Section 1071 litigation
Texas Bankers Association v. CFPB
Date: Feb. 7, 2025
Issue: ABA’s motion for a stay pending appeal to pause the Consumer Financial Protection Bureau’s (CFPB) final rule implementing Section 1071 of the Dodd-Frank Act.
Case Summary: A Fifth Circuit panel (Judges Jerry Smith, Carl Stewart and Stuart Duncan) granted ABA’s motion for a stay pending appeal in its lawsuit challenging CFPB’s Section 1071 final rule.
Section 1071 of the Dodd-Frank Act amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to collect and report thirteen data points to CFPB regarding credit applications by women-owned, minority-owned and small businesses. Section 1071 also authorizes CFPB to require additional data collection, but only if such data “would aid in fulfilling the purposes” of Section 1071.
On Aug. 26, 2024, Judge Randy Crane denied ABA’s motion for summary judgment, ruling CFPB acted within its authority under the Dodd-Frank Act and that the 1071 final rule is neither arbitrary nor capricious under the APA. On Oct. 23, 2024, ABA filed a notice of appeal and asked the Fifth Circuit to grant a stay pending appeal. In its motion, ABA argued that its claims — that the 1071 final rule exceeds CFPB’s statutory authority and is arbitrary and capricious — are likely to succeed on the merits. ABA also argued its members would face irreparable harm without a stay, the balance of equities heavily favors a stay, and a temporary stay is warranted while the Fifth Circuit considers the motion.
The case was scheduled for oral arguments before the Fifth Circuit on Feb. 3. However, due to Acting Director Bessent’s freeze order, counsel for CFPB appeared and informed the panel that new leadership had instructed them not to participate in litigation, except to seek a pause in proceedings. The panel then requested both parties to submit, in writing, their stance on the case’s status. In response, CFPB stated that it no longer opposes ABA’s motion for a stay pending appeal to postpone the compliance deadlines for the 1071 final rule by 90 days. This pause will allow the Acting Director time to consider the issues at hand. Consequently, the Fifth Circuit granted ABA’s motion for a stay pending the appeal, but this decision is subject to modification at any time. As a result, the compliance deadlines for the 1071 final rule are effectively paused for the plaintiffs and intervenors involved in the litigation.
The case was slated for oral arguments before the Fifth Circuit on Feb. 3. However, based on Acting Director Bessent’s freeze order, CFPB counsel appeared and, without addressing the merits of the case, notified the panel that they had been instructed by new leadership not to make any appearances in litigation except to seek a pause in proceedings. The panel then directed each side to announce, in writing, its posture on the status of the case. In response, CFPB stated in writing that it no longer opposes ABA’s motion to stay the 1071 final rule’s compliance deadlines (the first of which is in July 2025) for 90 days to give the acting director time to consider the issues. However, the Fifth Circuit granted ABA’s motion for a stay pending the appeal, but subject to modification at any time. As a result, the 1071 final rule’s compliance deadlines are tolled for members of the plaintiffs and intervenors in the litigation from Oct. 23, 2024, until the Fifth Circuit issues its merits ruling.
Bottom Line: CFPB’s status update is due March 5, 2025.
Documents: Order
