Congress Repeals Controversial Small Business Lending Rule, Setting Up Biden Veto

Republicans have derided the rule as a ‘woke’ attempt of the Biden administration to politicize lending.
Congress Repeals Controversial Small Business Lending Rule, Setting Up Biden Veto
The Consumer Financial Protection Bureau building in Washington on Oct. 31, 2023. (Madalina Vasiliu/The Epoch Times)
Samantha Flom
12/1/2023
Updated:
12/1/2023
0:00

A joint resolution signaling Congress’s disapproval of a new Consumer Financial Protection Bureau (CFPB) lending rule cleared its last congressional hurdle on Nov. 30 with its passage in the House in a 220–201 vote.

Having already passed the Senate, the measure will now head to President Joe Biden’s desk, where it is likely to be vetoed.

If enacted, S.J. Res. 32 would repeal the controversial rule, which requires lenders to annually collect and report to the CFPB certain credit application data, including personal demographics, from the small business owners they lend to. The rule also facilitates the creation of a publicly accessible database of small business credit applications.

Republicans balked at the inclusion of such categories as sexual orientation and gender identity on the list of demographics to be reported, finding the requirement to be intrusive.

“It is none of their business—none of their business—what a private American does with another private, adult American in the privacy of their bedroom,” said Sen. John Kennedy (R-La.), the resolution’s sponsor, during an impassioned Oct. 18 speech on the Senate floor.

“We are free—as long as it doesn’t break any laws—to express our sexuality however we want to, and it’s none of the CFPB’s business!”

The CFPB’s reasoning for collecting such information—increasing opportunities for minority-owned businesses—was also criticized by Republicans, who accused the agency of politicizing the lending process.

“Creditworthiness has nothing to do with the left’s obsession with ESG [Environmental, social, and governance], despite the CFPB’s insistence otherwise,” Sen. Kevin Cramer (R-N.D.) said in a statement. “Government-mandated politicization of lending is wildly inappropriate and invasive, and North Dakota’s financial institutions deserve better than this federal overreach.”
Further, in light of a recent CFPB data breach affecting 256,000 consumers, the potential exposure of business owners’ sensitive information in a publicly available database was also a cited concern.

“It’s not like the CFPB is exactly a wizard when it comes to data security,” Mr. Kennedy said.

The Louisiana senator’s resolution received the backing of the National Federation of Independent Business (NFIB), which said the new lending rule would add “time-consuming paperwork burdens” for both small businesses and the small banks they borrow from.

According to an NFIB survey, 67 percent of all of the organization’s members use a small or regional financial institution for their credit needs, and 17 percent use a medium-sized institution.
“NFIB is concerned that the rule will be onerous for the small businesses applying for credit and for the small financial institutions that lend to small businesses,” NFIB Senior Vice President of Advocacy Adam Temple said in a Nov. 30 statement. “We strongly support this legislation and are hopeful that Congress will take action to alleviate the government burdens placed on the small business community.”
The White House, however, defended the CFPB’s rule in an Oct. 18 statement of administration policy, stating that it would provide the public with “critical information” about the small business financing market and help to “close the most acute gaps in capital access” for women- and minority-owned businesses.

The administration added that it “strongly opposes” the joint resolution and that the measure would be dead on arrival on the president’s desk.

“If enacted, this resolution would harm all those that stand to benefit from this expanded transparency and accountability. Small businesses are the engines of our economy, and this Administration will not support policies that hurt their ability to thrive and grow.”

A veto override would require two-thirds majority votes in both the House and Senate—an unlikely feat given the resolution’s failure to reach that threshold in either chamber the first time around.