S. 2352: Preventing Regulatory Overreach to Empower Communities to Thrive and Ensure Data Privacy Act

This bill, titled the Preventing Regulatory Overreach to Empower Communities to Thrive and Ensure Data Privacy Act or the PROTECTED Act, aims to amend the Equal Credit Opportunity Act, specifically relating to small business loan data collection. Its key provisions include the following:

Changes to Loan Data Collection Requirements

The bill proposes amendments to the requirements financial institutions must follow regarding the collection and reporting of data for small business loans. Key changes include:

• Financial institutions must inform applicants that collecting certain information is a requirement set by the Bureau of Consumer Financial Protection.
• Applicants will be informed that their response to data requests will not impact the decision on their credit request, and they are not obliged to provide the requested information.

Modification of Data Reporting Rules

The bill outlines that certain data categories previously mandated for reporting will be removed, and modifications to existing data reporting rules will require a process where the Bureau must describe the changes and their purposes, particularly regarding privacy interests.

Prohibition on Certain Information Compilation

Financial institutions will be prohibited from compiling information about applicants through observation or means other than what is provided directly by the applicants themselves. This aims to ensure that all information reported is based solely on what applicants voluntarily provide.

Evaluation of Response Rates

The bill states that the percentage of applicants supplying information cannot be used to gauge compliance with the new requirements. This means that financial institutions cannot be penalized based on the data they receive from applicants.

Enforcement Delay

The Bureau of Consumer Financial Protection will not enforce compliance with these requirements for a period of two years following the bill's implementation. This allows financial institutions time to adjust to the new regulations.

Effective Date

The bill's provisions will take effect three years after the Bureau completes a required cost-benefit analysis, ensuring that stakeholders fully understand the financial implications before the rules come into force.

Definitions and Scope

Important definitions are provided within the bill:

• Financial Institution: This includes organizations that conduct financial activities and have originated a specified number of credit transactions for small businesses within the past two years.
• Small Business: Defined as entities with gross annual revenues of not more than $1,000,000 in the previous fiscal year.

Relevant Companies

None found