Opinión Experta: 4 pasos para que su Entidad Financiera esté preparada para Dodd-Frank 1071
La norma final de la Ley Dodd-Frank 1071, publicada el 30 de marzo de 2023, un día antes de la finalización prevista de la enmienda crítica a la Ley de Igualdad de Oportunidades de Crédito (ECOA), supone un cambio radical para las Entidades que ofrecen financiación a pequeñas empresas.
La norma obliga a las entidades financieras a comunicar determinados datos sobre préstamos a pequeñas empresas, incluidos datos demográficos sobre pequeñas empresas propiedad de mujeres, de minorías y de personas LGBTQI+. Estos datos serán utilizados por la Oficina de Protección Financiera del Consumidor (CFPB) para hacer cumplir las leyes de préstamos justos y para identificar las necesidades de la comunidad y el acceso al crédito. Los datos recogidos en virtud de la norma también se utilizarán para desarrollar nuevos programas e iniciativas de apoyo a las pequeñas empresas.
All FIs that originated at least 100 covered credit transactions in the past two calendar years (i.e., 2022, 2023) will need to comply with Dodd-Frank 1071. The loan types covered by the new rule include loans, lines of credit, credit cards, merchant cash advances and credit products used for agricultural purposes. As always, there are exceptions to the definitions on the types of loans to be reported.
An FI’s frontline staff are the first line of defense for financial institutions when it comes to complying with Dodd-Frank 1071. They’re the ones who will be interacting with customers and collecting the data that is required under the rule. They’re also the ones who will be making lending decisions that could impact whether a customer is approved for a loan or not.
By properly training your frontline staff on the Dodd-Frank 1071 rule changes, the scope of change based on your FI’s systems and how to collect and validate the required data, FIs can help to ensure that they are in compliance with the law. This can help to protect the financial institution from potential penalties from the Consumer Financial Protection Bureau (CFPB) and improve risk management. It can also help create a better experience for your FI’s clients, as your employees will be able to provide accurate and helpful information and build trust and loyalty among borrowers, which can lead to repeat business and referrals.
Dodd-Frank 1071 requires FIs to collect and report certain data on applications for credit for small businesses, including those small businesses owned by women or minorities. It’s important to note that the rule limits who should have access to the demographic information about the business and individuals. If an employee of the FI is involved in making a decision concerning the application, the data should have a firewall preventing access. However, there is also an option to provide a notice to some or all applicants advising certain information may need to view or access to make a loan decision.
The data that must be collected and reported includes, but is not limited to:
A loan-level unique identifier
Application date and how it was received
Action taken and when taken
Loan purpose
Loan type
Amount applied for or amount of the loan
Key elements of loan pricing (interest rate, total origination costs, prepayment penalites) of the credit, interest and all fees
Census tract (address of the business)
Gross annual revenue
NAICS code
Number of workers
Time in business
Number of principal owners
Minority-owned
Women-owned
LGBTQIA+-owned
Race, Ethnicity, Sex of the principal owners
The data collection and reporting required by Dodd-Frank 1071 can be costly, and FIs need to make sure that they have the resources in place to comply with the rule. The first step is to identify the costs that will be associated with compliance, including the costs of data collection and reporting, the costs of updating lending policies and procedures, the costs of technology associated with the change, costs of staff and audits, and the costs of providing additional disclosures. Once the costs of compliance have been identified, the financial institution needs to allocate resources. This may include hiring new staff, training existing staff and purchasing new software.
As a pioneer in cloud banking, nCino has a clear viewpoint about what it takes to move to a new banking future. Our deep domain expertise and industry knowledge make us an ideal partner to help financial institutions navigate and adapt to changing laws and regulatory shifts.
If you have additional questions about Dodd-Frank 1071 final rule, please reach out to your nCino representative or visit our resources page to learn more.
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