FAQs for Section 76.16 Data Collection and Reporting Regulation

FAQs About CRA Exams and Ratings

Q: What is the recent amendment to the New York CRA regulation?
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A: The New York State Legislature has amended the state Community Reinvestment Act (CRA), Section 28-b of the New York Banking Law, to require the Department of Financial Services (the Department) to evaluate how well banks are serving the credit needs of minority- and women-owned businesses (MWOBs) and their technical assistance programs for MWOBs. MWOBs are businesses that are more than half owned by minorities or women.

To implement this law, the Department recently issued a regulation, 3 NYCRR § 76.16 (Section 76.16), which will require state-chartered banking institutions to collect and report data obtained from all business loan applicants to allow the Department to conduct the analyses required by law.

Q: Who does this rule apply to?
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A: State-chartered banking institutions currently subject to CRA evaluations by the Department.

Q: When do the new data collection requirements take effect?
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A: August 8, 2023.

Q: For which loans do banks have to collect and report data? Are banks required to collect data on all business loan applicants or just those that identify as MWOBs?
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A: Banks must collect information from all businesses who apply for loans or other credit, not just MWOBs. Specifically, Section 76.16 requires collecting data on any application for credit by a business to a banking institution which has originated at least 25 credit transactions for businesses in their New York State assessment area(s) in each of the two preceding calendar years. (See 3 NYCRR § 76.16(b).)

Q: Are banks required to collect and report data only on originations, or all applications?
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A: Data should be collected and reported for all applications for credit, regardless of whether the application results in an origination, denial, or other outcome.

Q: Why are you referring to MWOBs? Isn’t the term MWBEs?
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A: The Department uses the phrasing “minority- and women-owned businesses” (MWOBs) to draw a distinction from the more commonly used “minority- and women-owned business enterprises” (MWBEs). State law already addresses MWBEs, whose minority- or women-owned status has been certified for the purposes of state contract eligibility. Designated MWBEs comprise a significantly smaller group than the overall group of businesses owned by minorities and/or women who should be considered for CRA purposes, so the regulation uses that broader term.

Q: Does the 25-loan threshold refer to loans made nationwide, within New York State, or something else?
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A: The threshold of 25 refers to the aggregate of loans and other credit transactions made to businesses within the bank’s assessment area(s) in New York State.

Procedures

Q: Is there a form banks can use to collect data from business loan applicants pursuant to Section 76.16?
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A: Yes. Section 76.16 itself includes, as an appendix, a form that banks can request their business loan applicants complete to comply with the bank’s Section 76.16 requirements. That form is also available online here. Banks have the option of collecting the required information from applicants in a different format or method and may contact the Department to discuss.

Q: Is there a template that banks can use to provide this data to the Department?
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A: Yes. The Department has sent to all CRA Officers at New York State-chartered banking institutions a template that banks may use to comply with the Department's information requests in CRA evaluations related to Section 76.16. That template is also available online here. Banks have the option of submitting the required information to the Department in a different format or method and may contact the Department to discuss.

Q: When should banks submit this data to the Department?
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A: Only when requested by the Department, generally as part of the bank’s regularly scheduled CRA evaluation.

Q: When in the application process should banks collect this data?
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A: Banking institutions should request information required by Section 76.16 from a business loan applicant at or around the time the business makes the application.

Q: Are there any geographic limitations on the data that should be collected?
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A: Yes. Because the data collection under Section 76.16 is made primarily for a bank’s CRA evaluation, Section 76.16 only requires the collection of data for credit applications in a covered banking institution’s CRA assessment area(s), based on the location of the loan.

Q: What if we do not know where a business loan will be used? Can we use the principal place of business of the applicant as the geographic location of the loan?
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A: Yes. For reference, Section 76.2(p)(3) provides that a loan “is located in the geography where the main business facility . . . is located or where the loan proceeds otherwise will be applied, as indicated by the borrower.” Thus, in the absence of other information indicating where a loan will be used, a banking institution should consider the applicant’s main business facility as the loan location. Section 76.16 data should not be collected in the absence of a good-faith belief in a connection between the loan application and the bank’s CRA assessment area.

