On February 17, the U.S. District Court for the Southern District of Florida’s Magistrate Judge Eduardo I. Sanchez recommended rejecting a trade association’s challenge to the CFPB’s Section 1071 small business lending data rule. The magistrate judge’s report and recommendation, issued on cross motions for summary judgment, addressed the trade association’s challenge averring, among other things, the Bureau’s rule wrongfully included merchant cash advances and violated the APA. The motions were referred to Judge Sanchez by another U.S. district court, and Magistrate Judge Sanchez recommended to deny the trade association’s motion for summary judgment and grant the Bureau’s cross-motion for summary judgment.
The trade association challenged the rule, which would require financial institutions to collect and report to the CFPB data regarding, among other things, demographics, geographic information, and pricing of small business loan applicants (covered by InfoBytes here) on two separate grounds. First, the trade association alleged the Bureau exceeded its authority in promulgating the rule because merchant cash advances are not “credit” as defined in the ECOA. Second, the trade association alleged the rule was arbitrary and capricious under the APA because the Bureau only included merchant cash advances to “level the playing field” for competitors and because the Bureau did not properly consider the trade association’s public comments in promulgating the rule. The court rejected both arguments, finding merchant cash advances did constitute “credit” under the ECOA and the Bureau acted within its authority and adequately considered public comments, including those from the trade association.
