WASHINGTON—The CFPB’s small business lending data collection rule should be set aside, according to America’s Credit Unions, Cornerstone League, Rally Credit Union, and other organizations that filed a consolidated motion for summary judgement in the U.S. District Court for the Southern District of Texas.
As CUToday.info reported in August 2023, the two trade groups and the credit union joined to file a motion to intervene in litigation challenging the Consumer Financial Protection Bureau’s section 1071 rule in the U.S. District Court.
As CUToday.info also reported earlier, the court has issued a preliminary injunction prohibiting implementation and enforcement of the rule, but it limited the scope of the injunction to only members of the American Bankers Association (ABA) and Texas Bankers Association (TBA), which filed the initial challenge requesting a broader national injunction.
The CFPB finalized its rule requiring financial institutions to collect and report certain data on applications for credit for women-owned, minority-owned, and small businesses in March 2023. However, implementation of the rule was stopped as a result of the cases filed with the court.
‘Ignored’ the Warnings
“The CFPB decided to ignore all of the warnings regarding costs and instead to require the collection and reporting of 81 data points, whatever the cost and however dubious the benefit. The CFPB did not substantiate that the Final Rule’s requirement that lenders collect 68 additional data points would serve any benefit, and it certainly did not provide a reasonable basis for concluding that any ‘qualitative benefit’ justified the costs,” wrote the organizations. “For this reason, the Final Rule is arbitrary and capricious and should be set aside.”
What’s Being Requested
Specifically, the motion argues the final rule:
- Exceeds the CFPB’s statutory authority
- Fails to consider significant aspects of stakeholder concerns, and will likely decrease credit availability
- Accounts for the costs and benefits of the rule in an “arbitrary and capricious manner” that fails to consider significant real-world costs to regulated financial entities
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