Your Section 1071 Resource
Section 1071 of the Dodd-Frank Act goes by many names: Commercial HMDA. Business HMDA. HMDA for small business. Dodd-Frank 1071. CFPB 1071. Small business lending data collection.
See the resources below to get prepared.
Section 1071 FAQ
Ncontracts' regulatory experts answer the most frequently asked questions about 1071.
1071 Compliance Software for Small Business Lending
Are you ready for 1071? With our 1071 Regulatory Compliance Software, lenders can significantly significantly reduce the compliance burden. Features include:
- Automated geocoding and edit checks
- Direct data transmittal to CFPB
- Expert training content for 1071
- 1071 sample policies and procedures
- Advanced fair lending analytics
Section 1071 Compliance
What Does the Final Rule Mean for Small Business Lenders Like You?
Watch our regulatory compliance experts take a deep dive into Section 1071 in our webinar, now on-demand.
How to Prepare Your Financial Institution for 1071
Here are some things your bank, credit union, mortgage company or fintech can do to be ready.
While we don’t know all the details of 1071, you should be able to conduct an impact analysis to determine what resources your institution will require to adopt the rule.
Think about which areas of your institution will need to be involved. This may include:
- Data collection/IT resources
- Training the first line (this includes loan officers who will be collecting government monitoring information (GMI) required data)
- Second line testing
- Compliance
- Audit
- Vendor management
This will help your institution understand the scope of what’s required and allocate resources accordingly.
Commercial lenders don’t necessarily have a standard application for small business loans. That makes it hard to collect the required information. Create a standard application that collects the anticipated data fields and start training commercial lenders to use it.
The CFPB has a sample data collection form that can be used as a starting point, but your institution will want to take the time to customize it.
When is an application opened? It’s a simple question, but many lenders don’t have a clearcut answer. Create an official definition for application date as part of your documented loan application process.
Similarly situated applicants need to be treated the same. That includes pricing and terms. Make sure your document your underwriting guidelines – including your exception policy. Creativity is an asset for a commercial lender, but it’s a problem when that customization results in disparate treatment.
If you don’t have a commercial loan application, it’s very likely you’re not collecting the type of data the CFPB will be requiring.
Now is the time to start thinking about how your institution will collect the small business data required by 1071.
If you’re one of the few small business lenders that already collects the demographic data the CFPB will require you to report on, you’re ahead of the game.
Stay that way by conducting a fair lending analysis of that data. Slice and dice denial reasons. Determine if similarly situated businesses are receiving similar pricing. The government, press, and consumer groups will be using this data to assess your lending patterns. Use the advantage of time to identify those patterns yourself, decide if anything in your program is problematic, and proactively correct your policies, procedures, and other controls. You need to be prepared to tell your story.
If you don’t already have fair lending analytics software, you’ll need it. Ask any HMDA reporter – it’s impossible to analyze this data manually.