On June 25th, the CFPB issued an interim final rule with a request for public comment extending the compliance dates for the Small Business Lending Rule in light of the Supreme Court’s decision finding the funding structure of the CFPB to be constitutional in CFPB v. Community Financial Services Association of America (CFSA). The CFPB previously issued informal guidance indicating that an interim final rule was forthcoming. Consistent with the order of the Texas federal district court in a case challenging the rule, the CFPB extended the compliance dates by 290 days (the amount of time the rule was stayed by the lower court pending the Supreme Court’s decision).
The extended compliance dates are effective 30 days after publication of the interim final rule in the Federal Register. As of the date of this blog post, the interim final rule has not yet published in the Federal Register.
The extended compliance dates are set forth below:
According to the interim final rule, covered financial institutions may use the volume of small business originations from 2022 and 2023 or 2023 and 2024 to determine the applicable compliance tier. The final rule adds new § 1002.114(c)(3) in connection the alternative period for counting covered originations.
The interim final rule does not make any changes to the submission deadline, which remains June 1 of the following calendar year in which the data is collected. Likewise, the CFPB’s grace period policy remains intact. During the grace period the CFPB does not intend to exercise its supervisory and enforcement discretion or assess any penalties for data reporting errors for the first 12 months after a covered financial institution’s initial compliance date (for those covered financial institutions subject to CFPB supervision and enforcement).
The interim final rule provides the following grace periods:
Similarly, the interim final rule does not change the ability of covered financial institutions to collect data early. Demographic data may be collected up to one year prior to the compliance date, affording covered financial institutions the opportunity to test their systems and procedures.
In addition, the CFPB’s small business lending data submission platform will be available and open for beta testing beginning this August. The CFPB encourages any entity interested in participating in the beta testing to sign up for updates on the agency’s Small Business Lending Rule webpage. The CFPB is revising the text of the final rule and commentary to account for these extended deadlines.
As a reminder, lawsuits challenging the rule that were filed in Texas, Kentucky and Florida were stayed until the Supreme Court’s decision in CFPB v. CFSA. The plaintiffs will seek leave to amend their filings consistent with the decision in CFPB v. CFSA and these cases will now move forward. We will continue to monitor the status of these cases, which could still have an impact on the compliance dates noted above.
Our CFS attorneys continue to assist financial institutions in preparing for the upcoming compliance dates. We continue to monitor updates to the CFPB’s Small Business Lending Rule.
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