S-2352-119
Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
Sponsored by Katie Britt (R-AL)
What it does
This bill would amend Section 704B of the Equal Credit Opportunity Act (ECOA), which requires lenders to collect and report demographic data on small business loan applicants. It would narrow which lenders must comply (excluding institutions with under $10 billion in assets, Farm Credit System lenders, community development financial institutions, and equipment/vehicle lenders), prohibit lenders from recording demographic data they observe visually rather than data applicants self-report, bar regulators from penalizing lenders based on how many applicants choose to provide demographic information, and delay enforcement for two years after a new effective date that itself is tied to completion of required regulatory cost-benefit analyses.
Who benefits
Large banks and lenders with $10 billion or more in assets that would face reduced compliance burdens. Community banks, credit unions, and smaller lenders (under $10 billion in assets) that would be fully exempted from the data collection requirement. Farm Credit System institutions and community development financial institutions (CDFIs) that would be explicitly excluded. Equipment and vehicle financing lenders. Small businesses whose demographic information would no longer be recorded without their explicit consent. Lenders concerned about liability from low applicant response rates.
Who is hurt
Civil rights and fair lending advocacy organizations that rely on small business loan data to identify potential discrimination patterns. Federal regulators — particularly the Consumer Financial Protection Bureau (CFPB) — whose enforcement tools and data resources would be reduced. Researchers and policymakers who use ECOA Section 704B data to study credit access disparities. Small business owners from minority or women-owned businesses who may have fewer data-driven tools to document unequal lending treatment. Competitors of large lenders who remain subject to the rule while smaller lenders are exempted.
Supporters argue
Supporters argue that the CFPB's existing Section 1071 rule — which implements Section 704B — imposes significant compliance costs on lenders without commensurate public benefit, and that the rule's data collection methods, including visual observation of race and ethnicity, raise serious privacy concerns for applicants. They contend that prohibiting lenders from guessing applicants' demographics and ensuring applicants know their responses are voluntary strengthens individual privacy rights, and that exempting smaller institutions protects community lenders from regulatory burdens that could reduce their capacity to serve local small businesses.
Opponents argue
Opponents argue that Section 704B was enacted specifically to detect and deter discriminatory lending practices against small businesses owned by women and minorities, and that narrowing the rule's scope — particularly by exempting lenders under $10 billion in assets, which originate a large share of small business loans — would leave the majority of the small business lending market unmonitored. They contend that prohibiting response-rate compliance metrics removes a key enforcement mechanism, and that delaying implementation further extends a period during which potential lending discrimination goes undetected and undocumented.
Constitutional context
The bill modifies a federal statute regulating credit markets, which falls squarely within Congress's Commerce Clause authority (Art. I, §8, cl. 3). The bill also adds a rulemaking requirement before the CFPB may modify or delete collected data, which touches on agency authority questions. Under Loper Bright v. Raimondo (2024), courts now independently review whether agency rules — including any future CFPB rules implementing this amended statute — are authorized by the statutory text, which could affect how courts evaluate CFPB enforcement actions under the revised framework.
Checks and balances
Congress would narrow the CFPB's enforcement authority and data collection mandate; the CFPB retains rulemaking power but must complete formal cost-benefit analyses and notice-and-comment rulemaking before modifying data, and courts would independently review agency interpretations under the post-Loper Bright standard.
Historical precedent
The CFPB finalized its Section 1071 small business lending data rule in March 2023, implementing the Section 704B mandate added by the Dodd-Frank Act (2010); that rule has faced multiple legal challenges, including a stay issued by a federal court in 2023, making it one of the most actively contested CFPB rulemakings in recent years.