Background: The CFPB rule, effective as of August 2023, requires small-business lenders to collect data on the race, ethnicity, gender and sexual orientation of those who apply for small business loans. The stated goal was to monitor the accessibility of small business loans and fight discrimination under federal fair lending laws.
Why it matters to CRE: The CFPB did not exempt commercial real estate mortgages from the final rule.
However, several factors would likely have limited the impact to CREFC members.
- The small business threshold generally impacted a business with under $5 million in gross annual revenue.
- Affiliate revenue counted in determining if the borrower is a small business. If the legal borrower was a special purpose entity, the owners or affiliate revenue could have proven that it was not a small business.
- A lender must have made 100 loans to small businesses in each of the preceding two years to be required to report. For CREFC members, that means 100 loans made to borrowers with under $5 million in gross annual revenue (including affiliates). But the threshold is institution-wide, not limited to a particular business line.
- Multifamily loans were excluded from 1071 reporting since they are already accounted for in the Home Mortgage Disclosure Act (HMDA) reporting.
Yes, but: Financial institutions with a dedicated small business lending platform would likely have been impacted. Therefore, they would have had to report data on their CRE loans to small businesses, even if that business line had not made 100 CRE loans.
CREFC will continue to monitor 1071-related developments.
Contact
David McCarthy (
dmccarthy@crefc.org) and
Sairah Burki (
sburki@crefc.org) with any questions.