Compliance concern of the month: What techniques may banks utilize to approximate gross yearly profits to identify their tier for information collection functions under the §1071 guideline?

My bank will be reporting small company loaning information (the §1071 guideline) under the Equal Credit Opportunity Act (Regulation B) and is attempting to identify which tier the bank falls under for information collection and reporting functions. However, the bank has actually not regularly gathered gross yearly profits (GAR) from its small companies to be able to identify whether it fulfills the limit of 100 came from covered credit deals in each of the 2 preceding fiscal year.

Q Is there a recommended technique for identifying the GAR for 2022 and 2023?

A The bank might utilize “any reasonable method to estimate its originations to small businesses for either or both of the calendar years 2022 and 2023” which might consist of any of the following choices.

The bank might:

• Ask every candidate of an authorized covered credit deal to self-report whether it had GAR for its preceding of $5 million or less throughout the duration from October 1 through December 31, 2023;
• Assume that every covered credit deal it stems for organization clients in fiscal year 2022 and/or 2023 is encompassed a small company;
• Annualize the variety of its covered credit deals from October 1 through December 31, 2023 by quadrupling the originations for this duration and use the annualized variety of covered originations to both fiscal year 2022 and 2023 or to either 2022 or 2023.

See remark 5 to §1002.114(c) and the Consumer Financial Protection Bureau’s small company loaning guideline Frequently asked questions – Institutional protection frequently asked question #14.

For more info, contact ABA’s Rhonda Castaneda.
Please note that this area is not a replacement for expert legal guidance.