Banking and Finance Law Daily Wrap Up, LOANS—CFPB finalizes scaled-back Section 1071 small-business lending rule, (May 1, 2026)

By Shashi Kant, BALLB, LLM.

The rule narrows 2023 data-collection regime by raising reporting threshold, shrinking small-business definition, excluding several loan categories, and delaying compliance.

The Consumer Financial Protection Bureau has finalized a substantially narrowed version of its Section 1071 small-business lending data collection rule, raising the reporting threshold to 1,000 covered originations, tightening the definition of a small business to firms with $1 million or less in annual gross revenue, excluding several categories of credit, trimming the required data set, and pushing compliance to January 1, 2028. The bureau said the revised rule will streamline the 2023 framework, reduce complexity for lenders, improve data quality, and better align the regime with the statutory purposes of facilitating fair-lending enforcement and identifying business and community development needs. The final rule takes effect June 30, 2026.

The new rule substantially revises the CFPB’s original 2023 Section 1071 regime, which had implemented Dodd-Frank Act amendments to the Equal Credit Opportunity Act by requiring lenders to collect and report detailed data on applications for credit by women-owned, minority-owned, and small businesses (see Banking and Finance Law Daily, Mar. 31, 2023). The 2023 rule was quickly challenged in court, and a federal district court halted implementation that August (see Banking and Finance Law Daily, Apr. 27, 2023; Aug. 1, 2023). The bureau later extended compliance dates multiple times while litigation and reconsideration of the framework continued (see Banking and Finance Law Daily,June 26, 2024; June 17, 2025; Oct. 1, 2025).

Rule narrows covered lenders, products, and data points. Among the most consequential changes, the bureau excluded merchant cash advances, agricultural loans, and transactions of $1,000 or less from the definition of covered credit transactions. It also exempted Farm Credit System lenders, reduced the small-business revenue threshold from $5 million to $1 million, and removed several data points that had been required under the 2023 rule, including application method, application recipient, denial reasons, pricing, and number of workers. The CFPB said those revisions should reduce compliance burdens while improving data quality by focusing reporting on what it considers core lenders, products, and information.

The bureau had previewed this retrenchment in a November 2025 proposal to amend Regulation B, saying it wanted to begin the data collection regime with more modest requirements after concerns that the original framework was too broad and operationally difficult (Banking and Finance Law Daily, Nov. 12, 2025). In the preamble to the final rule, the CFPB said it now believes Section 1071’s statutory goals are better served by a narrower framework that is less likely to disrupt credit availability or compromise data quality.

The CFPB also said it intends to take an incremental approach to public disclosure of reported data. The bureau committed to issuing a future notice of proposed rulemaking, after receiving and analyzing a full year of Section 1071 data, to address what data should be modified or deleted before publication.

Rule reflects lessons from litigation and implementation concerns. In explaining the rollback, the CFPB said the original rule’s broad scope generated sustained concern from smaller lenders and other market participants about implementation complexity and possible disruption to small-business credit markets. The bureau also said the changes should not materially alter current compliance expectations because the earlier rule never fully took effect as originally scheduled due to litigation and repeated deadline extensions.

Banking groups welcome narrower rule. House Financial Services Committee Chairman French Hill and Financial Institutions Subcommittee Chairman Andy Barr called the final rule a “step in the right direction,” arguing that the prior version risked reducing access to credit for the small businesses it purported to help. They said the final rule reduces complexity, strengthens privacy protections, provides more workable timelines, and better reflects relationship-based small-business lending. They also urged Congress to codify the changes and pursue broader statutory reforms.

Industry trade groups broadly echoed that view. The American Bankers Association said the bureau had appropriately refocused the rule on core lenders, products, and data points while addressing legal and operational flaws in the prior version. The Consumer Bankers Association said the final rule makes meaningful progress in balancing transparency with the need to avoid unnecessary burdens and preserve credit access. The Mortgage Bankers Association said the revisions appropriately narrow coverage so that most traditional commercial real estate lending is not swept into the regime. ICBA likewise welcomed the higher 1,000-loan threshold, narrower $1 million revenue definition, and exclusion of agricultural lending, while continuing to object to the Farm Credit System exemption without comparable relief for community banks.

Criticism from civil-rights and community groups. Consumer and community advocates sharply criticized the final rule. The National Community Reinvestment Coalition called it “a massive step backward,” arguing that the higher threshold, narrower small-business definition, product exclusions, and elimination of pricing and demographic-related data will significantly reduce transparency and make it harder to detect discrimination. Americans for Financial Reform similarly said the new rule guts the farm and small-business fair-lending disclosure regime by delaying implementation, excluding farm lending, and dramatically reducing lender coverage.

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