CFPB should delay 1071 rule implementation for all covered entities

Credit union association leaders are working together to delay the Consumer Financial Protection Bureau (CFPB) from enforcing and implementing its final rule on section 101 of the Dodd-Frank Act. CUNA and NAFCU wrote a joint letter outlining concerns and requesting the delay of the rule – which required collection of data on certain loans -  is scheduled to take effect on August 29, with compliance dates staggered depending on certain criteria.

The U.S. District Court for the Southern District of Texas has granted a preliminary injunction to the rule in response to a challenge from the American Bankers Association, but the decision applies only to ABA members.

“While the Court determined that a limited injunction was appropriate based on the facts offered by plaintiffs, we ask that you consider a broader set of circumstances that prioritizes consistency in the implementation of this rule as the collection of reliable data regarding small business lending requires consistent reporting among covered financial institutions to ensure fair and accurate peer comparisons. As the Final Rule acknowledges, “smaller financial institutions may face particular difficulties that justify providing them additional time to comply with the rule.”4 With this principle in mind, the CFPB should consider the competitive impact of granting compliance relief only to certain banks.

CUNA and NAFCU highlight that the decision provides “substantial regulatory relief” for the banks covered by the decision, relief that smaller community financial institutions aren’t eligible for.

“Given the effect of the Order on the overall distribution of compliance burdens across the financial sector, we ask that you consider broader relief,” the letter reads. “Specifically, we ask that you take action to provide the same injunctive relief to all covered financial institutions as afforded to the plaintiffs in the Order.”

The organizations also note the U.S. Supreme Court is currently scheduled to hear arguments in a challenge to the CFPB’s funding structure in October, so extending the injunctive relief would not cause significant disruption.

Additional analysis on the Order is available on CUNA’s CompBlog.