Biden vows to veto Kennedy’s plan to scrap ‘woke’ small business lending rule.
President Biden Vows to Veto Republican Measure on Small Business Data Collection
President Joe Biden has taken a firm stance against Senate Republicans’ proposal to cancel a rule that requires banks to collect data on small business owners when they apply for loans. The measure in question aims to roll back the implementation of Section 1071 of the Dodd-Frank Act by the Consumer Financial Protection Bureau (CFPB). This rule mandates financial institutions to gather and report specific personal information to the CFPB regarding small businesses seeking credit, including those owned by women or minorities. Critics, particularly Republicans, argue that the rule is burdensome, intrusive, and part of a “woke” agenda.
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The resolution, led by Senator John Kennedy (R-LA), has been advanced through the Congressional Review Act, which expedites the process of canceling administrative rules by bringing them to the floors of the House and Senate. Ahead of the vote, the White House has strongly opposed Kennedy’s proposal, emphasizing that the rule provides crucial information about the vast small business financing market to owners, lenders, and the public. The White House has made it clear that President Biden intends to veto the measure if it reaches his desk.
White House: Transparency and Accountability at Stake
The administration argues that the resolution would hinder efforts to promote transparency and accountability in small business lending. It would also create obstacles for mission-driven lenders and community organizations striving to address the capital access gaps faced by minority- and women-owned businesses.
Republicans: Privacy Invasion and Wasted Resources
Senator Kennedy and his Republican allies contend that the CFPB’s pursuit of personal demographic and other information poses a risk to small business owners’ privacy and is part of the Biden administration’s broader attempt to exert control over businesses. They argue that reporting such personal details is an invasion of privacy and a wasteful endeavor driven by a “woke” agenda, potentially hampering lending to Main Street.
The CFPB aims to collect data on the race, ethnicity, gender, and minority, women, or LGBT ownership status of small business owners. The 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 revenue of $5 million or less.
The rule is scheduled to take effect for financial institutions with the highest volume of covered credit transactions as early as October next year. However, institutions with the lowest transaction volume have until 2026 to comply, according to the final rule.
Senator Kennedy previously expressed concerns about privacy during a June hearing with CFPB Director Rohit Chopra, questioning why the CFPB needs to know personal details about small business owners, including their sexual preferences.
Republicans Challenge Biden’s Regulatory Expansion
This is not the first time congressional Republicans have used the Congressional Review Act to push back against the Biden administration’s rulemaking, which has significantly increased the pace of federal regulations compared to previous administrations. Earlier this year, two Democratic senators joined the GOP in canceling a Labor Department rule that allowed retirement plan managers to consider environmental and social issues when making investments. The House also passed the measure, resulting in Biden’s first veto as president. Republicans have made curbing the administrative state a top priority in response to the multitude of new Biden rules.
In June, the House passed legislation that targets executive branch rulemaking. If enacted, the Regulations from the Executive In Need of Scrutiny Act would require House and Senate approval for every new “major rule” proposed by federal agencies before it can take effect. This act would fundamentally change how presidential administrations utilize the federal bureaucracy, subjecting major changes to congressional oversight.
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What disparities in access to small business credit exist for historically disadvantaged groups in calendar years?
Calendar years. The purpose of this data collection is to help identify and address disparities in access to small business credit, particularly for historically disadvantaged groups.
The Biden administration believes that this data is critical in understanding the barriers that small business owners face when seeking financing. By collecting information on race, ethnicity, and gender, policymakers can better tailor programs and policies to support minority and women-owned businesses. This data will provide valuable insights into the lending patterns and practices of financial institutions, allowing for targeted interventions to address any disparities that exist.
However, Republicans argue that the collection of this data is an unnecessary intrusion into the privacy of small business owners. They claim that it undermines the principles of free market capitalism and further empowers government bureaucracy. According to their perspective, the government should not have the authority to collect such personal information, as it infringes upon individuals’ rights to privacy and poses a potential risk to their businesses.
The debate over this measure reflects a broader ideological divide between the two parties. Democrats see the government as playing a proactive role in promoting equality and fairness, whereas Republicans emphasize smaller government and individual freedoms. While both sides agree that fostering small business growth is important, they differ in their proposed approaches and the role that data collection plays in achieving this objective.
Given President Biden’s explicit vow to veto the Republican measure, it appears that the data collection requirement will remain in place. The administration firmly believes that transparency and accountability in small business lending are at stake, and that collecting this data is instrumental in addressing the disparities that exist in access to credit. Going forward, the implementation and enforcement of Section 1071 will continue to be a point of contention and debate between the two parties.
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