AUSTIN, Texas–The Texas Bankers Association (TBA) has filed suit against the Consumer Financial Protection Bureau (CFPB) seeking to block a new rule that requires lenders to collect data on loan applications from minority, LGBTQ+ and women-owned small businesses.
The lawsuit argues the rule—technically known as the Dodd Frank Act’s Section 10171--would overly burden and drive small lenders from the market.
The co-plaintiff in the lawsuit is Rio Bank, a minority depository institution in McAllen, Texas. The suit seeks declaratory and injunctive relief.
“CFPB has taken three pages of legislation requiring 13 data points and turned it into nearly 900 pages of regulation requiring 81 data points. CFPB repeatedly exceeds its authorities and ignores required rulemaking law because its unconstitutional funding and leadership structure make it accountable to no one,” said TBA President and CEO Chris Furlow.
In a statement on its website the bankers’ group said the rule will require practically all small business borrowers to be questioned on personal information then reported back to CFPB, “which recently exposed data on nearly a quarter million consumers” (as reported by CUToday.info here).
‘Ignored’ The Real Impact
“CFPB has failed to accurately account for, or simply ignored, the real impact that 1071 will have on small business borrowers and community banks, instead proffering a methodological explanation so bureaucratic and unintelligible that it would be laughable if it were not so serious,” the TBA said. “Even the Biden Administration’s own Small Business Administration said of CFPB’s 1071 rule plans, quote: ‘CFPB’s approach may be unnecessarily burdensome to small entities, may impact the cost of credit for small businesses and may lead to a decrease in lending to small, minority- and women-owned businesses’.”
The Texas Bankers Association said the 1071 Final Rule will be an “albatross to community banks, forcing them to purchase costly systems to support flawed data schemes, and they will have to put more personnel and resources toward reporting to Washington rather than lending in the community. It is unfortunate that the courts are currently the only recourse to challenge a virtually untouchable agency that believes it can hold everyone to account but itself.”
‘It Doesn’t Take a Statistician’
In its statement, the TBA further asked, “Does expanding the original 13 data points set by the Congress into 81 make it easier for small business borrowers? Does forcing community banks to collect 81 data points make them spend more resources on lending or compliance? It doesn’t take a statistician to figure out that the 1071 final rule will hurt both small business borrowers and community banks.”
The lawsuit asks the court to enjoin CFPB’s 1071 implementation in light of the Fifth Circuit’s ruling that the CFPB’s funding structure “violates” the U.S. Constitution and is void in Texas and other states.