There is no doubt that the 1071 Small Business LAR Rule will change the way commercial lending departments operate.
Compliance and Commercial Lending have not always gone hand in hand. Generally, there are lower compliance burdens for commercial purpose loans. As such, commercial lenders may be used to following strict guidelines and meeting regulatory requirements. Moreover, reworking or creating processes/procedures can be a daunting task when the commercial lending area has operated with less oversight and guidance.
Efficient Data Collection
The 1071 Small Business LAR rule will require significant data collection, which will be shouldered by the commercial lending staff.
Once an institution has determined if and when they will be required to report the SBLAR data, it is time to design a process for collecting, compiling, and reporting the data.
To understand how to gather the data we need, we should first see if the data already exists. Many of the reportable data points may exist and not require any additional collection on the part of the Bank. However, some data points will be new information and must be collected.
Talking with the commercial lending staff provides an understanding the workflow of a commercial loan from application to underwriting to decision to origination. This information allows for designing procedures for data collection organically.
Keep in mind that commercial lending staff may be more accepting of the increased regulatory burden if the new collection procedures become a natural part of the workflow. To make data collection smooth for both the commercial staff and borrowers, it’s helpful if Stakeholders understand the commercial lending process.
Managing Change, and Client Resistance
During this process, it is essential to listen to and understand the commercial lending staff’s concerns and find solutions to their misgivings, while also emphasizing the importance of accurate data collection. After all, the commercial lending staff will be responsible for discussing the collection of data with commercial applicants who may resist the new requirements and questions. Staff will need to manage their client’s pushback and effectively explain the importance of the data to be collected.
As we all know, change can be difficult. Easing the burden will involve coordination and cooperation with your commercial lenders and processors.
As always, we are here to help! TCA shows you “A Better Way” to comply with the Small Business LAR.
TCA – A Better Way!
