We Need Regulation that Matches Economic Policy

Leigh Lytle is the President and CEO of the Equipment Leasing and Finance Association and President of the Equipment Leasing & Finance Foundation. Previously, Lytle served as the Head of North American Policy at Plaid and Chair of the Board of Directors of the Financial Technology Association. Before joining Plaid, Lytle spent over 15 years in the Federal Reserve Bank system in various executive roles ranging from engagements in monetary and regulatory policy to operations and data analytics oversight.

Manufacturing is having a moment.  

The Trump administration has been a huge proponent of building in America, and the recent tariffs have amplified this conversation. But they’re not the only reason there’s a groundswell of support for the onshoring of production to the United States. This narrative has been building steam for some time in financial circles and it’s easy to see why:  

When the pandemic upended our supply chains demand skyrocketed at the same time, driving inflation higher than it has been since the 1970s. But the disruption didn’t stop there. Russia’s invasion of Ukraine and conflict and instability in the Middle East have contributed to a level of geopolitical uncertainty not seen for decades.   

Companies facing those disruptions realized that the resilience of their supply chains was just as important as keeping costs down. There’s no point making a product cheaper overseas if you can’t reliably transport it to a customer in the US within a reasonable timeframe.  

But onshoring operations and manufacturing requires investment.

The members of the Equipment Leasing and Finance Association (ELFA) are the source of that capital and contribute over $1 trillion annually to the US economy, touching almost every industry. When a farmer needs to finance the purchase of a new tractor, a retailer running a distribution center needs a fleet of new forklifts, or when a construction company needs a new bulldozer they work with one of ELFA’s lenders–regional banks, independent finance companies, captives, and increasingly, private equity firms.  

As the CEO of ELFA, my job is to ensure that my members can deploy the capital companies need to bring manufacturing back to America. That means cutting through any red tape standing in their way. Unfortunately, well-meaning but poorly executed regulation could throttle the rebuilding of America’s industrial base. 

As a former Fed Official … 

I spent more than 15 years at the Federal Reserve Bank of San Francisco and I believe that strong financial regulation is essential for a sound financial system. But I’ve also worked in fintech policy and the speed that industry is moving at is the speed we need to see across financial services.  

Not all regulations are created equal and some are seriously impeding borrowers from accessing the credit they need to grow. The biggest regulatory hurdles are in Section 1071 of the Dodd-Frank Act, which was originally intended to enforce fair lending practices. But the impact on small business lending is stifling the American economy. Many of the borrowers who are struggling to access credit are the very same small businesses that we need if the plan to bring manufacturing back to the US is going to be successful.  

Earlier this year, we sent communications to relevant decision makers in Congress and the administration. Recently, the CFPB said they plan to propose a new section 1071 rule. ELFA will be actively engaging in the new rulemaking process, however, it is still our position that a complete repeal of the 1071 would be the best outcome for American businesses.

Section 1071 

The problems with Section 1071 include:  

1. Increased Compliance Costs and Operational Burdens – The data collection and reporting requirements imposed by Section 1071 are complex and costly, disproportionately affecting small and mid-sized lenders. Compliance expenses divert resources away from core leasing and financing functions, limiting access to capital for small businesses that rely on these tools to acquire essential equipment.  

2. Privacy and Data Security Risks – The mandated collection of sensitive business and demographic data raises significant concerns regarding borrower privacy and data security. The risk of unintended disclosure or misuse of collected data could deter small business owners from seeking financing, ultimately harming the very businesses Section 1071 intends to support.  

3. Reduced Competition and Credit Availability – The increased regulatory burden may lead to market consolidation, discouraging smaller lenders from participating in the equipment finance sector. Reduced competition translates into higher costs and fewer financing options for small businesses, stifling growth and economic activity.  

4. Lack of Clear Benefit to Small Businesses – The broad data collection requirements fail to account for the unique nature of equipment financing, which differs significantly from traditional small business lending. Unlike conventional credit transactions, equipment finance transactions are often structured based on asset-backed considerations rather than traditional creditworthiness factors. The one-size-fits-all approach of Section 1071 does not align with the realities of the equipment finance industry and the poor quality and inconsistency of the data generated under rule is unlikely to produce meaningful insights that justify the regulatory burden.  

5. Forced Data Disclosures – When Congress passed this statute it clearly meant for the provisions to be voluntary: the lender must ask for data, but the borrower is not obligated to provide it. There are many reasons why customers may not want their private information reported to the government. The CFPB in their rulemaking process turned the voluntary nature of the provision on its head– even if the customer declined to provide their demographic information, the financial institution must report the transaction. This means that customers have no option to opt out of having their business’s credit application reported to the Government.  

Conclusion

President Trump wants to make America build again. Companies want to onshore production and lenders are ready and waiting to provide the capital to make it possible. But to unlock that capital we need to do away with the red tape that hinders small businesses, drives up costs, and discourages the very companies that are essential to powering the engine of American growth. 

The opinions shared in this article are the author’s own and do not reflect the views of any organization they are affiliated with.

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