A new report in The Wall Street Journal published Thursday (Aug. 27) is raising some questions about the data collection practices regarding small business lending – mainly, that there is little data collection actually going on.
According to the report, a lack of information aggregation among SME finance companies is preventing stronger insight into how small businesses are borrowing, which, in turn, can offer greater visibility into the health of the economy overall.
The 2010 Dodd-Frank Act requires such data collection efforts among lenders. However, the Consumer Financial Protection Bureau has yet to create the rule that enforces such data aggregation. Reports said lenders already collect and report information on mortgage borrowers. But that same data is few and far between for entrepreneurs and small business borrowers.
“Small businesses are vital to the continued recovery of our economy as important engines of job creation and neighborhood prosperity,” National Community Reinvestment Coalition President John Taylor said in an interview with the WSJ. “The existing data is clear: It is very difficult for small businesses, including those owned by women and people of color, to get access to small-business loans from banks.”
Taylor is spearheading a campaign to get the CFPB to establish this data collecting rule, arguing that without it, this lack of information is preventing women and minorities from more easily obtaining SME finance, and hampering economic growth.
Reports said that Taylor is joined by 84 Democrats in the House of Representatives who sent a letter to CFPB Director Richard Cordray last week, urging him to implement the data collection requirement. Cordray had told lawmakers earlier this year that the CFPB would focus on implementing this rule after similar guidelines were established for data collection in the mortgage lending space.
“Analyzing access to credit and removing barriers to small-business creation becomes imperative when considering the significant role of small business on job creation,” the lawmakers wrote to the CFPB, according to reports.