The Consumer Financial Protection Bureau has officially signaled it plans to rewrite its small business lending data collection rule, known as Section 1071, following major leadership changes earlier this year.
Why it matters: The Section 1071 rule, which expanded the data financial institutions must collect and report on small business lending, has faced strong legal and political opposition. Lenders and trade groups have criticized the rule for overstepping the original Congressional mandate, and multiple courts have stayed its compliance requirements.
Driving the news: In a filing submitted April 3 in a lawsuit brought by the Revenue Based Finance Coalition, the CFPB stated that “CFPB’s new leadership has directed staff to initiate a new Section 1071 rulemaking.” Acting Director Russell Vought confirmed the agency will issue a Notice of Proposed Rulemaking “as expeditiously as reasonably possible.”
- The CFPB requested that the U.S. District Court for the Southern District of Florida stay the current litigation and compliance dates while the new rulemaking process unfolds.
- The Bureau offered to submit status updates every 90 days and inform the court promptly once the process is complete.
Catch up quick:
- The U.S. Court of Appeals for the Fifth Circuit had already stayed the rule’s compliance deadlines for many financial institutions.
- Congress voted to disapprove the rule under the Congressional Review Act last year, but President Biden vetoed the resolution. Congress failed to override the veto.
- New legislation to repeal Section 1071, H.R. 976, has advanced out of the House Financial Services Committee.
What’s next: The CFPB’s statement suggests it may propose a more narrowly tailored Section 1071 rule, one more aligned with the original statutory requirements. Depending on the content and scope of the new rule, the ongoing litigation could become moot.
Zoom out: The CFPB’s pivot reflects the new leadership’s broader reassessment of the agency’s regulatory agenda. With Russell Vought now at the helm, the Bureau appears poised to take a more restrained approach to rulemaking, signaling a potential shift in how it oversees the financial services sector.
