Contact: Brian M. Maxey,
The finalized rule increases transparency, addresses inequities in lending to BIPOC and women-owned small businesses.
LOS ANGELES, March 30, 2023 — In a move years in the making, the Consumer Financial Protection Bureau (CFPB) announced today that it has issued a finalized rule on Section 1071, which requires financial institutions to report critical data to the agency on small businesses that apply for loans.
The announcement is a victory in the fight to enforce fair lending laws as well as identify and address the barriers small businesses face in accessing credit. The final rule establishes a compliance regulation for banks and other lenders to collect data on the race, ethnicity, gender and geographic location of small-business borrowers.
“The finalized rule has been much-anticipated by CRC, our members and advocates across California,” said Paulina Gonazalez-Brito, CRC’s Chief Executive Officer. “We have fought for years to ensure the CFPB puts forth a final rule that protects historically marginalized consumers and creates lending opportunities for women and Black, Indigenous and People of Color (BIPOC) business owners. We believe the disclosure of this data will be transformational for women- and BIPOC-owned small businesses.”
Since Dodd-Frank was enacted in 2010, CRC and its members have pushed for a stronger rule that requires small business lending data by race, ethnicity, gender and neighborhood. In 2019, CRC, represented by Democracy Forward, sued the Trump Administration for defying the Dodd-Frank Act by unlawfully failing to collect and disclose data on lending to women and minority-owned small businesses. CRC settled that case in 2020, with the CFPB agreeing to a process to develop the rule. In January 2022, CRC and more than 60 California-based organizations submitted a comment letter to the CFPB asking for a strong, detailed and transparent data collection rule.
The final rule increases access to credit for small businesses owned by people of color and women — groups that have historically faced significant obstacles to obtaining credit.
“Right now, small businesses, particularly those owned by women and people of color, are hurting,” said Kevin Stein, CRC’s Chief of Legal and Strategy. “While we are still reviewing the final rule, we believe that increased transparency will greatly increase access to fairly priced credit for small businesses that form the backbone of communities and our economy. And where there are outliers, it will lead to better enforcement of anti-discrimination laws. For every one that truly cares about closing racial and gender wealth gaps, today is an important day.”
CRC Member Quotes
“Every day, we talk to small business owners who are diligently seeking a small business loan. Many are declined by banks in their community, while they see that these same institutions are receiving federal support to maintain their business. We need to understand where banks are lending, and where they are not. This data will not only help our leaders make better policy decisions, but it will also educate consumers on which bank is committed to supporting their local economy.” —Rudy Espinoza, Executive Director, Inclusive Action for the City
“Banks and bankers have been prohibited from collecting data on the race of their customers for many years. Many have used this as an excuse to avoid the reality of their exclusion of people of color from their customer bases. This rule needs to be eliminated as the communities of color have been systematically and routinely overlooked by powerful institutions which allocate the capital needed by these communities to improve their resident’s quality of life and to contribute to the nation’s greater prosperity.” —George McDaniel, Co-Director, African Americans for Economic Empowerment (A2E2)
“For decades, we have heard the struggles our clients have in accessing capital due to barriers that have been in place for generations. Women, people of color and immigrant business owners deserve fair access to credit and an opportunity to build wealth. Section 1071 is key to providing transparency, removing existing barriers and fixing the racial inequities in our financial system.” —Robert Villarreal, Chief External Affairs Officer, Momentous Capital
About the California Reinvestment Coalition
The California Reinvestment Coalition (CRC) 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. CRC’s 300 organizational members include multi-service agencies, affordable housing developers, housing and financial capability counselors, tenants’ rights and legal aid organizations, small business technical assistance providers, Community Development Financial Institutions (CDFIs), small farm incubators, immigrant service organizations, and other community-serving organizations located throughout California. 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.