The Consumer Financial Protection Bureau (CFPB) has announced that it will deprioritize the enforcement of its rule requiring financial institutions to report their lending to women-owned, LGBTQI+-owned, and minority-owned small businesses. This decision is made in the interest of reallocating resources to support American taxpayers, servicemen, veterans, and small businesses more effectively. The agency believes that enforcing the rule against entities not protected by a court’s stay, while others are protected, would be unfair.
The stay currently applies only to plaintiffs and intervenors in a lawsuit challenging the rule. Key plaintiffs include members of the American Bankers Association, the Independent Community Bankers of America, and America’s Credit Unions.
Background of the Rule
In March 2023, the CFPB finalized what is informally known as the Section 1071 Rule, which is rooted in the Dodd-Frank Act’s requirement for financial institutions to report on small business lending. The rule targets financial institutions that have originated at least 100 covered small business loans in each of the two previous years. Compliance dates for the rule vary based on lending volume, with deadlines set for July 18, 2025, January 16, 2026, and October 18, 2026.
Legal Challenges and Court Decisions
The initial compliance dates were delayed following a ruling by the U.S. District Court for the Southern District of Texas in response to a lawsuit filed by a Texas banking trade association and a Texas bank. The lawsuit raised issues about the CFPB’s funding structure, the bureau’s statutory authority, and the accuracy of data used to estimate implementation costs. Although the U.S. Supreme Court later upheld the constitutionality of the CFPB’s funding structure, the district court proceeded with the other aspects of the case.
In September 2024, the district court issued a summary judgment in favor of the CFPB, prompting the plaintiffs to appeal to the U.S. Court of Appeals for the Fifth Circuit. They requested a stay pending appeal and the tolling of compliance deadlines. Coinciding with the inauguration of a new President on January 20, 2025, the CFPB was instructed by new leadership to pause its litigation appearances, leading to the Fifth Circuit Court of Appeals granting a stay.
Legislative Efforts Against the Rule
The rule has not only faced legal challenges but also political opposition. House Republicans are backing a bill introduced by House Small Business Committee Chairman Rep. Roger Williams, R-Texas, which aims to repeal the rule entirely. Previously, both the House and Senate voted to nullify the rule under the Congressional Review Act, only to be vetoed by then-President Joe Biden. Unlike Congressional Review Act legislation, a bill to repeal Section 1071 would require overcoming a filibuster in the Senate, needing 60 votes.
Future of the Section 1071 Rule
The CFPB has expressed intentions to reopen rulemaking on the Section 1071 rule, indicating potential revisions in light of ongoing challenges. As the legal and political landscape continues to evolve, financial institutions remain in a state of uncertainty regarding compliance and future requirements.
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Note: This article is inspired by content from https://www.consumerfinancemonitor.com/2025/05/13/cfpb-wont-make-small-business-reporting-rule-a-priority/. It has been rephrased for originality. Images are credited to the original source.