BankThink

CFPB Should Stop Stalling on Small-Business Loan Rules

The Dodd-Frank Act requires financial institutions to be transparent about the business loans they provide. But four years later, Section 1071 of the bill — which requires annual aggregate reporting of business lending practices by various categories such as race and sex — has yet to be implemented by the Consumer Financial Protection Bureau.

Many people have bemoaned the wealth gap plaguing our country's lower- and middle-class families. But there has been very little action to address the issue. Families of color in particular were disproportionately impacted by the Great Recession and the accompanying housing crisis. According to a national study by the Pew Foundation, Latino and black communities lost most of the wealth gained in the 30 years between 1983 and 2013.

In an effort to ensure that all people have equal access to economic opportunities, the Home Mortgage Disclosure Act increased transparency about lenders' mortgage practices. It has helped substantially narrow the homeownership gap since it was enacted in 1975 and opened new markets for banks. Section 1071 could do the same for business loans.

Small and minority-owned businesses could be a major contributor in narrowing the wealth gap. But they need access to capital. Therefore small-business lending is key to creating minority jobs and stable employment. Stable employment, in turn, leads to homeownership — which has always been America's avenue to middle-class wealth accumulation. The racial strife so evident in our streets today can be partially attributed to the effects of joblessness, poverty and unconscious racism.

Putting a spotlight on banks' business lending practices can help diminish redlining and prod them to market to a relatively untapped business sector. Large banks in particular have a lot of room for improvement. Community banks with under $1 billion in assets, which hold just 8% of the assets of the banking industry, make one-third of the outstanding loans to small businesses, as Thomas Curry, Comptroller of the Currency, noted in a recent speech. Despite the concerns of a major bank regulator, the CFPB has still failed to implement section 1071.

President Obama should publically denounce CFPB director Richard Cordray for his failure to comply with the spirit and letter of the Dodd-Frank Act, which the President signed into law in 2010. Fair lending practices are a crucial step in easing our nation away from the ravages of the Great Recession, and putting Section 1071 into action is an important part of this effort.

John C. Gamboa is the executive director of the California Community Builders, an affordable housing development organization. George Dean has been the president and chief executive of the Greater Phoenix Urban League since mid-1992. Al Piña is chairman of the Florida Minority Community Reinvestment Coalition.

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Law and regulation Community banking Dodd-Frank Small business
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