The Sweet Escape: CFPB Won’t Prioritize Enforcement of Section 1071
From here, I can hear the collective sigh of relief from credit unions now that the CFPB has announced its intention to deprioritize enforcement of its small business lending data collection rule for all entities outside of the stay imposed as part of the ongoing lawsuit challenging the rule. I imagine this announcement is almost as satisfying as learning the identity of the scoundrel who won't clear his used coffee pods from the break room's Keurig.
This blog discusses the legal developments of this controversial rule and how it applies to credit unions.
BRIEF HISTORY Section 1071 of Dodd Frank mandates financial institutions, including credit unions, to collect and report certain data on applications for credit extensions to minority-owned, women-owned, and small businesses. With credit unions believing the rule creates unduly compliance burdens, America's Credit Unions, the Cornerstone League, and Rally Credit Union joined a lawsuit (Texas Bankers Association v. CFPB) against the rule in the U.S. District Court of the Southern District of Texas. After a denial of a motion for summary judgment, the case was appealed to the Fifth Circuit.
The Fifth Circuit granted plaintiff's motion for a stay (temporary suspension of legal proceedings) pending the appeal. The granted stay only applies to plaintiffs and intervenors (parties of this lawsuit). As America's Credit Unions is an intervenor, the stay applies to all members of America's Credit Unions.
LEGISLATURE In February 2025, Sen. John Kennedy, R-La. Introduced a bill which would repeal the CFPB's small business data collection rule under Section 1071 of Dodd-Frank. House Small Business Committee Chairman Roger Williams, R-Texas, introduced the House version of the bill.
CFPB On April 30, 2025, The Consumer Financial Protection Bureau (CFPB) announced with respect to the Small Business Lending Rule aka Section 1071, it will not prioritize enforcement or supervision actions with regard to entities that are presently outside the stay (not plaintiffs or intervenors), imposed under Texas Bankers Association v. CFPB.
In a recent news release, the CFPB stated:
"The Bureau will instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans. The Bureau takes this step in the interest of focusing resources on supporting hard-working American taxpayers, servicemen, veterans, and small businesses. Even absent resource constraints, the Bureau would deprioritize enforcement of this rule because of the unfairness of enforcing it against entities not protected by the court's stay but similarly situated to parties that are protected by the stay. The Bureau looks forward to resolving the status of this regulation and ensuring fair, consistent treatment for all entities impacted by the regulation."
The Bureau notes "resource constraints" on their enforcement ability and is possibly a reference to recent attempts at staff reductions at the Bureau.
Impact on America's Credit Union's members?
While America's Credit Unions' members are already covered by the stay and not directly affected by the CFPB's announcement, the announcement further reinforces the likelihood that credit unions will not need to implement the requirements of the 1071 rule as it is written today.
If you have any questions concerning this blog, please contact the Compliance Team using compliance@americascreditunions.org.
