NEWS: The CFPB’s Reg. B small-business lending data collection rule is now on hold for all covered lenders nationwide, including credit unions, after a Texas federal court issued an order today that delays enforcement of the rule.
As described in this Aug. 1 League Compliance Courier, the Texas court at first had only blocked implementation of the rule for certain banks, not credit unions or other lenders. That partial injunction only applied to American Bankers Association members, Texas Bankers Association members, and Rio Bank – the parties that started the court action asking for the injunction. However, CUNA, the Cornerstone League, and Rally Credit Union then intervened in the lawsuit and asked the court to expand its order, so that credit unions would have equal footing with other lenders.
The CFPB’s rule (which implements Section 1071 of the Dodd-Frank Act and is sometimes called the 1071 rule) requires many financial institutions to collect and report data on lending to small businesses with gross revenue of $5 million or less. The rule is designed to help regulators and others uncover discrimination in small business lending.
The rule required compliance by October 1, 2024, for financial institutions that originated at least 2,500 covered small business loans in both 2022 and 2023. The rule provided later compliance deadlines for those with fewer originations.
Among other things, the Texas lawsuit alleged that the rule is invalid because the CFPB’s funding structure is unconstitutional. The same argument over CFPB funding is at the heart of a different case – CFPB v. Community Financial Services Association of America – which is pending before the U.S. Supreme Court. Today’s injunction order blocks the CFPB from enforcing the rule until the Supreme Court issues its opinion on CFPB funding, which is expected sometime in the summer of 2024. When that case is decided, new compliance deadlines may be issued for the small business lending rule.
The League will update credit unions on further developments related to this rule and advise of any new compliance deadlines.
The CFPB opposed a nationwide injunction, arguing it would bar the agency from answering compliance questions raised by lenders. Under today’s order, the CFPB may still answer questions and post compliance bulletins and other information on its website about the rule.
The League has information on the rule in our ii Release No. B083, which is being updated with a note about this preliminary injunction.