Once again, hard work, constant vigilance, and staying true to ICBA’s one mission of serving only community banks has paid off as we continue to challenge and make meaningful headway with the Consumer Financial Protection Bureau’s Section 1071 small-business rule.
Successful Court Decision: The U.S. District Court for the Southern District of Texas today granted a request from ICBA, the Independent Bankers Association of Texas (IBAT), and Texas First Bank to expand injunctive relief from the CFPB’s 1071 final rule to all community banks nationwide. Today’s court decision provides a nationwide injunction to all community banks and covered financial institutions, ensuring relief is not limited by trade association membership.
Response to Court Filings: When the CFPB argued in federal court that injunctive relief from the 1071 final rule should be limited to only some banks on the basis of trade association membership, ICBA, IBAT and Texas First Bank swiftly responded. We sought injunctive relief for all community banks in a motion to intervene and in a separate complaint filed with the court this summer. ICBA separately sent a letter to the CFPB reiterating its prior calls for the agency to stay the effective date of its 1071 rule for all covered financial institutions pending a court challenge to the constitutionality of the bureau’s funding structure.
Impact: Today’s court decision reflects what ICBA has long said—the implementation of the bureau’s 1071 rule should be suspended for all community banks subject to the final rule until the constitutionality question is resolved. The U.S. Supreme Court is currently reviewing a U.S. Court of Appeals for the Fifth Circuit decision that the CFPB’s funding structure violates the Constitution’s appropriations clause and separation of powers, so today’s ruling will help promote regulatory certainty for our industry.
1071 Rule Background: The CFPB’s 1071 rule requires lenders to collect and report data on credit applicants, including the race, sex, and ethnicity of the principal owners as well as gross annual revenue. While the CFPB has the authority to exempt any class of financial institutions from the standards it develops and to limit mandatory data points to those required by the law, it has opted to apply the rule to the vast majority of community banks and to require data points far exceeding those required by law.
Ongoing Congressional Advocacy: ICBA has long opposed the 1071 data collection and reporting requirements and strongly supports a congressional resolution to nullify the rule, which passed through the Senate earlier this month and through the House Financial Services Committee in July. The resolution would reverse the harm of the rule and require the CFPB to craft a new rule that preserves the flow of credit to small businesses.
Grassroots Tools: While ICBA continues working with policymakers to enact relief from the 1071 rule, community bankers can use ICBA’s Be Heard grassroots action center to urge their lawmakers to advance the resolutions. ICBA also offers customizable resources that community bankers can use to educate and engage their customers on the ICBA-opposed 1071 rule, including a recently added handout for small-business customers.
Thank you for all of your efforts to challenge this misguided CFPB rule. Let’s keep fighting to ensure community banks can continue meeting the needs of the nation’s small businesses.
