Republican Sens. Katie Britt and John Boozman have introduced the Preventing Regulatory Overreach to Empower Communities to Thrive and Ensure Data privacy (PROTECTED) Act a measure drafted to protect small financial institutions and Main Street businesses from regulatory overreach and excessive compliance costs and standards, particularly in the absence of a full repeal of the CFPB’s final rule for Section 1071 of the Dodd-Frank Act.
“The CFPB under the last Administration operated virtually unchecked—with no real Congressional oversight—and in an authoritarian manner, creating a regulatory nightmare for the very people and businesses it was meant to protect,” said Sen. Britt. “The PROTECTED Act delivers much-needed regulatory relief for community banks, farm credit lenders, CDFIs, and equipment financers. Importantly, this legislation safeguards small businesses by limiting excessive data collection and protecting consumer privacy. I’m proud to lead this effort to provide critical changes to this harmful rule.”
The PROTECTED Act would also limit the number of small businesses impacted, and significantly reduce the amount of data required to be collected and reported, to ensure that consumers’ privacy is protected.
“As the backbone of our economy, small businesses need access to capital. Identity-based data collection requirements handed down from Washington jeopardize lenders’ ability to provide vital investments and invite the federal government to pick winners and losers based on factors other than sound underwriting,” said Sen. Boozman. “Our legislation cuts this red tape for small and local financial institutions, including those trusted by farmers and rural communities, so they can focus on helping entrepreneurs and business owners launch or expand operations.”
The PROTECTED Act establishes safeguards to prevent the CFPB from publishing sensitive consumer data and requires the Bureau to conduct updated cost-benefit analyses prior to the rules’ implementation. The rule’s effective date would be three years after the completion of these updated analyses and publication in the Federal Register, followed by a two-year grace period.
“I will always advocate for small businesses across Alabama and our nation—they’re the backbone of our country and what make our communities so unique—and our community banks play a pivotal role in providing these businesses with vital access to capital,” said Sen. Britt. “This CFPB rule would have damaging downstream effects on our most rural and underserved communities. In the absence of a full repeal, this bill makes critical changes needed to ensure small lenders can continue to meet the needs of Main Street businesses.”
Chairman of the House Financial Services Committee French Hill is leading similar legislation in the U.S. House of Representatives.
“America’s small businesses depend on affordable and accessible credit, and community banks play a crucial role in their success,” said Rep. Hill. “The CFPB’s current approach under the 1071 rule restricts credit and places unfair burdens on our community banks. The PROTECTED Act provides a clear path forward for how the Bureau can revise the 1071 rule to best support small businesses while ensuring responsible lending. I thank Senator Britt and Senator Boozman for working with me on companion legislation to the Small LENDER Act to support policies that help small businesses grow and achieve success.”
In October 2024, Sen. Britt authored a column warning of the increasing politicization and regulatory overreach at the CFPB.
“Take, for instance, the CFPB’s 1071 small business lending rule, a far-reaching regulation that imposes significant costs to our smallest community banks,” she wrote in her piece. “This unnecessary regulatory expansion undermines the relationship banking model of small financial institutions, while allowing the CFPB to collect, store, and create a public registry of personal data on business owners and consumers in our communities.”
In a December 2024 hearing with then-Director Rohit Chopra, Sen. Britt criticized the small business lending rule and the damage it could pose to community banks and their ability to provide credit and services to Main Street.
“The compliance costs alone are literally putting at risk community banks in a multitude of ways … I want to make sure the agency continues to look at cumulative impacts and how rules like this hurt the most vulnerable,” said Sen. Britt at the hearing.
Click here to read the full version of the bill, the Preventing Regulatory Overreach to Empower Communities to Thrive and Ensure Data privacy (PROTECTED) Act.
