For applications subject to Section 1071, financial institutions must request the ethnicity, race and sex/gender of an applicant’s principal owner(s). A principal owner is any individual that directly owns 25% or more of the equity interests of a business. Keep in mind, the applicant may or may not be a principal owner and/or all of the principal owners may not be present, so this will need to be requested from the applicant. When requesting a principal owner’s ethnicity, race and sex from an applicant, a financial institution must inform the applicant that the financial institution cannot discriminate of the basis of a principal owner’s ethnicity, race or sex/gender, or on whether the applicant provides the information. A financial institution must also inform the applicant that Federal law requires it to ask for the principal owner’s ethnicity, race and sex/gender to help ensure that all small business applicants for credit are treated fairly and that communities’ small business credit needs are being fulfilled. The applicant must also be able to refuse to provide the information. There are some other intricacies you need to be aware of when it comes to reporting the information provided.
Jerod explains more in the video.