Senate votes to block CFPB small business lending rule, Biden threatens veto

With the U.S. House of Representatives effectively incapable of conducting lawmaking business until a new speaker is elected, the U.S. Senate is pressing forward with its own business, including the Wednesday vote to overturn the Consumer Financial Protection Bureau (CFPB)’s small business lending rule. This is according to reporting at Politico and Roll Call.

The rule, introduced in March, would require lenders to collect and report information about received small business credit applications including geographic and demographic data, lending decisions and credit pricing.

It aims to partially align small business lending standards with those of the mortgage industry, a recommendation made in 2017 by inaugural CFPB Director Richard Cordray.

But Republican Sen. John Kennedy, who sponsored a bill aimed at blocking the rule from going into effect, said that the regulation was too “intrusive” on small businesses.

The bill managed to garner support from Democratic Sens. Joe Manchin, Jon Tester and John Hickenlooper, as well as independent Sens. Kyrsten Sinema and Angus King, with a final vote tally of 53-44.

“The bank has to ask the small-business person if that small-business person is gay,” Kennedy said on the Senate floor, according to Politico. “What a private American does with another private, adult American in the privacy of their bedroom — we are free, so long as it doesn’t break any laws, to express our sexuality however we want to, and it’s none of the CFPB’s business.”

“Today, the Senate will vote on a Republican resolution to chip away at yet another example of the Biden administration’s runaway regulatory state,” said Sen. Mitch McConnell, the Senate Minority Leader, before voting. “Washington Democrats want to tie small-business loans to diversity quotas.”

Sen. Sherrod Brown, chairman of the Senate Banking Committee, defended the rule in his floor remarks.

“Small-business lending takes place in the dark,” Brown said. “We don’t have good data about how lenders are serving the small business in their communities. We don’t have good data about whom lenders might be leaving behind. The data we do have suggests too many small-business owners aren’t getting a fair shot at a loan for their businesses.”

The bill will still need to be adopted in the House, which likely cannot take place until the election of a new speaker or the empowerment of Republican Speaker Pro Tempore Rep. Patrick McHenry, to take up new legislative business.

However, the White House on Wednesday threatened to veto the bill if it is passed in the House and sent to the president’s desk. Congress has the option to override the veto, but unlike an initial passage a veto override requires a two-thirds majority in both chambers to be codified into law. That would require at least 66 senators and 290 House members.

The lending rule has faced a consistent stream of challenges from multiple parties since being introduced, including from the House and a Texas trade group and local bank, along with court challenges in other states.

In recent news, the U.S. Senate made a significant move by voting to overturn the Consumer Financial Protection Bureau’s (CFPB) small business lending rule. This rule, introduced in March, aimed to align small business lending standards with those of the mortgage industry. It required lenders to collect and report information about small business credit applications, including demographic and geographic data, lending decisions, and credit pricing.

Republican Senator John Kennedy, who sponsored a bill to block the rule, argued that it was too intrusive on small businesses. He expressed concerns about the regulation requiring banks to inquire about the sexual orientation of small business owners. Kennedy stated that personal matters should not be the business of the CFPB as long as they comply with the law.

The bill received support from Democratic Senators Joe Manchin, Jon Tester, and John Hickenlooper, as well as independent Senators Kyrsten Sinema and Angus King. The final vote tally was 53-44 in favor of overturning the rule. Senate Minority Leader Mitch McConnell criticized the Biden administration’s regulatory state and accused Washington Democrats of wanting to tie small-business loans to diversity quotas.

On the other hand, Senator Sherrod Brown, chairman of the Senate Banking Committee, defended the rule, highlighting the lack of transparency in small-business lending. Brown argued that there is a need for better data to understand how lenders are serving small businesses and to ensure fair access to loans.

Although the Senate has passed the bill, it still needs to be adopted in the House. However, the election of a new speaker or the empowerment of Republican Speaker Pro Tempore Rep. Patrick McHenry is necessary for the House to take up new legislative business. Additionally, the White House has threatened to veto the bill if it passes in the House and reaches the president’s desk. Overriding a veto would require a two-thirds majority in both chambers.

The CFPB’s small business lending rule has faced various challenges since its introduction. It has received opposition from lawmakers, trade groups, and local banks. Court challenges have also been filed in multiple states, further complicating its implementation.

In conclusion, the U.S. Senate’s vote to overturn the CFPB’s small business lending rule has sparked debates about the balance between regulatory oversight and the privacy rights of small business owners. The outcome of this bill in the House and its potential override of a presidential veto will determine the future of small business lending regulations in the United States.