Bill Summary
The "Small Lenders Exempt from New Data and Excessive Reporting Act" (the "Small LENDER Act") amends the Equal Credit Opportunity Act to establish a new framework for small business lending data collection. Key provisions include:
1. **Effective Date and Compliance Timeline**: Financial institutions will have a three-year period from the issuance of the new data collection rules to comply. This period allows institutions to adjust their practices without immediate penalties.
2. **Temporary Safe Harbor**: Following the three-year compliance period, there will be an additional two-year safe harbor phase. During this time, financial institutions are expected to comply with the new rules but will not face penalties for any failures to do so.
3. **Definitions**: The Act clarifies that a "financial institution" is any entity that engages in financial activities and has originated at least 500 small business credit transactions in the previous two years. A "small business" is defined as an entity with gross annual revenues of $1 million or less in the most recently completed fiscal year.
Overall, the Act aims to ease the regulatory burden on small lenders while ensuring that data collection rules are implemented effectively to promote fair lending practices.
Possible Impacts
The "Small Lenders Exempt from New Data and Excessive Reporting Act" (Small LENDER Act) could affect people in several ways:
1. **Increased Access to Credit for Small Businesses**: By providing small lenders with a temporary safe harbor and extended compliance period for new data collection rules, the legislation may encourage these lenders to continue offering loans to small businesses. This could lead to greater access to credit for small businesses, which often struggle to secure financing. Increased access can help these businesses grow, hire more employees, and contribute to local economies.
2. **Reduced Regulatory Burden on Financial Institutions**: The legislation aims to ease the regulatory pressure on small financial institutions by allowing them extra time to comply with new reporting requirements. This could result in lower operational costs for these institutions, potentially leading to more favorable loan terms or lower interest rates for borrowers. As small lenders redirect resources to customer service and loan origination rather than compliance, individuals seeking loans may benefit from a more streamlined borrowing process.
3. **Potential for Data Privacy Concerns**: While the act provides temporary relief from compliance penalties, there may be concerns about the implications of collecting and managing sensitive financial data. If small financial institutions are not adequately prepared to handle the data collection requirements after the compliance period, it could lead to mishandling of personal information, impacting the privacy and security of borrowers. Any data breaches or misuse could negatively affect individuals' financial well-being and trust in lending institutions.
These examples illustrate both the potential benefits and risks associated with the legislation for individuals and small businesses.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 941 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 941
To amend the Equal Credit Opportunity Act to provide for an effective
date and a temporary safe harbor for compliance with certain small
business lending data collection rules, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 4, 2025
Mr. Hill of Arkansas (for himself, Mr. Meuser, Mrs. Wagner, Mr.
Huizenga, Mr. Timmons, Mr. Moore of North Carolina, and Mr. Williams of
Texas) introduced the following bill; which was referred to the
Committee on Financial Services
_______________________________________________________________________
A BILL
To amend the Equal Credit Opportunity Act to provide for an effective
date and a temporary safe harbor for compliance with certain small
business lending data collection rules, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Lenders Exempt from New Data
and Excessive Reporting Act'' or the ``Small LENDER Act''.
SEC. 2. SMALL BUSINESS LOAN DATA COLLECTION.
Section 704B of the Equal Credit Opportunity Act (15 U.S.C. 1691c-
2) is amended--
(1) in subsection (g), by adding at the end the following:
``(4) Compliance with covered rule.--
``(A) In general.--With respect to the covered
rule, the Bureau shall provide a financial institution
a 3-year period beginning on the date the covered rule
was issued to comply with the rule.
``(B) Safe harbor.--After the end of the 3-year
period described under subparagraph (A), the Bureau
shall provide a 2-year safe harbor to a financial
institution during which the financial institution is
required to comply with the covered rule but is not
subject to any penalties for failure to comply with the
covered rule.
``(C) Covered rule defined.--In this paragraph, the
term `covered rule' means the final rule of the Bureau
titled `Small Business Lending Under the Equal Credit
Opportunity Act (Regulation B)' (88 Fed. Reg. 35150,
published May 31, 2023).''; and
(2) in subsection (h)--
(A) by striking paragraph (1) and inserting the
following:
``(1) Financial institution.--The term `financial
institution' means--
``(A) any partnership, company, corporation,
association (incorporated or unincorporated), trust,
estate, cooperative organization, or other entity that
engages in any financial activity; and
``(B) in each of the previous 2 calendar years
originated not less than 500 credit transactions for
small businesses.''; and
(B) by striking paragraph (2) and inserting the
following:
``(2) Small business.--The term `small business' means any
entity with gross annual revenues of $1,000,000 or less in the
most recently completed fiscal year.''.
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