Section 1071 Regulation

Q: The Consumer Financial Protection Bureau (CFPB) has recently adopted a regulation implementing Section 1071 of Dodd-Frank (the Section 1071 Regulation), which also requires financial institutions to begin collecting information on business loan applicants. Does compliance with the Section 1071 Regulation count as compliance with Section 76.16?
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A: No. The Department is considering whether to treat compliance with the Section 1071 Regulation, either as written or in a modified form, as compliance with Section 76.16 after the Section 1071 Regulation takes effect.

Q: What are the differences between the Section 1071 Regulation and Section 76.16?
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A: Covered banking institutions are responsible for determining their own regulatory obligations. Nonetheless, the Department notes that some of the most significant differences between the two regulations include:

  • Section 76.16 applies only to New York State-chartered banking institutions subject to the state CRA who have originated at least 25 business loans (or other extensions of credit) in their CRA assessment area(s) in each of the past two years. The Section 1071 Regulation applies nationally and sets its own lending volume threshold.
  • Section 76.16 requires data collection regarding all business loan applicants, regardless of size of the business. The Section 1071 Regulation requires data collection only from small business loan applicants, as defined by that regulation.
  • Section 76.16 requires data collection regarding business loan applicants in the banking institution’s CRA assessment area. The Section 1071 Regulation requires data collection for small business loan applicants throughout the United States.
  • The Section 1071 Regulation requires the collection of information regarding the sex of principal owners and the LGBTQI+-owned status of small business loan applicants. Section 76.16 does not require this information for any loan applicants and does not authorize institutions to request this information from non-small business loan applicants, even after both regulations take effect.
  • Data collected pursuant to Section 76.16 will only need to be submitted to the Department upon request, as part of a CRA evaluation or otherwise, whereas the 1071 Regulation sets an annual reporting schedule.

Data Collection

Q: Are loans to businesses of all sizes reportable?
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A: Yes. There is no limitation on the business size for Section 76.16 data collection and reporting.

Q: Are loans of all sizes reportable?
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A: Yes. There is no limitation on the size of the loan for Section 76.16 data collection and reporting.

Q: Does a farm count as a business?
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A: No. Because Section 28-b of the Banking Law (the New York State CRA) refers to “small businesses” and “small farms” as separate concepts, the Department has concluded that the Legislature did not intend to treat farms as businesses for CRA purposes.

Q: Does a non-profit or government agency count as a business for Section 76.16 purposes?
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A: No. Because many of these entities lack an ownership structure, they are not appropriate for an analysis of lending to minority- and women-owned businesses.

Q: Does a publicly traded company count as a business for Section 76.16 purposes?
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A: No. Data on applications from publicly traded companies is not required.

Q: There may be circumstances where a corporate entity, such as a trust or LLC, applies for credit that may be used primarily for personal, family, or household purposes. Are those applications subject to data collection under Section 76.16?
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A: Personal loans going through a corporate entity (such as a trust or LLC) do not constitute business loans and should not be reported.

Q: There may be circumstances in which a natural person applies for credit for business purposes. Are those applications subject to data collection under Section 76.16?
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A: If a natural person applies for a loan intending to use the proceeds for business purposes, as opposed to personal, family or household purposes, such applicant is considered a “business” for purposes of Section 76.16.

Q: Should loan and application data be collected and reported for businesses whose owners are corporate entities and not natural persons?
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A: Appendix A to Section 76.16 states that “a principal owner is any natural person who owns 25 percent or more of the equity interest of a business.” If no natural persons own 25 percent or more of the equity interest in a business loan applicant, then the business should be marked as neither a minority- nor women-owned business, and no information should be entered for the business loan applicant’s principal owners.

Q: If there is an application for a loan or other credit from two or more businesses applying jointly, from whom should the banking institution collect data?
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A: Section 76.16(f)(6) requires that, “[i]n the event of a single application from multiple entities operating pursuant to a joint venture agreement or other form of business combination, the banking institution shall obtain information pursuant to this section for all entities participating in the application.”

