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Best Practices

Your Section 1071 Resource

Section 1071 of the Dodd-Frank Act goes by many names: Commercial HMDA. Business HMDA. HMDA for small business. Dodd-Frank 1071. CFPB 1071. Small business lending data collection. 

See the two resources below to get prepared.

Download the FAQ

Section 1071 FAQ

Ncontracts' regulatory experts answer the most frequently asked questions about 1071.

Watch the Webinar

Section 1071 Compliance

What Does the Final Rule Mean for Small Business Lenders Like You? 

Watch our regulatory compliance experts take a deep dive into Section 1071 in our webinar, now on-demand.

How to Prepare Your Financial Institution for 1071

Here are some things your bank, credit union, mortgage company or fintech can do to be ready.

Conduct an impact analysis.

While we don’t know all the details of 1071, you should be able to conduct an impact analysis to determine what resources your institution will require to adopt the rule. 

Think about which areas of your institution will need to be involved. This may include:

  • Data collection/IT resources
  • Training the first line (this includes loan officers who will be collecting government monitoring information (GMI) required data) 
  • Second line testing 
  • Compliance 
  • Audit 
  • Vendor management 

This will help your institution understand the scope of what’s required and allocate resources accordingly. 

Create a commercial loan application.

Commercial lenders don’t necessarily have a standard application for small business loans. That makes it hard to collect the required information. Create a standard application that collects the anticipated data fields and start training commercial lenders to use it. 

The CFPB has a sample data collection form that can be used as a starting point, but your institution will want to take the time to customize it.

Create a commercial loan application process.

When is an application opened? It’s a simple question, but many lenders don’t have a clearcut answer. Create an official definition for application date as part of your documented loan application process.

Document underwriting guidelines.

Similarly situated applicants need to be treated the same. That includes pricing and terms. Make sure your document your underwriting guidelines – including your exception policy. Creativity is an asset for a commercial lender, but it’s a problem when that customization results in disparate treatment.

Consider how you’ll collect commercial loan data.

If you don’t have a commercial loan application, it’s very likely you’re not collecting the type of data the CFPB will be requiring.  

Now is the time to start thinking about how your institution will collect the small business data required by 1071.

Preemptively analyze any commercial loan data you collect.

If you’re one of the few small business lenders that already collects the demographic data the CFPB will require you to report on, you’re ahead of the game.   

Stay that way by conducting a fair lending analysis of that data. Slice and dice denial reasons. Determine if similarly situated businesses are receiving similar pricing. The government, press, and consumer groups will be using this data to assess your lending patterns. Use the advantage of time to identify those patterns yourself, decide if anything in your program is problematic, and proactively correct your policies, procedures, and other controls. You need to be prepared to tell your story.  

If you don’t already have fair lending analytics software, you’ll need it. Ask any HMDA reporter – it’s impossible to analyze this data manually. 

Want to talk about how we can help you with 1071?