The House votes to eliminate ‘woke’ small business lending rule, setting up Biden veto
The House Votes to Cancel Rule Collecting Data on Small Business Owners
The House of Representatives voted on Friday to cancel an administration rule that requires banks to collect personal data on small business owners when they apply for a loan. Republican critics argue that this rule is an invasion of privacy and has been labeled as “woke.”
The resolution passed with a vote of 221-202, with six Democrats joining Republicans in supporting the rollback. However, President Joe Biden has stated that he would veto the measure, despite it already receiving bipartisan support in the Democratic-controlled Senate.
Stopping the Implementation of Dodd-Frank Act
This legislation aims to halt the implementation of a section of the Dodd-Frank Act by the Consumer Financial Protection Bureau (CFPB). The rule in question requires financial institutions to collect and report personal information to the CFPB on small businesses applying for credit, including those owned by women or minorities. Republicans argue that this measure is burdensome and intrusive, hence the “woke” label.
Senator John Kennedy (R-LA) led the effort to cancel the CFPB’s implementation of the rule using the Congressional Review Act, which allows Congress to vote down administrative rules through an expedited process.
Republicans and some centrist Democrats believe that the CFPB’s push for more disclosures about small business owners, some of which would be made public, would create unnecessary burdens for small businesses.
Data Collection and Veto Threat
The CFPB rule seeks to collect data on the race, ethnicity, gender, and minority, women, or LGBTQ+ ownership of small businesses. The White House argues that this rule provides “critical information” about the small business financing market, benefiting small business owners, lenders, and the public.
However, the White House has vowed that President Biden will veto the rollback, stating that it would hinder efforts to promote transparency and accountability in small business lending. They believe it would create obstacles for mission-driven lenders and community organizations striving to address capital access gaps for minority- and women-owned businesses.
Privacy Concerns and Previous Republican Actions
The CFPB rule applies to financial institutions that have provided 100 or more small business loans in each of the past two calendar years. A small business, within the context of this rule, is defined as a company with $5 million or less in revenue.
During a hearing earlier this year, Senator Kennedy raised privacy concerns with CFPB Director Rohit Chopra, questioning why personal details such as sexual preference are necessary when a small business owner applies for a loan.
Republicans have previously used their Congressional Review Act authority to challenge the Biden administration’s rulemaking, resulting in presidential vetoes. One example is the cancellation of a Labor Department rule allowing retirement plan managers to consider environmental and social issues when making investments, which led to President Biden’s first veto.
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What criticisms do critics of the rule have regarding the redundancy of data collection and its impact on paperwork and bureaucracy
Ican opponents of the rule argue that it is a clear violation of privacy rights and unnecessarily expands the reach of the federal government into the affairs of small businesses. They claim that the collection of personal data on small business owners is not relevant to determining creditworthiness and is an unfair burden on both lenders and borrowers.
Supporters of the rule, however, argue that it is necessary to address the issue of financial discrimination against women and minority-owned businesses. They believe that collecting data on the race and gender of business owners will allow for the identification of discriminatory lending practices and the implementation of corrective measures.
Critics of the rule also point out that the data collection requirement is redundant, as banks already collect information on small business borrowers as part of the normal loan application process. They argue that the additional requirement imposed by the rule creates unnecessary paperwork and bureaucracy for both small business owners and financial institutions.
The decision to cancel the rule has generated a heated debate in Congress and among industry experts. Those in favor of the cancellation argue that it is a necessary step to protect the privacy of small business owners and to reduce the burden of unnecessary regulations on lenders.
On the other hand, opponents of the cancellation argue that it undermines efforts to address discriminatory lending practices and protect the rights of women and minority-owned businesses. They assert that the rule provides important data that can be used to promote fair lending practices and ensure equal access to credit for all entrepreneurs.
With the House of Representatives voting to cancel the rule and President Biden threatening to veto the measure, the fate of the requirement remains uncertain. It is clear, however, that the issue raises important questions about the balance between privacy rights and the need to address discrimination in lending practices.
In the coming weeks, the Senate will have to decide whether to support the cancellation of the rule or uphold its implementation. The final decision will have far-reaching implications for both small business owners and lenders, as well as for the broader debate on privacy rights and equal access to financial resources.
Regardless of the outcome, it is crucial to continue the conversation on how to promote fair lending practices without compromising the privacy and rights of small business owners. As the debate rages on, lawmakers and industry experts must work together to find a solution that addresses both concerns and supports a thriving and inclusive small business ecosystem.
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