Trending
NEW YORK (AP) -- Banks will need to start reporting the demographics and income of small business loan applicants under new rules published by the Consumer Financial Protection Bureau on Thursday.
It's a move that policymakers hope will lead to less discrimination and more transparency in the small business lending market, similar to how other laws have regulated the residential mortgage market for decades.
Under the Dodd-Frank Act, Congress mandated the bureau to start collecting data on small business lending decisions to look for patterns of discrimination. Implementation of the rule has taken more than a decade, and the bureau was sued by the California Reinvestment Coalition for its failure to start collecting this data.
Bank regulators have for decades collected data on residential mortgage applicants -- including race, geography, whether the loan was approved and the interest rate -- under a 1970s era law known as the Home Mortgage Disclosure Act. The data collected under HMDA has long been used by regulators and the public to look for potential signs of banks discriminating against borrowers, also known as redlining.
The size of the small business lending market is roughly $1.4 trillion, according to the CFPB. ze of the small business lending market is roughly $1.4 trillion, according to the CFPB. But there's not much data on how banks and non-banks decide who to approve or deny for loans, and there's no way of seeing -- outside anecdotal reports -- whether banks have discriminated against black and Latino small businesses.