Community bankers tell committee CFPB’s Section 1071 reporting burdens could curb small‑business lending
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Summary
Alice Frasier, vice chair of the Independent Community Bankers of America and CEO of Potomac Bancshares, said the CFPB’s small‑business data rule will force banks to standardize underwriting, reduce relationship lending, and may diminish credit availability for small borrowers unless it is repealed or significantly altered.
Alice Frasier, president and CEO of Potomac Bancshares and vice chairman of the Independent Community Bankers of America, told the House Committee on Small Business that the bureau’s Section 1071 rule will add substantial cost and administrative burden for community lenders and could reduce customized lending to small firms.
"There is over 81 different data decision points that we would need to collect and decide upon in evaluating or just taking the application," Frasier said, explaining how the rule would multiply reporting work across thousands of small loans.
Frasier said her bank handled more than 237 loans totaling about $140,000,000 in a recent two‑year period and that collecting and reporting 81 data elements per application would require substantial new technology or staffing. "The only way that that could be possible is to continue to evaluate technology and use of AI which then doesn't focus us on the conversations or building the relationships or giving the advice and counsel many small businesses need," she said.
The committee's chairman, who described the hearing as a priority for "Main Street America," said he introduced a repeal of Section 1071 to "Protect Small Business Lending Act" and asked witnesses how repeal would affect lending. Frasier testified it would preserve community banks' ability to underwrite customized loans tailored to small borrowers in rural and lower‑volume markets.
Frasier and other witnesses also urged tiered regulatory thresholds so that community banks are not regulated like the largest national institutions, and they asked members to consider the tax code's pass‑through deduction (Section 199A) and other provisions that support small‑business cash flow and bank lending.
Committee questioning included requests for concrete examples; Frasier offered the 81 data points as an illustrative burden and spoke to the risk that standardized data requirements could encourage lenders to commoditize loans rather than underwrite through local, relationship‑based assessments.
The discussion closed with requests from members that committee staff examine legislative options and the potential consequences for small borrower access to credit if reporting rules remain unchanged.