The Independent Community Bankers of America, Independent Bankers Association of Texas and Texas City-based Texas First Bank have been authorized to join a federal lawsuit challenging the final Section 1071 rule.
Judge Randy Crane of the U.S. District Court for the Southern District of Texas granted the request in an Aug. 15 decision. The lawsuit against the Consumer Financial Protection Bureau was originally filed by the American Bankers Association and Texas Bankers Association. The associations say the rule should be delayed until the Supreme Court issues a final decision on the constitutionality of the CFPB’s funding structure, which is expected next year.
In late July, Crane granted a motion for a preliminary injunction against Section 1071. The court stayed the deadlines to comply with Section 1071 pending the Supreme Court’s decision. However, the injunction only applied to TBA and ABA member banks, which the ICBA argued should be extended to community banks. On Aug. 16, ICBA, IBAT and Texas First Bank filed an emergency motion requesting the injunction cover their members.
“ICBA has strongly opposed the 1071 rule for years, and we’re going to continue working every angle to protect community banks and small businesses from this harmful and burdensome policy,” said President and CEO Rebeca Romero Rainey.
Section 1071 will require lenders to collect and report information on the race, sex and ethnicity of the principal owners of the small business applicant as well as the company’s gross annual revenue. Under the rule, lenders that originate at least 2,500 small business loans will need to collect data starting Oct. 1, 2024. Lenders that originate at least 500 loans will need to begin collecting information on April 1, 2025, and those that originate at least 100 annually must collect data beginning Jan. 1, 2026.