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The small business lending landscape is undergoing a significant transformation with the implementation of the Small Business Lending (SBL) Rule under Section 1071 of the Dodd-Frank Act. This article will delve into some key considerations for lenders as they navigate the complexities of the new rule and evaluate technology solutions available to ensure compliance and efficiency in their small business lending operations.
The SBL Rule mandates increased data collection and reporting for lenders, aiming to provide greater transparency and identify potential discrimination in lending practices. As financial institutions prepare for these changes, the selection of an appropriate loan origination system (LOS) and analytics provider has become more critical than ever.
It's crucial to understand several key aspects of LOS, especially in light of the SBL Rule:
Functionality and Automation
Compliance and Data Management
Integration and Scalability
User Experience and Vendor Support
Analytics and Decision Support
By carefully considering these factors, lenders can select an LOS that not only ensures compliance with the SBL Rule but also streamlines internal operations, improves efficiency, and supports sound lending practices. With the compliance dates looming for Tier 1 data collection, now is the time to ensure your LOS supports the lending process effectively and efficiently.
While an LOS can help meet SBL Rule compliance requirements, it is essential to identify where additional analytics solutions may be needed to enhance data collection and streamline the submission process. Analytics solutions provide a crucial layer of analysis and compliance oversight, especially in the context of the SBL Rule. Here's a breakdown of their key contributions:
Data Validation and Compliance Reporting
Geocoding and Mapping
Reporting institutions must understand how their LOS will support the requirements of the rule and where analytic software is needed to refine data for submission. By leveraging analytic systems, lenders can enhance their compliance efforts, mitigate fair lending risks, and gain valuable insights into their lending operations. This is particularly important in the context of the SBL Rule, which requires detailed data collection and reporting.
Changes in the administration raise questions about the future of the SBL Rule and this article in the ABA Banking Journal provides some clarity about what to expect in 2025. As author Carl Pry mentions, “all covered lenders have much work to do to be ready to begin collecting the required data, and this time must be used wisely.”
RiskExec is a leading SaaS-based fair lending analytics and reporting platform that helps banks, mortgage lenders, credit unions, and non-traditional lenders more easily comply with demanding regulatory requirements, including HMDA, CRA, and SBL/1071. RiskExec’s browser-based software automatically incorporates new regulatory, geographic, and peer institution data in real-time to help lenders stay up to date on evolving requirements. Financial institutions rely on RiskExec’s modules to geocode; proactively identify areas of disparate impact, redlining, and/or steering; take corrective action as needed; and assemble HMDA and CRA files and run government edit checks prior to submission. To learn more about how RiskExec helps compliance experts shift their focus from finding problems to proactively building opportunities for clients and institutions, visit riskexec.com, or follow RiskExec on LinkedIn.
About the Author
Sarah Brons is an expert in community reinvestment and community development and leads Community Reinvestment Act and SBL product development for RiskExec. She has more than 20 years of experience in financial services and regulatory compliance.
Explore RiskExec's full suite advantages and the many benefits of our flexible, easy-to-use browser-based SaaS solution for all lending portfolios.