Since being issued in March 2023, Section 1071 of the Dodd-Frank Act has prompted a lot of discussion about its implications for institutions serving the equipment finance industry. In this Trail Mix installment, we’ll provide a quick overview of what you need to know about Section 1071.
What is Section 1071?
Consumer Financial Protection Bureau (CFPB) Section 1071 refers to a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act that requires financial institutions to collect and report certain data related to small business lending.
What kind of data must be collected?
Specifically, Section 1071 mandates that the CFPB create rules and regulations that compel lenders to gather information on race, ethnicity, gender and other relevant characteristics of loan applicants.
Why must lenders collect this data?
The primary goal of Section 1071 is to promote fair lending practices and increase transparency in small business lending to better understand potential disparities and barriers faced by minority-owned and women-owned businesses.
Who will use this data?
The data collected under this section can help policymakers, researchers and regulators assess and address potential discrimination regarding access to credit for underserved communities.
What transactions and small businesses are covered under Section 1071?
As it applies to the equipment finance (EF) industry, loans and working capital are covered transactions but true leases are exempt. A “small business” is defined as having $5 million in gross annual revenue the previous fiscal year.
When is the deadline for becoming compliant with the collection and reporting of this data?
Compliance depends on the number of covered transactions offered to small businesses in a given year:
| Covered Transactions | Begin Collecting | Begin Reporting |
|---|---|---|
| 2,500 | 10/01/2024 | 06/01/2025 |
| 500 | 04/01/2025 | 06/01/2026 |
| 100 | 01/01/2026 | 06/01/2027 |
Can Tamarack help my organization prepare for 1071 compliance?
Tamarack and Stinson LLP have partnered to provide lenders an in-depth understanding of Section 1071 with a special focus on how the data collection and reporting impact your workflow and operational systems - all through an EF-centric lens.
Looking for more information? Check out this excellent CFPB executive summary and/or contact us via discover@tamarack.ai.