Woodstock Institute Pushes for Fairness in Small Business Lending

Illinois Consumer Advocacy Group Responds to CFPB Proposal

In response to proposed rules on small business lending issued by the Consumer Financial Protection Bureau (CFPB), Chicago-based Woodstock Institute released a comment letter calling for fairness in data collection.

In their letter, Woodstock outlined some key concerns with the current process of data collection relative to Section 1071 of the Dodd-Frank Act.

Specifically, Woodstock highlighted the following needs relative to small business lending:

• Collect and reporting credit score data: The CFPB already collects this data in the mortgage context and has found that: “Black and Hispanic White applicants are on average denied at a higher rate than non-Hispanic White applicants, even if they are within the same credit score range.” Failing to collect credit score data will enable small business lenders, as they do now, to hide behind the fact that we don’t know the credit scores.
• Stop collecting race, ethnicity, and gender data based on the lender’s visual observation: This is unreliable and raises equity concerns. If an applicant selects “do not wish to answer” for a race/ethnicity/gender question, but then the lender makes an assumption and essentially answers for the applicant, that is taking away the agency of the applicant and overriding their reasons for declining to answer.