Navigating Section 1071
of the Dodd-Frank Act

A Comprehensive Guide to the Small Business Lending Rule for Financial Institutions

Are you ready for the 1071 Small Business Lending Rule? We can help. Let's Talk

Stay informed and stay ahead.

Discover the impact of the CFPB Small Business Lending Rule (Section 1071) on your financial institution. This comprehensive guide equips you with the insights and information necessary to ensure compliance with the ruling.

In the ever-evolving landscape of financial regulation, staying informed and compliant is paramount for any financial institution. One of the latest and most significant regulations to affect the sector is the Small Business Lending Rule, also known as Section 1071 of the Dodd-Frank Act. The final ruling, announced on March 30, 2023 by the Consumer Financial Protection Bureau (CFPB), impacts all financial institutions, particularly those focusing on small business lending.

At Baker Hill, we’ve been listening to the CFPB and our clients to not only understand the impact of the Small Business Lending Rule on financial institutions but also be prepared to help them collect the data they need to comply with the ruling prior to the reporting timelines. This guide includes insights and resources financial institutions need in order to be prepared for compliance with the Small Business Lending Rule (Section 1071).

The role of the CFPB

The Consumer Financial Protection Bureau is an integral agency in the United States' financial sector. Its vision is to create a consumer finance marketplace that benefits American consumers, responsible providers, and the economy as a whole. The CFPB's primary responsibility is to enforce federal consumer financial laws and ensure fair, transparent, and competitive markets for consumer financial products.

Additionally, the CFPB provides invaluable educational materials and handles consumer complaints. Its role in resolving customer issues is crucial to relationship banking and maintaining consumer trust. The CFPB also plays an important role in providing consumer education, creating clear rules for financial institutions, and taking action against marketplace malpractices.

Understanding Covered Financial Institutions

Under Section 1071 of the Dodd-Frank Act, a covered financial institution is defined as an entity that originated at least 100 covered originations for small businesses loans in each of the two preceding calendar years.  This provision aims to promote transparency and fair lending practices within the financial industry.

It's important to note that certain "covered credit transactions" are excluded from the scope of this ruling. For instance, HMDA reportable transactions, which are subject to separate reporting requirements, are not considered covered originations under Section 1071. Additionally, insurance premium financing and securities credit are also exempted from the requirements of this section.

By providing clarity on the definition of covered financial institutions and specifying the exclusions, the Section 1071 Small Business Lending Rule seeks to enhance the accuracy and comprehensiveness of data collection related to small business lending, ultimately promoting better access to credit for entrepreneurs and small business owners.


The CFPB made their final ruling on the Small Business Lending Rule to have a positive impact on small business lending without being a burden on financial institutions. Reporting compliance timelines are based on the number of covered lending transactions in the last two years.

Keep reading to learn when your financial institution will need to be prepared.

In banking, compliance is a full-time job. Recently, the Consumer Financial Protection Bureau (CFPB) issued a final rule to implement Section 1071 of the Dodd-Frank Act. This section requires financial institutions to collect and report certain data on credit applications from small businesses, including women- or minority-owned ones.

This regulation goes beyond data collection, aiming to ensure fair lending and address the needs of women-owned, minority-owned, and other small businesses. Preparation will be crucial for financial institutions, and this blog will outlinethe "do's" to make sure your institution is ready.

Read the Blog

Compliance Timeline

The compliance timeline holds significant importance for most financial institutions. According to the regulations, the first year of data should be collected starting October 1, 2024 and reported to the CFPB by June 1, 2025, if the institution has at least 2500 covered originations in both 2022 and 2023. However, for institutions with at least 100 covered originations in two consecutive years, the timeline extends to January 1, 2026 to collect data and to June 1, 2027 for reporting. It is crucial for financial institutions to adhere to these reporting deadlines to ensure compliance and transparency in their operations. By providing accurate and timely data, institutions can contribute to the overall integrity and effectiveness of the regulatory framework.

