The Clarity in Lending Act aims to reshape rules around small-dollar lending, consumer protection enforcement, and small business loan data collection. It creates a legal "safe harbor" protecting banks, credit unions, and their contracted third parties from penalties or lawsuits when offering small loans of $3,500 or less, as long as they follow specific structural rules such as reasonable repayment terms, no rollover loans, no prepayment or overdraft penalties, and prompt fund disbursement. The bill also narrows and clarifies the Consumer Financial Protection Bureau's authority to label financial practices as "abusive," requiring the agency to define that term through formal rulemaking, conduct cost-benefit analyses, give companies notice and a chance to fix problems before enforcement, and limit penalties to violations discovered within a set examination period. Additionally, it raises the threshold for which small lenders must report detailed small business loan data—exempting institutions with fewer than 500 small business loans per year—and gives affected lenders a five-year phase-in period before enforcement and penalties apply. Finally, the bill requires the CFPB to seek public input before altering or deleting small business lending data collected for privacy purposes, aiming to balance transparency with protecting sensitive financial information. Most provisions would take effect through rulemakings required within 180 days of enactment, with certain compliance deadlines extending three to five years for small lenders.
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