September 18, 2023

Kentucky court halts 1071 enforcement until after SCOTUS decision

gavelA federal court in Kentucky delayed enforcement of the CFPB’s small business lending data reporting rule until the Supreme Court rules on the constitutionality of the bureau’s funding structure. The Supreme Court is scheduled to hear arguments for the case Oct.  3.

The plaintiffs in the lawsuit include the Kentucky Bankers Association and some local banks. A similar lawsuit was brought in Texas.

Of note in the U.S. District Court Eastern District of Kentucky’s decision, the court cited unrecoverable compliance costs, including training programs, seminar fees, staff time, and new software.

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.

NAFCU, other financial trades, and lawmakers have called on the CFPB to provide a nationwide stay of the effective date of the rule, flagging the disparity that exists for covered institutions.