Credit union trade organizations are pressing the ConsumerFinancial Protection Bureau to limit the scope of data they provideon business loan applications used by regulators to determinewhether lenders are discriminating against women andminorities.

CUNA and NAFCU are responding to the bureau's request Wednesdayfor comments over the next 60 days before it drafts regulations tocomply with the Dodd-Frank Act's Section 1071 provisions tocreate reporting frameworks to monitor small business lending towomen and minorities.

“NAFCU acknowledges that taken on its own, Section 1071 is awell-intentioned provision,” Andrew Morris, NAFCU's regulatoryaffairs counsel, wrote in a three-page letter to the bureau.However, he said the law's implementation could raise lending costsand discourage credit unions from making the very loans the bureauwas trying to foster.

“The creation of a new data collection regime potentiallyexceeding the complexity of HMDA would likely frustrate creditunion efforts to originate MBLs at low cost to women-owned,minority owned and other small businesses within theircommunities,” Morris wrote.

Business lending is a relatively small, but fast-growing sectorfor credit unions. They worry that their numbers might look badcompared with banks because banks can lend to anyone, while manycredit unions have charters that restrict membership by employmentand geography.

Joe Valenti, director of consumer finance for the Center forAmerican Progress, a progressive think tank in Washington, D.C.,said that enforcement of fair-lending standards was hobbled fordecades by the lack of publicly available information about lendingpatterns by race or gender.

Credit unions have long been known for offering better terms onloans, Valenti said. “Credit unions may look more attractive whentheir data is made public.”

Alex Monterrubio, NAFCU's director of regulatory affairs, saidcredit unions want to exclude small business loans under $50,000 –a statutory threshold for Member Business Loans under a separatelaw applying only to credit unions.

The rule-making process is likely to take at least 18 months,and could easily last two years, Monterrubio said.

Section 1071 requires financial institutions, includingcooperatives, to collect data on small business loan applicationsshowing:

• A loan application number (but not the name of theapplicant)
• Date of the application
• Type and purpose of the loan
• Amount of the loan request
• Amount approved
• Census tract
• Gross annual revenue of the business applicant
• Race, sex and ethnicity of the principal owners of thebusiness

Lenders are required to report the data once a year to bureauand keep the data for at least three years. The public can haveaccess to the data from the credit union, by request, and the lawsays the data is to be “made available to the public generally bythe bureau.”

The bureau can use the data to discern patterns, and publishcompilations for the public. It can also delete or modify data toprotect privacy.

The data is kept separately from the loan application, andshielded from underwriters. People applying for loans can declineto provide the information.