Community lenders tell House panel data-collection and compliance costs are slowing SBA lending

WASHINGTON — Leaders of community banks, credit unions and a nonprofit lender told the House Committee on Small Business that recent federal reporting rules and rising compliance costs are reducing their capacity to make small-business loans and slowing access to SBA-backed credit.

“the typical turnaround time on SBA loans within our department ranges from 45 to 75 days,” Justin Hooper, CEO and chairman of the Cross Timbers region of First Financial Bank, said during the committee’s hearing. Hooper told members that his bank estimates it now spends about $11,000,000 a year on compliance and related outside services, and that implementation of the Consumer Financial Protection Bureau’s Section 1071 rule alone could cost his institution about $2,100,000 annually.

The concern extended beyond community banking. “One of the most pressing challenges … is the complexity of the SBA program requirements,” Mike Sims, chief commercial banking officer for Georgia’s Own Credit Union, said. Sims said administrative delays in SBA responses and the complexity of standard operating procedures make it “extremely difficult” for credit unions to scale SBA lending. He recommended stronger engagement by regional SBA offices to help lenders navigate the process.

Witnesses told the committee that compliance resource needs go beyond staff salaries. Hooper described additional annual expenses tied to audit, legal and technology support of roughly $3,800,000 and rising fraud-prevention costs of about $5,900,000 in personnel and technology; he said combined fraud losses and prevention spending were on the order of $8,300,000 in 2024.

Multiple witnesses singled out collection and reporting rules as unnecessary burdens. Sims called the CFPB’s Section 1071 “overly broad” and told the committee he supported Chairman Williams’s legislative effort to repeal that rulemaking. Members also discussed the FinCEN beneficial-ownership reporting rule, which committee members noted has been the subject of litigation and temporary pauses in implementation.

Committee members and witnesses differed on the policy trade-offs. Some members argued that expanded reporting is necessary to enforce fair-lending laws and to produce data on credit access for women- and minority-owned firms. Witnesses countered that the paperwork, implementation costs and privacy concerns will deter borrowers and reduce the willingness of community lenders to offer SBA products.

Several witnesses urged targeted fixes rather than wholesale program changes: faster, clearer SBA responses; more proactive regional SBA engagement; and scalable technical assistance or software support so smaller lenders can meet new reporting requirements without diverting front-line staff from lending.

The hearing produced no formal votes. Members gave witnesses five legislative days to submit written materials and questions for the record.