U.S. Senators Katie Britt (R-Ala.) and John Boozman (R-Ark.) have introduced legislation in response to the Biden Administration\u2019s Consumer Financial Protection Bureau (CFPB) finalizing its 1071 Small Business Lending Data Collection rule last year.<\/p>\n
\u201cThe CFPB under the last Administration operated virtually unchecked\u2014with no real Congressional oversight\u2014and in an authoritarian manner, creating a regulatory nightmare for the very people and businesses it was meant to protect,\u201d <\/em>said Senator Britt.<\/strong>\u00a0\u201cThe PROTECTED Act delivers much-needed regulatory relief for community banks, farm credit lenders, CDFIs, and equipment financers. Importantly, this legislation safeguards small businesses by limiting excessive data collection and protecting consumer privacy. I\u2019m proud to lead this effort to provide critical changes to this harmful rule.\u201d<\/em><\/p>\n The Preventing Regulatory Overreach to Empower Communities to Thrive and Ensure Data privacy (PROTECTED) Act<\/a><\/u><\/em>\u00a0aims to shield our smallest financial institutions and Main Street businesses from regulatory overreach and excessive compliance costs and standards, particularly in the absence of a full repeal of the CFPB\u2019s final rule for Section 1071 of the Dodd-Frank Act. The bill would also limit the number of small businesses impacted, and significantly reduce the amount of data required to be collected and reported, to ensure consumers\u2019 privacy is protected.<\/p>\n \u201cAs the backbone of our economy, small businesses need access to capital. Identity-based data collection requirements handed down from Washington jeopardize lenders\u2019 ability to provide vital investments and invite the federal government to pick winners and losers based on factors other than sound underwriting. Our legislation cuts this red tape for small and local financial institutions, including those trusted by farmers and rural communities, so they can focus on helping entrepreneurs and business owners launch or expand operations,\u201d<\/em>\u00a0Senator Boozman said<\/strong>.<\/p>\n Notably, the PROTECTED Act<\/em>\u00a0establishes critical safeguards to prevent the CFPB from publishing sensitive consumer data and requires the Bureau to conduct updated cost-benefit analyses prior to the rules\u2019 implementation. The rule\u2019s effective date would be three years after the completion of these updated analyses and publication in the\u00a0Federal Register, followed by a two-year grace period.\u00a0The full bill text can be viewed here<\/a><\/u>.<\/p>\n \u201cI will always advocate for small businesses across Alabama and our nation\u2014they\u2019re the backbone of our country and what make our communities so unique\u2014and our community banks play a pivotal role in providing these businesses with vital access to capital. This CFPB rule <\/em>would have damaging downstream effects on our most rural and underserved communities<\/em>. In the absence of a full repeal, this bill makes critical changes needed to ensure small lenders can continue to meet the needs of Main Street businesses,\u201d<\/em>\u00a0said Senator Britt.<\/strong><\/p>\n The Chairman of the House Financial Services Committee French Hill (R-Ark.) is leading similar legislation in the U.S. House of Representatives.<\/p>\n \u201cAmerica\u2019s small businesses depend on affordable and accessible credit, and community banks play a crucial role in their success. The CFPB\u2019s current approach under the 1071 rule restricts credit and places unfair burdens on our community banks. The PROTECTED Act provides a clear path forward for how the Bureau can revise the 1071 rule to\u00a0best support small businesses while ensuring responsible lending. I thank Senator Britt and Senator Boozman for working with me on companion legislation to the Small LENDER Act to support policies that help small businesses grow and achieve success,\u201d <\/em>said Chairman Hill.<\/strong><\/p>\n Senator Britt has long been an outspoken opponent of the CFPB\u2019s misguided 1071 rule. In October 2024, American Banker<\/em>\u00a0published a column<\/a><\/u>\u00a0written by the Senator,\u00a0warning of the increasing politicization and regulatory overreach at the CFPB. \u201cTake, for instance, the CFPB\u2019s 1071 small business lending rule, a far-reaching regulation that imposes significant costs to our smallest community banks. This unnecessary regulatory expansion undermines the relationship banking model of small financial institutions, while allowing the CFPB to collect, store, and create a public registry of personal data on business owners and consumers in our communities,\u201d <\/em>she wrote.<\/strong><\/p>\n