President Joe Biden said he would veto a measure by Senate Republicans to cancel an administration rule requiring banks to collect data on small business owners when they seek a loan.
Specifically, the proposal in question would roll back the Consumer Financial Protection Bureau’s plan to implement Section 1071 of the Dodd-Frank Act. The rule requires covered financial institutions to collect and report certain personal information to the CFPB on small businesses that apply for credit, including those that are owned by women or minorities. Republicans have criticized the rule as overly burdensome and intrusive, in addition to "woke."
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The resolution, spearheaded by Sen. John Kennedy (R-LA), was advanced through the Congressional Review Act, which provides for measures canceling administrative rules to be brought to the floors of the House and Senate through an expedited process.
Ahead of the vote on Wednesday, the White House pushed back on the Kennedy proposal and said the rule would give small business owners, lenders, and the public “critical information” about the massive small business financing market. The White House said that Biden plans to veto the Kennedy measure if it lands on his desk.
“This resolution would hamper the efforts to promote transparency and accountability in small business lending and create hurdles for mission-driven lenders and community organizations striving to close the most acute gaps in capital access for minority- and women-owned businesses,” the administration said.
Kennedy and his Republican allies contend that the CFPB’s quest for more information about small business owners, some of which would be made public, represents yet another burden for small businesses and is part of a broader effort by the Biden administration to exert control over businesses.
“By collecting and publishing personal demographic and other information, the CFPB is putting small business owners at risk of having their private financial affairs exposed to a watching world,” the Louisiana Republican said. “Reporting these personal details is an invasion of privacy and a waste of resources aimed at furthering the woke agenda. The practical impact of this rule could hamstring lending to Main Street.”
Among the information the CFPB wants to collect are data on the race, ethnicity, and gender of the small business owner and whether the business is minority-owned, owned by women, or LGBT-owned.
The CFPB rule itself applies to financial institutions that provided 100 or more small business loans in each of the two preceding calendar years. In the context of the rule, a small business is defined as a company with $5 million or less in revenue.
The rule is set to go into effect for financial institutions that originate the most covered credit transactions beginning as early as October of next year, although institutions with the lowest transaction volume will have until 2026 to comply, according to the text of the final rule.
Kennedy had previously railed against the CFPB rule during a June hearing with CFPB Director Rohit Chopra. He questioned Chopra over the privacy concerns he said the rule brings to the fore.
“Why do you want to know what a small business woman — let's say in a town of 20,000 people, going to her local bank [to] borrow money — why do you want to know what her sexual preference is? What business is that of yours?” Kennedy asked.
“What business is that of yours, what a small business woman does in her bedroom?” he added.
This isn’t the first time that congressional Republicans have used their CRA authority to push back on the Biden administration’s rulemaking, which has greatly expanded the pace of federal regulations when compared to the previous two administrations.
Earlier this year, two Democratic senators voted with the GOP on a measure to cancel a Labor Department rule that allows retirement plan managers to weigh environmental and social issues when making investments.
The House also passed the measure in a 216-204 vote, sending it to the Oval Office in what led to Biden’s first veto of his presidency.
Given the bevy of new Biden rules, Republicans this year have made curtailing the administrative state a top priority.
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In June, the House passed legislation targeting rulemaking from the executive branch that would require that every new “major rule” proposed by federal agencies be approved by the House and Senate before going into effect.
If it were to become law, the Regulations from the Executive In Need of Scrutiny Act would fundamentally change how presidential administrations use the federal bureaucracy, given that any major changes would be subject to congressional oversight.