Bill Overview
Title: Small LENDER Act
Description: This bill exempts certain financial institutions and transactions from the Consumer Financial Protection Bureau (CFPB) reporting requirements with respect to data about small business credit applications. Under the bill, the requirements apply only to financial institutions that originate at least 500 credit transactions to small businesses in each of the preceding two years. The bill further defines small businesses as those with annual revenue of $1 million or less. Currently, the CFPB has proposed a rule that the requirements apply only to financial institutions that originate at least 25 annual credit transactions to small businesses in each of the preceding two years. The rule further defines small businesses as those with annual revenue of $5 million or less.
Sponsors: Rep. Hill, J. French [R-AR-2]
Target Audience
Population: People impacted by exempting small lenders from CFPB requirements
Estimated Size: 30000000
- Under the current CFPB rule, financial institutions originating at least 25 transactions with small businesses having up to $5 million in revenue are subject to reporting requirements.
- The bill raises this threshold to financial institutions originating at least 500 transactions with businesses having $1 million or less in revenue.
- This change will reduce reporting requirements for many small lenders, particularly those that do not meet the originations threshold.
- Small businesses with less revenue might face harder scrutiny as fewer eligible financial institutions will be subjected to detailed reporting.
- Lenders with fewer transactions will have reduced compliance costs, potentially impacting their ability to offer credit.
- Small businesses often rely on local banks and credit unions, which likely fall under this threshold, therefore experiencing less regulatory burden.
Reasoning
- The policy targets small lenders exempt from reporting, focusing on institutions with fewer than 500 credit transactions and borrowers under $1M revenue.
- Local banks and credit unions prominently feature as they serve numerous small business clients with revenues under $1M.
- Compliance cost reductions for lenders could alter credit availability, as eased regulations might o incentivize small lenders to readily service such businesses.
- In crafting the simulations, diverse small business owners and lending figures were considered, alongside some individuals indirectly impacted, such as those in larger businesses.
Simulated Interviews
Owner of a Small Auto Repair Business (Wichita, KS)
Age: 52 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 2/20
Statement of Opinion:
- I think reducing reporting requirements might allow my local bank to offer better terms.
- The policy could ease loan applications since banks face fewer hurdles.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 7 |
| Year 20 | 8 | 7 |
Credit Union Loan Officer (Tucson, AZ)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 3/20
Statement of Opinion:
- I’m relieved that smaller institutions like ours will have reduced paperwork.
- The change might free up more resources to approve more loans.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Independent Coffee Shop Owner (Salt Lake City, UT)
Age: 33 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 2.0 years
Commonness: 4/20
Statement of Opinion:
- I’m worried this might limit bank choices since fewer banks report.
- It might help some, but it seems better for lenders than us.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 5 | 4 |
Retired Banker (Tallahassee, FL)
Age: 61 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 6/20
Statement of Opinion:
- Smaller banks being exempt is good; it's a lot of unneeded stress from extensive reporting.
- It may help to focus more on lending rather than reporting.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 5 | 4 |
| Year 3 | 5 | 4 |
| Year 5 | 5 | 4 |
| Year 10 | 5 | 4 |
| Year 20 | 4 | 3 |
Microbrewery Owner (Columbus, OH)
Age: 29 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 3/20
Statement of Opinion:
- With my revenue growing, I might miss out on some relaxed benefits.
- Approvals faster would be great, though.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 5 |
Tech Startup Entrepreneur (Phoenix, AZ)
Age: 38 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 7.0 years
Commonness: 2/20
Statement of Opinion:
- Flexibility encouraged by the policy can be a lifeline for growing startups like mine.
- My future loan applications could be more hassle-free.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 5 |
| Year 10 | 8 | 5 |
| Year 20 | 7 | 5 |
Farmer (Billings, MT)
Age: 50 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 4.0 years
Commonness: 5/20
Statement of Opinion:
- Expectations are mixed; on one hand, it helps with refinancing; on the other, less data might risk bias later.
- It's critical that small lenders remain intact for community support.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 4 |
| Year 10 | 6 | 4 |
| Year 20 | 5 | 4 |
Local Retail Store Manager (Raleigh, NC)
Age: 48 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 4/20
Statement of Opinion:
- It might shift bank perspectives on risk without extensive data.
- Easier procedure is a solid plus, though.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 4 |
Consultant for Medium Businesses (Dallas, TX)
Age: 55 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 7/20
Statement of Opinion:
- While small lenders benefit, some clarity is lost on credit transparency.
- Overall, it impacts less the group I usually work with.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Bank Compliance Officer (Indianapolis, IN)
Age: 42 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- Though compliance estaff will lessen, managed well it cuts down administrative burden.
- It seems like a win for smaller lenders in easing processes and saving time.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 5 | 4 |
Cost Estimates
Year 1: $30000000 (Low: $25000000, High: $40000000)
Year 2: $30000000 (Low: $25000000, High: $40000000)
Year 3: $30000000 (Low: $25000000, High: $40000000)
Year 5: $30000000 (Low: $25000000, High: $40000000)
Year 10: $30000000 (Low: $25000000, High: $40000000)
Year 100: $30000000 (Low: $25000000, High: $40000000)
Key Considerations
- Decreased administrative burden on smaller financial institutions.
- Potential risk of decreased transparency in small business lending.
- Balancing small lenders' capacity to offer competitive loan terms with consumer protection objectives.