As we have reported previously, including here, here, and here, the CFPB’s section 1071 small business loan data collection and reporting rule is facing court challenges. The U.S. Court of Appeals for the Fifth Circuit has stayed compliance with the rule for many financial institutions.
Most recently, the CFPB filed a response to a motion for a stay by the Revenue Based Finance Coalition in the lawsuit before the U.S. District Court for the Southern District of Florida in which it advised the court that “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.” The rule significantly expanded the data reporting categories specified by Congress and has been subject to criticism from small business lenders and their representatives and members of Congress. Presumably, the CFPB will propose a more limited section 1071 rule.
Last year Congress voted to disapprove the section 1071 rule under the Congressional Review Act, but President Biden vetoed the measure and Congress was unable to override the veto. Efforts are underway in the current Congress to repeal section 1071.
With regard to the motion for a stay of the rule, in its filing the CFPB stated “[b]ecause the anticipated rulemaking process may moot or otherwise resolve this litigation, holding this matter in abeyance would conserve the Court’s resources.” The CFPB also stated that “staying the Final Rule’s effective date and holding the litigation in abeyance would not prejudice any party, as [the CFPB] agree[s] with Plaintiff’s request for relief here.” The CFPB proposed to the court that it submit periodic status reports every 90 days during the pendency of the rulemaking, and advised that it will promptly inform the court when the rulemaking process is complete.
Separately, on April 2 the House Financial Services Committee approved H.R. 976, which would repeal section 1071.
[View source.]
