October 27, 2023

Court issues nationwide stay of CFPB’s 1071 rule

Govt building columnsThe U.S. District Court for the Southern District of Texas Thursday issued an order expanding its suspension of the CFPB’s 1071 rule to apply to all financial institutions, including credit unions, covered by the rule. The implementation is delayed until the Supreme Court rules on the constitutionality of the bureau’s funding structure.

The court’s initial stay applied only to members of the banking trade groups that sued. The expanded order comes in response to a motion to intervene filed by CUNA, the Cornerstone League, and a Texas-based credit union. A similar lawsuit was filed by banking groups in Kentucky, where the court also issued a stay.

The rule implements section 1071 of the Dodd-Frank Act and would require banks to collect data on small businesses that apply for loans. NAFCU consistently expressed opposition to the rule, noting its requirements would likely stifle credit unions’ small business lending. The association is supportive of legislative efforts to undo the rule; the Senate last week passed a Congressional Review Act (CRA) resolution to do so.

NAFCU, other financial trades, and lawmakers had called on the CFPB to provide a nationwide stay of the effective date of the rule, flagging the disparity that exists for covered institutions. The association will continue to engage the bureau and lawmakers on the issue to obtain regulatory relief for credit unions.

The Supreme Court heard oral arguments in the bureau’s funding constitutionality case Oct. 3, though a decision is not expected until 2024. A recent episode of NAFCU’s Credit Union Policy Podcast provides a recap of the hearing.