California groups sue CFPB for shirking Dodd-Frank data collections

Dodd-Frank requires the CFPB to collect this data from financial institutions and make it publicly available to facilitate enforcement of fair lending laws to curb lending discrimination. Congress further mandated that the CFPB issue rules to implement this data collection.

“Yet, in 2018, without any explanation, then-Acting Director Mick Mulvaney unlawfully halted the required rulemaking process and Director Kathy Kraninger has taken no meaningful steps to remedy this failure,” the groups said in a statement. “The lack of data frustrates the ability of small businesses and organizations to detect and address obstacles women-owned, minority-owned, and small businesses face to obtaining credit.”

“Since Dodd-Frank was enacted nearly a decade ago, small-business borrowers have been waiting for the CFPB to fulfill its mandate to collect and disclose lending data, especially on loans made to women and people of color,” CRC Executive Director Paulina Gonzalez-Brito said in a statement. “Under two Trump-appointed directors, the Bureau has failed to move forward on its obligation to implement the law. Small business is the engine of growth for our economy. Identifying discriminatory lending practices is critical to ending the racial wealth gap and economic disparities.”

Between 2017 and 2018, women started an average of 1,821 new businesses per day in the United States, and the number of businesses owned by people of color has grown by 79 percent between 2007 and 2017.

Yet, as the CFPB has acknowledged, current data “is inadequate to fully understand, let alone remedy, the extent to which discriminatory lending creates credit deserts for small businesses and businesses owned by women and minorities,” the lawsuit claims.

Section 1071 of the Dodd-Frank Act was designed to fill this gap by requiring financial institutions to maintain and disclose data about their actions on loan applications by women-owned, minority-owned, and small businesses. Congress required the CFPB to make such data publicly available, which would help organizations like the CRC and its members identify and address gaps in credit access.

“By failing to implement Section 1071 of Dodd-Frank, the CFPB has unlawfully withheld and unreasonably delayed agency action, violating the Administrative Procedure Act,” the groups wrote.

“The Trump administration is actively defying a law specifically designed to expose discriminatory lending practices by financial institutions, while small businesses, women- and minority-owned businesses, and the communities they support are harmed in the process,” said Democracy Forward Executive Director Anne Harkavy.

The suit was filed May 14, 2019, in the U.S. District Court for the Northern District of California.

The CRC “builds an inclusive and fair economy that meets the needs of communities of color and low-income communities by ensuring that banks and other corporations invest and conduct business in those communities.”