CORPUS CHRISTI, Texas– Following a motion by three credit union entities, the U.S. District Court for the Southern District of Texas has issued an order expanding its initial injunctive relief so that the CFPB’s 1071 rule is stayed for all financial institutions covered by the rule.
Section 1071, part of the Dodd Frank Act, was finalized by the CFPB in March and requires financial institutions to collect and report certain data on applications for credit by small businesses. The data to be collected includes information on geographic and demographic data, lending decisions, and the price of credit.
Even prior to the final rule’s adoption by the CFPB there was strong pushback by both banks and credit unions, with the former first to file a lawsuit that led to partial injunction for banks that are members of the American Bankers Association and the Texas Bankers Association, along with Rio Bank..
But on Aug. 10 CUNA, the Cornerstone League and Rally Credit Union of Corpus Cristi, Texas filed a motion to intervene and then a joinder to an emergency motion for preliminary injunction to obtain parity for credit unions.
‘Large Compliance Costs’
“Today’s decision levels the playing field when it comes to implementing the CFPB’s rule, which is very important for credit unions facing large compliance costs due to this rule, while also working to serve members,” CUNA President/CEO Jim Nussle said in a statement. “The burdensome requirements of this rule—combined with the significant questions about the constitutionality of the CFPB’s funding—created too much uncertainty in the marketplace, especially when credit union products and services are needed by members and businesses more than ever. Thank you to the Cornerstone League and Rally Credit Union for joining us in this victory for all credit unions that lend to small businesses.”
Other Statements
Others issuing statements in response include:
- “We are grateful for the opportunity to partner with CUNA and Rally Credit Union to stop the implementation of the 1071 rule,” said Jim Phelps, Cornerstone League EVP and chief advocacy officer. “Credit unions were preparing for a significant compliance burden with this rule, so the court’s decision is welcome news indeed.”
- “We appreciate the court’s decision to provide Rally the same relief from Rule 1071 as was provided to our bank peers,” said Dana Sisk, president/CEO of Rally Credit Union. “This decision helps Rally continue offering affordable financial services to small businesses across South Texas.”
Joint CUNA/NAFCU Letter
As CUToday.info reported earlier, CUNA and NAFCU sent a letter to the CFPB in August ahead of the legal action that called on the Bureau to voluntarily delay implementation of 1071 for all covered lenders that raised concerns over the “uneven implementation of the rule” and saying it “is in violation of the purpose of both the rulemaking and the Bureau itself.”
The CFPB declined to delay the rule.