Congresswoman Nydia Velázquez, ranking Democratic member on the House Small Business Committee, has sent a letter to Director Cordray and Mary Jo White, SEC Chair, seeking information about the roles of the CFPB and SEC in regulating online lending to small businesses.
In her letter, Ms. Velázquez raises concerns that “small business consumers and retail investors that participate in the online lending market may face undue risks, and lack basic consumer protections, as a result of the current regulatory environment.” She references the Treasury Department’s July 2015 Request for Information (RFI) regarding marketplace lending. Among the RFI’s objectives is to help the Treasury Department become better informed about the impact of marketplace lending on small businesses.
Ms. Velázquez wants the CFPB and SEC to respond to five questions that ask (1) which federal laws under each agency’s jurisdiction apply to small business borrowers and investors participating in the online lending marketplace, (2) what is the current role of each agency in regulating or overseeing such marketplace, (3) what resources has each agency devoted to regulating such marketplace, (4) whether the agencies believe they have the necessary authority to protect small business borrowers and investors participating in the online lending marketplace, and (5) what statutory changes, additional legal authority, and resources are necessary to support the agencies’ roles in regulating online lending as it relates to small businesses.
We recently blogged about the CFPB’s apparent interest in small business lending and noted that the CFPB has authority to enforce some statutes that apply to small businesses, such as the ECOA and FCRA. We will be interested to see whether, in responding to Ms. Velázquez’s letter, the CFPB suggests that it has broader authority in the area of small business lending. If so, it may portend yet another attempt by the CFPB to aggressively test the limits of its jurisdiction. In August 2015, Ballard Spahr attorneys conducted a webinar: “Pushing the Envelope: Are There Limits to the CFPB’s Jurisdiction?” in which we discussed the CFPB’s continuing “jurisdiction creep” and explored the limits of the CFPB’s jurisdiction.
There has been growing pressure on the CFPB from lawmakers and consumer groups to expedite rulemaking to implement the small business lending data requirements of Dodd-Frank Section 1071. Section 1071 amended the ECOA to require financial institutions to collect and maintain certain data in connection with credit applications made by women- or minority-owned businesses and small businesses. Such data includes the race, sex, and ethnicity of the principal owners of the business.