This bill modifies federal requirements for how banks collect and report demographic data on small business loan applicants. Currently, the Equal Credit Opportunity Act requires financial institutions to gather detailed information about applicants' race, ethnicity, and gender for federal reporting purposes. The PROTECTED Act narrows these requirements by eliminating three categories of demographic data and requiring banks to inform applicants in writing that providing such information is voluntary and won't affect their loan decision. The bill also prohibits banks from inferring demographic information through visual observation and states that low response rates cannot be used as a measure of compliance. The law applies only to large financial institutions with at least $2.5 billion in assets and originating at least 2,500 small business loans annually, excluding community development banks and equipment lenders. The bill includes a three-year implementation timeline after the federal government completes a cost-benefit analysis, and includes a two-year safe harbor period during which regulators cannot enforce compliance with the new rules.
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