View the image to the right taken from the CPFB Compliance Date Infosheet at to see the reporting compliance timeline for your financial institution.

CFPB Reporting Timelines

The CFPB provided documentation regarding compliance dates for the Small Business Lending Rule. Click below to download their documentation to learn about compliance timelines for your financial institution.

Read More

Firewall Ruling

The firewall rule, established to protect the privacy and security of applicants' demographic data, prohibits employees or officers of covered financial institutions from accessing such information if they are involved in making determinations about the corresponding applications. This rule, although crucial in safeguarding sensitive data, presents considerable challenges for smaller institutions with limited staff in their credit processes. As a result, these institutions must implement clear and effective procedures to ensure compliance with the rule while maintaining operational efficiency.

Person using laptop with cloud icon

The Four “Don’ts” of Section 1071 and How They Will Help Your Bank

There is a lot to take in when you look at the Small Business Lending Rule, and it can be overwhelming. At Baker Hill we are working alongside the CFPB, banks and credit unions within our User Community, and other leaders in the fintech ecosystem to ensure that when the time comes to collect and report, you can have confidence in your submission.

Read the Blog

Data collection requirements

Under the Small Business Lending Rule (Section 1071), financial institutions are required to establish and maintain robust procedures for the identification and handling of potential discouragement and low response rates. These procedures are designed to ensure that applicants have the necessary means and ease to promptly respond to requests for applicant-provided data. As a result, institutions will need to carefully consider and evaluate their existing data collection processes, documentation practices, administrative requirements, firewall procedures, and change management protocols to fully comply with the final ruling within the specified deadline. By doing so, financial institutions can effectively meet the regulatory requirements and uphold the integrity of their data management practices.

Preparing for the Compliance Deadline

Section 1071 of the Dodd-Frank Act is a comprehensive 885-page document that holds significant implications for financial institutions, their council, and compliance departments. The Small Business Lending Rule mandates a deep understanding and proactive implementation of processes and procedures within banks or credit unions. This pivotal ruling serves as an indispensable cornerstone in the regulatory landscape, affecting not only financial institutions but also software companies that provide support in streamlining the lending process. Its intricate requirements necessitate meticulous attention and diligent adherence, ensuring compliance and fostering a robust financial system.

Baker Hill has been partnering with the CFPB and our clients to understand the impact of the Small Business Lending Rule on financial institutions and be prepared to help them collect the data they need to comply with the ruling prior to the reporting timelines. Learn more about how we're supporting complaince with the Section 1071 Small Business Lending Rule by helping banks and credit unions gather, process, and report on the necessary data.

For additional information on the entire final ruling, along with tools, please visit the CFPB website dedicated to the 1071 rule.

By understanding and diligently preparing for these changes, your institution can navigate this new regulatory chapter effectively and continue to provide excellent service to your customers.

Remember, we're all in this together – let's embrace these changes as opportunities to improve, grow, evolve and prosper in the world of finance.

Additional Resources on the 1071 Small Business Lending Rule

Simplify Compliance with the CFPB's Final Ruling

Discover Baker Hill's comprehensive solution for financial institutions, designed to help you adapt to evolving regulations like the CFPB's  Section 1071 Small Business Lending Rule. Ensure compliance and streamline processes with the loan origination system puprosefully built for the needs of banks and credit unions.

Learn More

Are you ready for the 1071 Small Business Lending Rule? We can help. Let's Talk

Baker Hill Logo

Baker Hill is in the business of evolving loan origination by combining expertise in technology with expertise in banking. Baker Hill NextGen® is built on decades of walking alongside banks and credit unions as they provide vital resources to their communities. A configurable, single platform SaaS solution for commercial, small business, consumer loan origination and risk management that grows along with you as your business needs change, Baker Hill is lending evolved.

Learn how Baker Hill can support your compliance with the CFPB Section 1071 Small Business Lending Rule.

Let's Talk