Q: What commercial transaction types does Section 76.16 cover? For example, is data collection required for line increases? How about a refinance or modification of a loan?
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A: All applications for loans or other forms of credit from business applicants should be included. As a general guideline, banks should treat an application for changes to a credit amount or interest rate as a new credit or loan application. Specifically, then, both a line increase and a refinance which changes the loan amount would constitute applications for credit and trigger Section 76.16’s data collection and reporting requirements. A material loan modification, such as a change to the interest rate or loan amount, would also trigger the data collection and reporting requirement. Please note, however, that under Section 76.16(i), reevaluation, extension, and renewal requests do not constitute applications for credit as long as no terms of the transaction change other than its duration or maturity date. Please also note, especially for business applicants who regularly engage in credit applications as described above, that Section 76.16(f)(4)(i) permits banks to reuse data collected from a business credit applicant on subsequent applications for up to 12 months after the data is initially obtained.

Q: How should a bank report transactions in which the bank approves a larger loan commitment, but over time the borrower requests disbursements of smaller term loans from the larger commitment? Should banks report the entire amount of the commitment or each of the individual term loans as the funds are advanced?
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A: In this situation, banks should collect data on the loan once the commitment is made, and not as the funds are disbursed. If the data for certain fields are not known at the time the commitment is made, banks should leave those fields blank and update them as the data becomes available. The Department recognizes that there may be circumstances where, at the time of reporting to the DFS for a CRA evaluation, the data for certain fields for some loan commitments may not be known.

Q: Should data be collected and reported for HMDA-reportable loans? What about commercial real estate loans?
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A: Section 76.16 covers “any application for credit by a business,” so data should be collected and reported for HMDA-reportable loans and commercial real estate loans if the applicant is a business.

Q: How should data be collected and reported for transactions made through a loan participation agreement?
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A: Data should not be collected or reported for the purchase of an interest in a credit transaction, such as through a loan participation agreement. Note, however, that a bank who receives an application for credit that results in a loan participation agreement must still collect and report data on the transaction and applicant as usual.

Q: Should data be collected and reported for leases?
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A: No. A lease transaction where the lessor retains title and will receive the property back after the conclusion of the lease term, without any expectation by either party that, for example, ownership of the property will be transferred or that payments made pursuant to the lease agreement constitute anything other than payments in exchange for the temporary use of the property, does not constitute a loan or credit for the purposes of Section 76.16.

Q: Does a factoring transaction, where a business sells all or a portion of its accounts receivable (existing but unpaid invoices) to another business, constitute an extension of credit under Section 76.16?
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A: No. Factoring transactions should not be considered an extension of credit for the purposes of Section 76.16.

Q: Should data be collected and reported from non-operating entities?
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A: Yes. Data from all corporate or business entities who apply for a loan or other type of credit should be collected and reported.

Q: When a state-chartered banking institution funds a loan, but another entity originates the loan, who should collect and report the data?
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A: The originator of the loan should collect and report the data.

Q: Is the collection and reporting of indirect auto loans, if the motor vehicle dealer is the last financial institution with authority to set the material credit terms of the covered credit transaction, required?
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A: No.

Q: In the case of sole proprietorships, such businesses may use personally identifiable information for business purposes, such as if the business operates out of the business owner’s personal residence. Is the expectation that such information is not considered personally identifiable information if it used for business purposes?
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A: When the business applicant provides information intended as information on the business, that information is not considered to be personally identifiable information for the purposes of Section 76.16 data collection requirements.

Data Reporting

Q: Should interest rate data be limited to a certain number of decimal points?
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A: No. Banks should input the entire interest rate unless the interest rate is a repeating decimal, such as 1/3 of a percent.

Q: Should loan amounts be listed in full dollar amounts or in thousands (000’s) of dollars?
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A: Banks should input full dollar amounts in the MWOB Business Loan Register tab. Banks should input amounts in thousands of dollars in the Total MWOB Loans by Year tab (note the footnote stating that, “Dollar amounts should be expressed in thousands of dollars”). For banks who elect not to use the Department’s template, data for individual loans should be input as full dollar amounts, and summaries of aggregate data should be input as thousands of dollars.

Q: How should banks calculate the Cost to Institution in the Technical Assistance Programs tab in the reporting template?
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A: Banks should make a good-faith effort to determine how much the bank spends on each program, including both direct costs (e.g., renting a conference room) and indirect costs (e.g., staff time). The Department understands that some degree of estimation may be required in some circumstances.

Further Questions

If you have further questions, please contact Terry McMahon, Senior Assistant Deputy Superintendent, Consumer Examinations, at [email protected].