New Consumer Bureau Rule has Civil Rights Implications
As the Consumer Financial Protection Bureau (CFPB) examines small business lending and relevant data collection, consumer advocacy groups are pushing for equity and fairness in the industry.
The HOPE Policy Institute released a letter to the CFPB signed by 40 organizations from the Deep South and highlighting the need for action to create a level playing field in the arena of small business lending.
“The proposed rule for collecting small business lending data from financial institutions has the potential to be a significant step toward creating a level playing field for small businesses, ending discriminatory lending practices, and helping close the racial wealth gap here in the Deep South.”
In the Deep South states of AL, AR, MS, LA, and TN, one in three businesses are owned by people of color, and nearly 40% are owned by women. In Mississippi and Louisiana, more than 20% of businesses in the state are Black-owned. They are integral to the fabric of our communities and economies, but yet do not receive equal access to capital as other businesses.
Ensuring fair lending for these businesses is necessary for the economic prosperity of our region. The CFPB’s proposed rule has the potential to provide the necessary accountability and transparency to advance fair lending practices. We are confident this proposal will impact our communities in a positive manner if properly implemented.”
HOPE suggests in its individual letter that the status quo has entrenched discrimination by failing to collect adequate data on lending practices.
“Data collected under Section 1071 gives credence to the countless anecdotes of underserved businesses that have been denied capital or relegated to exploitative financing, while their counterparts benefit from a more responsive and supportive financial service system. The proposed rule will quantify and make transparent the extent to which financial institutions serve business owners of color and other marginalized groups. This is critical to eradicating the racial wealth gap.”
The proposed rule takes significant and vital steps to assess and enforce compliance with fair lending and anti-discrimination statutes, to identify community development small business capital needs, and to improve transparency in small business credit and lending markets. AFREF wholeheartedly supports the intent of the proposed rule and urges the CFPB to finalize the rule promptly with modest suggested improvements.