In the aftermath of the 2008 financial crisis, a wave of new regulations reshaped the financial landscape. Among the significant rules, the qualified mortgage regulations, mortgage servicing standards, and appraisal valuations drew considerable focus, and rightly so, given their impact. But as compliance programs have taken root, it’s time to turn our attention to upcoming regulatory changes, particularly Section 1071 of the Dodd-Frank Act.
Understanding Section 1071 Section 1071 amends the Equal Credit Opportunity Act (Regulation B) to mandate the collection of data from applicants for commercial loans. This data collection mirrors what is currently required by the Home Mortgage Disclosure Act (HMDA). Although some speculate that the current presidential administration’s stance on Dodd-Frank might impede the full implementation of this regulation, the value of the data it requires cannot be overstated.
Key Details As of early 2024, the implementation of Section 1071 had been delayed pending a Supreme Court ruling on the constitutionality of the CFPB. However, the earliest deadline for data collection is now set for July 18, 2025, with initial reporting due by June 1, 2026. The information required includes:
- Application number and date received
- Type and purpose of the loan or credit applied for
- Credit amount requested and approved
- Action taken and date of action
- Census tract location of the applicant’s business
- Gross annual revenue of the business
- Race, sex, and ethnicity of the business owners
- Any additional data deemed necessary by the Bureau
Importantly, no personally identifiable information can be included in these records to ensure that the credit decision remains unbiased.
Why This Regulation Matters The primary goal of Section 1071 is to enhance the enforcement of fair lending laws and to help identify the financial needs of women-owned, minority-owned, and small businesses. By gathering this data, regulators and financial institutions alike will be better equipped to craft policies and practices that support these communities.
What’s Next? When this regulation takes effect, financial institutions will need to ensure that the collected data does not influence credit decisions. Even with limited staff, banks must create safeguards to keep this information separate from the underwriting process.
Looking Forward It’s challenging to predict the full impact of Section 1071, but one thing is clear: the influence of fair lending and equal credit opportunity laws will only grow in the coming years. Banks will need to demonstrate that their credit products meet the needs of the communities they serve.
Why Start Now? With compliance deadlines approaching, why wait? High-volume lenders will begin submitting data by June 1, 2026, with lower-volume lenders following a year later. While early data collection isn’t mandatory, it’s an opportunity to test procedures and systems before the official deadline. The CFPB has indicated that penalties for reporting errors won’t be assessed during the first year of collection, as long as institutions are making a good faith effort to comply.
Delaying preparation could lead to higher costs and increased risk of noncompliance. Regardless of the timeline, understanding the demographics of your borrowers should be a strategic priority. This information will be crucial for demonstrating your institution’s role in the local economy and community, as well as for tapping into the potential of unbanked and underbanked customers.
Whether Section 1071 is implemented sooner or later, developing insights into women and minority-owned businesses will be a key competitive advantage for financial institutions that recognize the vast opportunities these businesses represent.