The Consumer Financial Protection Bureau plans to soon propose replacing or changing Section 1071.
The CFPB released its plans April 3 in a filing in a lawsuit challenging Section 1071 by Miami-based Revenue Based Finance Coalition in the U.S. District Court for Southern Florida. The CFPB requested the court suspend the case until it proposes a new rule.
“The CFPB anticipates issuing a notice of proposed rulemaking as expeditiously as reasonably possible,” the bureau wrote in its April 3 filing. “Because the anticipated rulemaking process may moot or otherwise resolve this litigation, (temporarily suspending this case) would conserve the court’s resources.”
The CFPB did not describe its proposed rulemaking in depth. The bureau offered to submit requests to the court every 90 days during the rulemaking process, with it and the Revenue Based Finance Coalition meeting within 30 days to decide whether to proceed with the lawsuit.
Finalized in 2023 under former CFPB Director Rohit Chopra, Section 1071 requires financial institutions to report small-business lending data. The rule would require collecting and submitting data on credit applications by women-owned, minority-owned and small businesses. Lenders would need to furnish data on loans made to small businesses with less than $5 million in the last fiscal year, submit Congressionally-required data points and provide additional information typically included in lender files.
Detractors said the proposal exceeded the CFPB’s authority and would create compliance challenges, especially for smaller banks. Several lawsuits ensued, including one filed by the Texas Bankers Association and American Bankers Association.
The ABA praised the CFPB’s decision, saying it “could effectively end ongoing legal challenges to the current rule. “We look forward to learning more about the CFPB’s plans, while urging the bureau to develop a new rule that adheres to the law and does not require the nation’s banks to invade the privacy of their small business customers,” according to the ABA.