Update: RATA's Implementation of the new 1071 Small Business Lending Regulation

As announced previously, RATA is in the process of adding a new component to Comply 23 for Small Business Lending (SBL 1071). The SBL component will be very similar to the current HMDA/CRA components, as you can see from the screenshots below, and will be made available to all RATA customers to explore and test at no charge through June 2024. It will be released in phases to allow reasonable development and quality assurance time for our staff, as well as allow customers to begin testing, when they are ready. The Fall release will contain the basics for importing, data processing, and phase 1 of the edit checks. The edit checks are constantly evolving and usually change up until submission time. Everything but the actual submission should be contained in our Fall release. Submission capabilities will be added closer to submission dates for clients that purchase the new component.

You can order the product at any time, and will only begin paying for the year you need to officially begin collecting data for submission. In the meantime, you can continue to use and test the software at no charge. So if you are a large submitter that needs to collect the 2024 data you will pay for the full 2024 year, and so on. RATA will not be pro-rating the component on any volume categories.

The CFPB has taken a phased approach to the implementation of this new rule in that larger lenders are required to collect and report the data earlier than smaller lenders. Below are the guidelines:

We previously sent an inquiry to the CFPB regarding inconsistencies we noticed, some of which have been resolved. Below are our questions, their responses in italics, and the resolution (if applicable) in bold:

• Why does the UID not follow the full specification of the ULI in HMDA, you are leaving off the check digit, for what purpose?
• Upon analysis, the check digit was determined to be not as useful in inclusion with the ULI. However, it is worth it to note that the length of the UID is the same length as the ULI for HMDA.
• Are purchased Small Business Loans not reportable, as Action Type 6 is missing?
• This is correct, purchased loans are not included in Small Business Loan Data Collection.
• Are the "Edit Checks" truly not numbered? In CRA and HMDA edits follow a standardized structure V### and Q###; in SBL there are seemingly no edit numbers and you have opted to change to Errors and Warnings verses the Validity and Quality which people are used to.
• The edit checks are not numbered in the SBL FIG, but we will take this suggestion to our team.(In the latest FIG, there are now edit numbers.)
• Why are you re-arranging the Ethnicity field values (example: in HMDA Ethnicity 11 is Mexican, 12 is Puerto Rican and 13 is Cuban, in SBL these are all switched around as 11 is Cuban, 12 is Mexican and 13 is Puerto Rican). The same applies for Race (example: in HMDA 41 is Native Hawaiian and 42 is Guamanian or Chamorro, whereas is SBL 41 is Guamanian or Chamorro and 42 is Native Hawaiian). These codes have an established following, why would you deviate from established norms?
• Thank you for your feedback, we will take this to our team as a suggestion for future iterations.(In the latest FIG, the race and ethnicity codes now match HMDA.)

If you decide to move forward with the Comply SBL component, please contact Angela at als@RATAassociates.com to get the order form completed for your institution. We will continue to update you if we learn anything new. If you have any questions or comments feel free to contact us at support@rataassociates.com or 407-831-7282.

RATA's Implementation Plans for the new Small Business Lending (SBL) Regulation

4/4/2023

On March 30, 2023, the CFPB released the finalized rule to create the new data set on Small Business Lending (SBL) in America. Required institutions that originate at least 2,500 small business loans annually will be required to collect this data starting October 1, 2024. For smaller required lenders originating 500 loans or 100 loans annually, the dates to start collecting are April 1, 2025 and January 1, 2026, respectively.

RATA is currently reviewing the specifications and will be offering a new component in Comply to fulfill this rule. The new component will have similar functionality to the current HMDA and CRA components, and will be released in phases to allow reasonable time for development, allowing customers to become acquainted with the component and begin testing if they are so inclined. We should have the basics for data collection and importing contained in our fall release (September/October timeframe), then the edits and submission functionality shortly afterward.

Understandably there are differences between the SBL data collection versus HMDA and CRA, notably:

• Instead of using NA values for any of the fields, they've opted to use 3-digit codes in the 900s.
• Various data points are simply a flag for a field, while there is a separate field for the actual value. One example of this is the Loan Term. There is a flag field where 900 = Applicable and reported, 988 = Applicable but not provided by applicant and otherwise undetermined, and 999 = Not applicable. Then there is an actual Loan Term field where you enter the numerical term.
• A handful of fields can contain multiple values separated by a semicolon (;): denial reasons, ethnicities, and races.
• There were also items that didn't seem consistent, and we've already sent an inquiry to the CFPB regarding these:
• Why did you opt to use a UID (with no check digit) versus the ULI (with a check digit) as is already used for HMDA?
• Is it an oversight that there is not an Action Taken code of 6 for purchased loans like in HMDA and CRA?
• Will the data validations (errors and warnings) have numbers assigned to them?
• Will the errors and warnings be labeled as Validity and Quality edits like in HMDA and CRA?
• Some of the ethnicity and race sub-category codes are switched around as compared to HMDA. In HMDA the ethnicities are 11-Mexican, 12-Puerto Rican, and 13-Cuban, but in SBL they are 11-Cuban, 12-Mexican, and 13-Puerto Rican. In HMDA the races are 41-Native Hawaiian and 42-Guamanian or Chamorro, but in SBL they are 41- Guamanian or Chamorro and 42-Native Hawaiian.

To simply explain the difference between SBL and CRA: SBL data concerns any size of loan to a small business, whereas CRA data concerns small loans to any size of business or farm. We expect that there could be some crossover where a loan will meet both SBL and CRA requirements, and in that case, will need to be reported/submitted in each component separately.

If you need a price quote for this new component for budget purposes, please send an email to sales@rataassociates.com or call 407-831-7282 Ext. 200.

We will continue to update you if we learn anything new. If you have any questions or comments feel free to contact us at support@rataassociates.com or 407-831-7282.