WASHINGTON—U.S. Senators John Boozman (R-AR) and Katie Britt (R-AL) introduced legislation in response to the finalization of the Biden administration’s Consumer Financial Protection Bureau (CFPB) 1071 Small Business Lending Data Collection rule requiring small business lenders to collect and report social data on small businesses seeking loans.

The senators’ Preventing Regulatory Overreach to Empower Communities to Thrive and Ensure Data privacy (PROTECTED) Act would shield small financial institutions and Main Street businesses from the burdensome compliance costs associated with the CFPB rule as well as limit the number of small businesses impacted and significantly reduce the amount of data required to be collected and reported.

“As the backbone of our economy, small businesses need access to capital. Identity-based data collection requirements handed down from Washington jeopardize lenders’ ability to provide vital investments and invite the federal government to pick winners and losers based on factors other than sound underwriting. Our legislation cuts this red tape for small and local financial institutions, including those trusted by farmers and rural communities, so they can focus on helping entrepreneurs and business owners launch or expand operations,” Boozman said. 

“The CFPB under the last administration operated virtually unchecked—with no real Congressional oversight—and in an authoritarian manner, creating a regulatory nightmare for the very people and businesses it was meant to protect,” said Britt. “The PROTECTED Act delivers much-needed regulatory relief for community banks, farm credit lenders, CDFIs, and equipment financers. Importantly, this legislation safeguards small businesses by limiting excessive data collection and protecting consumer privacy. I’m proud to lead this effort to provide critical changes to this harmful rule.”

“I will always advocate for small businesses across Alabama and our nation –– they’re the backbone of our country and what make our communities so unique — and our community banks play a pivotal role in providing these businesses with vital access to capital,” Britt continued. “This CFPB rule would have damaging downstream effects on our most rural and underserved communities. In the absence of a full repeal, this bill makes critical changes needed to ensure small lenders can continue to meet the needs of Main Street businesses.”

The Chairman of the House Financial Services Committee Rep. French Hill (AR-01) is leading similar legislation in the U.S. House of Representatives.

“America’s small businesses depend on affordable and accessible credit, and community banks play a crucial role in their success. The CFPB’s current approach under the 1071 rule restricts credit and places unfair burdens on our community banks. The PROTECTED Act provides a clear path forward for how the Bureau can revise the 1071 rule to best support small businesses while ensuring responsible lending. I thank Senator Britt and Senator Boozman for working with me on companion legislation to the Small LENDER Act to support policies that help small businesses grow and achieve success,” said Hill.

The PROTECTED Act also establishes critical safeguards to prevent the CFPB from publishing sensitive consumer data and requires the Bureau to conduct updated cost-benefit analyses prior to the rule’s implementation. Its effective date would be three years after the completion of these updated analyses and publication in the Federal Register, followed by a two-year grace period. 

Boozman has pushed back against the regulation, designed to implement Sec. 1071 of the Dodd-Frank Act, and CFPB’s implementation that attempts to pick small business winners and losers based on social factors. The senator also supported a Congressional Review Act resolution to reverse the Biden-era CFPB rule.