A recently proposed rule by the Consumer Financial Protection Bureau (CFPB) could have significant repercussions for small businesses, particularly in terms of lending. The rule, known as the CFPB 1071 Small Business Lending Rule, has been flagged by the National Federation of Independent Business (NFIB) as a potential obstacle to small business growth.
NFIB, recognized as the top small business advocacy organization in the country, revealed that it is mulling over S.J. Res. 32, a Congressional Review Act resolution that could disapprove the rule in question. As an indication of its significance, the NFIB has also marked this as a Key Vote for the ongoing 118th Congress and has officially expressed its support for the legislation to the US Senate.
At the heart of the issue is the concern that the CFPB 1071 rule will bring about increased reporting requirements for small business owners and their partner financial institutions. Kevin Kuhlman, the Vice President of Federal Government Relations at NFIB, stated, “Small businesses are already inundated with federal paperwork when opening and running a business and applying for loans. They do not have the resources or staff to handle additional paperwork that this rule will require, and neither do the small financial institutions they overwhelmingly use. This rule would not only have a negative impact on credit unions and small banks nationwide but also has the potential to limit small businesses’ access to credit.”
Drawing from a recent NFIB banking survey, a substantial 67% of small businesses have a preference for small or regional financial institutions for their credit requirements. Another 17% lean towards medium-sized institutions. This data underscores the potentially widespread impact of the rule.
But what exactly does the CFPB 1071 rule entail? In essence, it mandates financial institutions to gather, maintain, and submit specific data related to small business lending to the CFPB. Such a directive might sound relatively harmless on paper, but the actual implementation could spell added complexities for both lenders and borrowers. This isn’t the first time the NFIB has voiced its concerns over this rule. In 2017, the organization lodged comments against the CFPB 1071 rule, emphasizing the overwhelming reporting responsibilities it would introduce and urging Congress to reconsider its stance.
The overarching concern here is twofold. For one, the rule could pose direct operational challenges for small businesses and their associated financial institutions, both of whom are often operating without the cushion of extensive resources. Secondly, and perhaps more critically, the rule might inadvertently stifle small businesses’ access to essential credit. If banks and credit unions are bogged down with paperwork, it could slow down the lending process or even deter these institutions from offering loans to small businesses altogether.
In an economy where small businesses play an undeniably vital role, rules and regulations that could hinder their growth warrant serious reflection. The NFIB’s recent move only underscores the gravity of the situation, and it remains to be seen how the 118th Congress will respond. Small business owners nationwide will be watching closely, with hopes of a resolution that acknowledges and supports their integral role in the American economy.
This article, “CFPB Rule Could Negatively Impact Small Business Lending” was first published on Small Business Trends
CFPB’s new rule could strain small business lending. NFIB raises concerns over more paperwork and limited access to credit for entrepreneurs.Read MoreSmall Business NewsSmall Business Trends