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Credit Union National Association (CUNA), together with the Cornerstone League and Rally Credit Union, filed a motion to intervene in litigation challenging the Consumer Financial Protection Bureau’s (CFPB) section 1071 rule in the U.S. District Court for the Southern District of Texas.
The court issued a preliminary injunction prohibiting implementation and enforcement of the rule. However, it limited the scope of the injunction to only members of the American Bankers Association (ABA) and Texas Bankers Association (TBA), which filed the initial challenge requesting a broader national injunction.
By submitting the motion, Rally Credit Union, CUNA and the Cornerstone League are fighting for parity on behalf of all credit unions so that both the courts and the CFPB consider credit unions’ unique member owned cooperative structure and give them equal relief to what the court has already given to members of the ABA and TBA.
The CFPB’s 1071 rulemaking requires financial institutions to collect and report certain data on applications for credit for small businesses. The implementation would affect all covered financial institutions that provide business loans, and the motion aims to broaden the preliminary injunction to cover all affected entities – including credit unions.
“Our motion to intervene in the Texas suit is critical step in protecting credit unions and the people we serve from an unfair and scattershot implementation of the 1071 Rule,” said CUNA President/CEO Jim Nussle. “Credit unions nationwide need and deserve the same injunctive relief granted to banks while important questions about the constitutionality of the CFPB’s funding structure are being considered by the U.S. Supreme Court. This is an issue that affects all covered financial institutions who serve small businesses, and the injunction should apply broadly.”
“We join CUNA and Rally Credit Union in our staunch opposition of the Court’s narrow injunction as it gives an unfair advantage to banks and unfairly skews the grounds on which credit unions can serve their members,” said Jim Phelps, EVP and chief advocacy officer at Cornerstone League. “This is an issue that affects all financial institutions that serve small businesses and the injunction should unilaterally apply.”
“As a not-for-profit credit union serving South Texas since 1955, Rally Credit Union is proud to provide affordable credit for women-owned, minority-owned, and small businesses,” said Dana Sisk, president/CEO, Rally Credit Union. “We support the goals of the Consumer Financial Protection Bureau’s section 1071 rule, and we seek to provide all members with fair and equitable financial opportunities. However, we are concerned about the potential for those members to experience substantial increases in borrowing costs due to the burdensome data collection requirements of this rule.”
“We are asking the court to help us continue serving the borrowing needs of small business owners in South Texas by granting us the same relief that it granted to our banking peers in its recent ruling,” Sisk added.
The rule is scheduled to go into effect August 29, with staggered compliance dates depending on certain criteria. The preliminary injunction will postpone implementation and enforcement of the rule will be postponed until questions about the CFPB’s constitutional structure are resolved by the Supreme Court, or the injunction is lifted, whichever comes first.