodd-Frank requires the Consumer Financial Protection Bureau to collect this data from financial institutions and make it publicly available to facilitate enforcement of fair lending laws to curb lending discrimination. Congress further mandated that the CFPB issue rules to implement this data collection. Yet, in 2018, without any explanation, then-Acting Director Mick Mulvaney unlawfully halted the required rulemaking process and Director Kathy Kraninger has taken no meaningful steps to remedy this failure. The lack of data frustrates the ability of small businesses and organizations like CRC to detect and address obstacles women-owned, minority-owned and small businesses face to obtaining credit.
“Since Dodd-Frank was enacted nearly a decade ago, small business borrowers have been waiting for the CFPB to fulfill its mandate to collect and disclose lending data, especially on loans made to women and people of color,” said California Reinvestment Coalition Executive Director Paulina Gonzalez-Brito. “Under two Trump-appointed directors, the Bureau has failed to move forward on its obligation to implement the law. Small business is the engine of growth for our economy. Identifying discriminatory lending practices is critical to ending the racial wealth gap and economic disparities.”
Between 2017 and 2018, women started an average of 1,821 new businesses per day in the U.S., and the number of businesses owned by people of color has grown by 79 percent between 2007 and 2017. Yet, as the CFPB has acknowledged, current data is inadequate to fully understand, let alone remedy, the extent to which discriminatory lending creates credit deserts for small businesses and businesses owned by women and minorities. Section 1071 of Dodd-Frank was designed to fill this gap by requiring financial institutions to maintain and disclose data about their actions on loan applications by women-owned, minority-owned and small businesses.
Congress required CFPB to make such data publicly available, which would help organizations like CRC and its members identify and address gaps in credit access. By failing to implement Section 1071 of Dodd-Frank, the CFPB has unlawfully withheld and unreasonably delayed agency action, violating the Administrative Procedure Act.
“The Trump administration is actively defying a law specifically designed to expose discriminatory lending practices by financial institutions, while small businesses, women- and minority-owned businesses, and the communities they support are harmed in the process,” said Democracy Forward Executive Director Anne Harkavy.
Under President Trump, the CFPB has failed to take needed steps to protect consumers, veterans, and student borrowers. A recent news report described the “strategic neglect and bureaucratic self-sabotage” that characterized the CFPB’s governance under Mulvaney’s tenure. Another analysis found that under Director Kraninger, CFPB enforcement activity has declined to levels much lower than at any time since the agency’s inception.
The suit was filed May 14, 2019 in the United States District Court for the Northern District of California.
The California Reinvestment Coalition builds an inclusive and fair economy that meets the needs of communities of color and low-income communities by ensuring that banks and other corporations invest and conduct business in our communities in a just and equitable manner. We envision a future in which people of color and low-income people live and participate fully and equally in financially healthy and stable communities without fear of displacement, and have the tools necessary to build household and community wealth.
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.