Section 1071 litigation
Revenue Based Finance Coalition v. Consumer Financial Protection Bureau
Date: April 3, 2025
Issue: The Consumer Financial Protection Bureau’s (CFPB) plan to initiate new rulemaking for its final rule implementing Section 1071 of the Dodd-Frank Act.
Case Summary: In CFPB’s response to Revenue Based Finance Coalition’s (RBFC) unopposed motion to stay the 1071 final rule, the bureau stated it plans to initiate a new 1071 rulemaking “as expeditiously as reasonably possible.”
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. The 1071 final rule did not seek to exclude Merchant Cash Advances (MCAs) from the collection and reporting requirements.
On Dec. 26, 2023, RBFC sued CFPB, alleging it exceeded its authority in promulgating the 1071 final rule because MCAs are not “credit” under the ECOA. RBFC also claimed the rule is arbitrary and capricious under the APA, because CFPB only chose to regulate MCAs to “level the playing field” for competitors of MCA providers and failed to consider RBFC’s public comments during the rulemaking process properly.
On Feb. 17, 2025, A Florida federal magistrate judge recommended granting CFPB summary judgment and denying RBFC’s motion for summary judgment. On March 13, 2025, RBFC filed its motion to stay the 1071 final rule and hold proceedings in abeyance.
In its response, the CFPB stated that its new leadership reviewed the 1071 final rule and the legal issues raised in this case to determine CFPB’s position. Following this review, the CFPB announced plans to begin a new rulemaking process for the 1071 rule. The bureau agreed with RBFC that this upcoming rulemaking could resolve or render the litigation moot and argued that placing the case in abeyance would preserve judicial resources.
Bottom line: The CFPB also noted that several courts have recently stayed compliance dates for its rules, including in ABA’s lawsuit challenging the same 1071 rule. Based on those rulings, the CFPB urged the court to extend similar relief to RBFC by staying the rule’s effective date.
Document: Response
