The regulatory trajectory for Section 1071 of the Dodd-Frank Act has reached a new and significant inflection point. The US Consumer Financial Protection Bureau (CFPB) has issued a proposed rule signaling a fundamental shift toward a scaled-back, incremental implementation of the small business lending data collection mandate. Released on November 13, 2025, this proposal reflects a pragmatic response to industry concerns; the CFPB’s decision to narrow the scope is viewed as a necessary act of regulatory prudence to prevent market disruption, with the public comment period set to close on December 15, 2025.
Legal challenges
The contentious history of Section 1071 dates back to the Dodd-Frank Act, which amended the Equal Credit Opportunity Act or ECOA, to mandate data collection on credit applications from women-owned, minority-owned, and small businesses for fair lending enforcement. When the CFPB finalized the rule in March 2023, requiring 20+ data points for each covered credit transaction, it faced stiff resistance and legal challenges over its burdensome scope and, critically, the CFPB's unique constitutional funding structure. The subsequent nationwide stay on compliance created acute uncertainty until the U.S. Supreme Court ruled the funding constitutional in May 2024, thus clearing the legal barrier for the CFPB to proceed with the current, significantly revised proposed rule.
Revised scope of the rule
The revised proposal significantly narrows the rule's coverage (who must report, what they report on, and which businesses count) to focus on data quality and reduced market disruption:
Reporting threshold: The volume threshold for covered financial institutions is proposed to be raised tenfold from 100 to 1,000 covered originations in each of the two preceding calendar years. This exempts most community institutions.
Small business definition: The gross annual revenue threshold defining a "small business" for reporting purposes is proposed to be reduced from USD 5 million or less to USD 1 million or less.
Transactional exclusions: The proposal excludes Merchant Cash Advances, agricultural lending, and small-dollar credit transactions of USD 1,000 or less from the definition of a covered transaction.
Removal of data points: The rule eliminates five discretionary, non-statutory data points—application method, application recipient, denial reasons for application, number of workers employed by the business, LGBTQI+-owned business status, and pricing information (like interest rate; origination charges; broker fees; the non-interest charges imposed in first annual period; applicable prepayment penalties).
Institutional exemption: Farm Credit System lenders are explicitly proposed to be exempt from the entire rule.
Key changes in proposed timelines
The proposal eliminates the complex, multi-tiered compliance schedule from the 2023 final rule and replaces it with a single, later deadline for all covered institutions:
Earliest compliance date: The proposed uniform compliance deadline for all covered institutions is January 01, 2028, which is significantly later than the earliest original Tier one date of October 01, 2024.
First filing deadline: The first submission of collected data would be due on June 01, 2029, covering the data collected during the calendar year 2028.
Applicable originations for coverage: Coverage is based solely on originations of 1000 or more in the two preceding years, departing from the previous lowest threshold of one hundred.
Way forward
The CFPB's decision to drastically narrow the scope of the Section 1071 rule is a strategic regulatory concession, providing clarity and a substantial time buffer for the lending industry. This January 01, 2028 compliance deadline should not be thought of as a delay but rather as a definitive window for preparation.
For high-volume institutions, the mandate now is to move past reactive compliance. Leveraging this extended period to align core digital lending platforms—ensuring new threshold filters and streamlined data requirements are accurately integrated—will transform this regulatory obligation into a core operational strength. Ultimately, those who treat this as an opportunity to optimize their lending data quality and digital customer experience will emerge with a clear competitive advantage.
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