In a court filing today, the Consumer Financial Protection Bureau said its leadership has directed staff to initiate new rulemaking to implement Section 1071 of the Dodd-Frank Act and plans to soon release a proposal to possibly replace or change its current rule.
The CFPB in 2023 released a final rule implementing Section 1071, which requires financial institutions to report data on small-business lending. Critics said the rule was unwieldy and would create numerous compliance headaches, especially for smaller institutions. Several lawsuits followed, including one brought by the Texas Bankers Association and American Bankers Association. The CFPB was also sued by the Revenue Based Finance Coalition in U.S. District Court for Southern Florida. In a filing today in that case, the CFPB noted that its leadership has changed since the original rule was finalized, with Office of Management and Budget Director Russ Vought currently serving as the bureau’s active director. The bureau asked the court to suspend any further action until it has proposed a new rule.
“New leadership has been assessing the final rule and the issues that this case presents to determine the CFPB’s position,” the bureau said in its filing. “CFPB’s new leadership has directed staff to initiate a new Section 1071 rulemaking. The CFPB anticipates issuing a Notice of Proposed Rulemaking as expeditiously as reasonably possible. Because the anticipated rulemaking process may moot or otherwise resolve this litigation, holding this matter in abeyance would conserve the court’s resources.”
The CFPB did not elaborate on when the proposed rulemaking would be released or what it would contain. The bureau proposed submitting reports to the court every 90 days during the rulemaking process, with the parties in the case conferring within 30 days of a new final rule to decide whether they want to proceed with the lawsuit.
An ABA spokesperson said in a statement that the association welcomes the CFPB’s decision to begin new rulemaking, which 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.”
