Small Business Lending Rules for Section 1071 of the Dodd-Frank Act

CMS reviews help financial institutions identify gaps in their compliance risk management framework. Each review is unique and can focus on a single law or regulation, or expanded to provide an over-arching assessment across all legal and regulatory requirements.

Wolters Kluwer can provide an overview of a covered institution’s small business and small farm lending activity in low- and moderate-income areas and to small businesses and small farms by Gross Annual Revenue at the assessment area level for each assessment area(s).

Wolters Kluwer will identify census tracts within a covered institution’s assessment area(s) that have little to no small business or small farm loan activity. The tracts without activity will be listed, including key demographics, assisting covered institutions with understanding census tracts with additional opportunity to lend.

Wolters Kluwer can create a visual representation of a covered institution’s assessment area(s). Maps can be created highlighting census tracts with a 50% and higher minority population, those census tracts designated at low- or moderate-income. Maps are often used in conjunction with Over/Under Tables and No Activity Reports.

Utilizing Wolters Kluwer proprietary software, small business and farm data can be batch geocoded to assist covered institutions understand lending by geography that will be subject to Section 1071 using State, MSA, County, Census Tract, and tract income level per transaction. This exercise may be extremely helpful for financial institutions that would like to know how to best comply with the “waterfall” approach for geocoding as set forth in Section 1071.

Wolters Kluwer will review the covered institution’s (pre-Section 1071) small business and/or small farm data to identify statistically significant disparities in raw and reported data relative to proxy demographic data, identifying disparate treatment by protected class and potential redlining risks. This exercise will be crucial for covered institutions wanting to better understand what their lending tells them before they file their first record under Section 1071.