Why sixteen years wasn’t long enough to meaningfully move the needle on small business lending reporting

A review of the final Dodd-Frank rule

The promise of better data and greater accountability

The small business lending market is extremely opaque. For example, decades of surveys and research has shown that minority-owned firms are approved for bank loans at significantly lower rates than their white-owned counterparts, are more likely to be discouraged from applying, and receive smaller loan amounts when they do obtain credit. 

America has never had a federal regulatory requirement to track whether small business credit is being distributed fairly or effectively. When a lender approves or denies a small business’ application for a loan or other credit product, there is no systematic requirement to record and report the identity of the applicant, the application type, the loan terms, or the reasons for denial. 

Congress attempted to ameliorate this issue in 2010 through the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) which directed the Consumer Financial Protection Bureau (CFPB) to adopt regulations governing the collection of small business lending data. The provision, known as Section 1071, amended the Equal Credit Opportunity Act (ECOA), requiring lenders to collect, maintain, and report information on who is applying for small business credit, who is getting it, and on what terms, with particular attention to women-owned and minority-owned firms. The idea was straightforward: you can’t improve access to capital you can’t measure — and you can’t identify which products and practices are actually reaching small businesses, including those in underserved segments, without the data to show it. 

As Louis Caditz-Peck, Executive Director of the Responsible Business Lending Coalition, explains: “If implemented well, Section 1071 would simply use transparency to reveal which products and practices are effective at reaching small businesses. That information would enable market forces to work, creating more of the lending that the data reveals to be successful at reaching small businesses that are not being well served.” 

The CFPB didn’t publish its first proposed rule until 2021. After receiving over 2,000 comments from interested stakeholders, its final rule was released in 2023, outlining a tiered compliance schedule based on loan volume, with the largest lenders required to begin collecting data as early as October 2024. 

Industry trade groups moved quickly to challenge the final rule in court. Lawsuits were filed in three jurisdictions, and each court temporarily suspended the rule’s compliance deadlines while the litigation played out, pushing the start date first to July 2025 and then again to at least July 2026. 

A final rule has been published, and leaves much to be desired

This month, the CFPB published its final revised rule, and while the regulation is now finally operative, its ability to achieve the initial goal of mandating reporting, increasing transparency, and improving data collection has been significantly curtailed.

The headline change is the coverage threshold. Lenders must now originate at least 1,000 small business loans annually to be subject to the rule, up from the original 100 loan threshold, shrinking the total number of covered lenders from roughly 2,400 to approximately 200, and leaving CDFIs, commercial finance companies, and merchant cash advance providers entirely outside the rule's reach. Critics have noted that the lenders now exempted are the ones whose lending to the small businesses where credit gaps are most acute — rural, minority-owned, and women-led firms operating in underserved communities — will now go entirely untracked.

The rule also narrows what will be collected. Loan pricing data is out. Denial reasons are out. Disaggregated race and ethnicity categories have been removed. Merchant cash advances have been excluded from coverage altogether. As Louis Caditz-Peck notes, “Unfortunately, the rule has been scaled back to the point we won’t see some of that benefit. And the scaled-back rule may even encourage higher-cost, less responsible funding.”

The CFPB’s stated rationale is that a narrower starting point will produce cleaner, more reliable data and minimize disruption to credit markets. Congressional Republicans on the House Financial Services Committee framed the earlier Biden-era version as a rule that would have “risked cutting off credit to the small businesses that need it most.”

The black hole created by the revisions

Consider this example of how wide the data gap already is. When we asked Federal Reserve researchers what their surveys show about how many small business credit cards require personal guarantees, the answer was around 10%. When we asked a major bank the same question, they told us that every single one of their small business credit card products requires a personal guarantee. Survey data is the best we have — and it’s profoundly unreliable. People often don’t know they’re personally guaranteeing their loans and surveys asking what prices they’re paying are notoriously inaccurate because borrowers don’t remember — especially on small business loans where prices aren’t disclosed transparently in the first place. This is a stark example of what happens when there is no reporting requirement, no standardized data collection, and no systematic way to know what terms borrowers are actually being offered.

Section 1071 was designed to improve equity in lending and enhance access to credit for small businesses, like the kinds of firms participating in Small Firm Diaries USA: those operating in low-income neighborhoods, predominantly minority-owned, operating in sectors with thin margins and limited collateral. In our sample, over 70% of owners are from minority communities, and nearly half report difficulty accessing credit when they need it. These are not firms borrowing from the largest banks at the highest volumes. They are borrowing (when they can) from community lenders, credit unions, CDFIs, and, increasingly, from non-bank lenders like merchant cash advance providers, that now fall entirely outside the rule’s reporting requirements. Merchant cash advance providers — which Senate leaders have described as “predatory” and that SBA representatives have called “extortionists” — are now entirely exempt from any reporting obligation.

But the CFPB’s rationale for the revisions raises a deeper question: data collection is only as valuable as the enforcement it enables. If the data that gets collected remains unused — if no enforcement action is taken and no policy intervention targets the gaps the numbers reveal — then the reporting requirement becomes little more than paperwork. And the removal of loan pricing data raises its own concern: if lenders are evaluated on approval rates without any visibility into the terms being offered, the path of least resistance is to approve more applicants, but at higher prices. The danger isn’t just what the final rule fails to collect; it’s that a weakened rule, left unenforced, normalizes the absence of accountability and risks deepening access issues among the communities the rule is designed to support.

Where does it leave us?

Section 1071 data, even in its narrowed form, will be genuinely valuable when it arrives; it will mark the first time the U.S. has had standardized, institution-level data on small business lending at national scale. But it will be a partial picture. Activity among smaller lenders, rural markets, and non-bank channels will remain largely invisible. And as the personal guarantee example above illustrates, even the data we do have is less reliable than it appears: survey respondents don't always know the terms of their own loans, and prices that aren't disclosed can't be accurately reported.

In a time when the infrastructure for understanding small business credit access is being intentionally narrowed, understanding what’s actually happening will increasingly rely on the work of researchers, practitioners, and the firms willing to tell their own stories. And it will require the kind of high-touch research that can go beyond surveys, collecting actual financing contracts, verifying the terms borrowers are being offered, and establishing what prices and conditions look like in practice, not just on paper. Small Firm Diaries USA is working toward this goal.