Under the Section 1071 Rule, covered institutions will need to collect and report data on any credit application for funds to be used primarily for a commercial (or ag) purpose if an applicant had a gross annual revenue (GAR) of $5 million or less in its prior fiscal year. That in and of itself is a lot to digest. Some of you may be focused on the small business part of that definition and thinking through how to determine GAR, but you don’t want to lose focus on the importance of ensuring your ag and commercial lenders are on the same page when it comes to understanding what an “application” is.
The Rule will shine a much brighter light on whether requests for ag or commercial credit (i.e., applications) are being properly identified. Remember, covered institutions must report on ALL applications not just completed applications. In fact, the CFPB specifically passed on the option of having institutions only report completed applications for the 1071 Rule. They noted that data on incomplete and withdrawn applications is essential for identifying potential discrimination or other “barriers” to credit. Will your ag and/or commercial lenders identify ALL reportable applications? To help ensure they do, you will need to train them appropriately.
In case you missed it, the CFPB recently issued both a Small Entity Compliance Guide and an initial round of Small Business Lending Rule FAQs to help you with your 1071 Rule compliance efforts.
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Published
2023/07/11