As you know, ICBA has strongly opposed the 1071 rule for years, and we’re going to continue to fight to protect community banks and small businesses from this harmful and burdensome regulation. Even before the final rule was published, we engaged in a wholistic strategy to have the rule fully repealed or at a minimum, revised, to protect our industry.
We have noticed increased confusion and misinformation around rule 1071 related to who is required to comply and who may be temporarily exempt from the current implementation period. We want to set the record straight and provide the facts.
The Consumer Financial Protection Bureau (CFPB) issued the final 1071 rule on March 30, 2023. When it did so, the bureau failed to consider the hundreds of comment letters received or the resulting deleterious impact the rule will have on small business lending and the nation’s economy. The final rule provides implementation dates by which banks and other financial institutions will need to comply as follows:
- A covered financial institution that originated at least 2,500 covered credit transactions for small businesses in each of calendar years 2022 and 2023 shall comply beginning Oct. 1, 2024.
- A covered financial institution that originated less than 2,500 but at least 500 covered credit transactions for small businesses in each of calendar years 2022 and 2023 shall comply beginning April 1, 2025.
- A covered financial institution that originated less than 500 but at least 100 covered credit transactions for small businesses in each of calendar years 2022 and 2023 shall comply beginning Jan. 1, 2026.
When you review these dates and deadlines, you might be wondering why there is misinformation spreading suggesting community banks need to take certain action if they want to be exempt from the final rule before Oct. 1, 2023. Let me be clear, this is NOT a deadline that has been established by any rule of law or court ruling.
So again, let’s get the facts straight!
Recent Court Filings: As you’ve heard from ICBA, pending court cases targeting the 1071 rule are ongoing. As part of ICBA’s efforts to ensure a recent district court decision granting temporary injunctive relief from the rule applies to all community banks, ICBA, the Independent Bankers Association of Texas (IBAT) and Texas First Bank moved to intervene in the TBA v. CFPB case pending in the U.S. District Court for the Southern District of Texas. The court granted this request, and ICBA, IBAT and Texas First Bank are now asking the district court to enter a preliminary injunction prohibiting the CFPB from enforcing the 1071 rule nationwide or, alternatively, for all ICBA and IBAT members.
CFPB Constitutionality Case: To be clear, the limited injunctive relief recently granted to the Texas Bankers Association (TBA) and American Bankers Association (ABA) is temporary. It is tied to the broader question of the constitutionality of the CFPB’s funding structure, which is pending review by the U.S. Supreme Court in Community Financial Services Association of America, Ltd. v. CFPB. In fact, the court’s order specifically states “that all deadlines for compliance with the requirements of the Final Rule are stayed for Plaintiffs and their members until after the Supreme Court’s final decision in Cmty. Fin. Servs. Ass’n of Am., Ltd. v. CFPB.” So, here’s the bottom line: There is no court order specifying any date by which a bank must be a member of either the TBA or ABA and the U.S. Supreme Court is not expected to decide the CFSA case on October 1. We could speculate on the source and reasoning behind the October 1st rumors, but what we can say with certainty is that ICBA is fighting for community banks every day and we will never set an arbitrary date for community banks to join our membership. ICBA has successfully intervened in the TBA and ABA’s lawsuit, and ICBA is seeking, on an emergency basis, injunctive relief for the community banks excluded from the TBA and ABA’s prior order.
Grassroots Resources: Given the unsettled state of 1071, we continue calling on community bankers to keep up the pressure with policymakers. Community bankers can use ICBA’s Be Heard grassroots action center to urge their lawmakers to support a resolution to block the 1071 rule as well as ICBA’s customizable resources to educate and engage their customers on the issue.
1071 Resources: ICBA recently issued a summary of rule 1071 which lays out the details. In addition to our summary, ICBA also offers more than 100 Q&As about the rule on the ICBA Compliance Vault, while the CFPB offers frequently asked questions and a small entity compliance guide for more information.
While there is much information—and more than a little misinformation—circulating on the state of the 1071 rule and ongoing legal challenges, community bankers can rest assured that ICBA’s multipronged efforts continue to advance on several fronts. While we await the court’s ruling on our motion for injunctive relief, ICBA will continue working to protect community banks from the 1071 rule, and we want to ensure you continue to have the latest and most accurate information on our ongoing efforts to oppose this misguided rule and ensure all community banks are afforded the same temporary relief from its implementation.
