CFPB Defends Small Business Lending Rule in Cross-Motion for Summary Judgment
The Consumer Financial Protection Bureau (CFPB) has filed a cross-motion for summary judgment in the ongoing lawsuit challenging its small business lending data collection and reporting rule, also known as the 1071 rule. The Bureau argues that the additional data points included in the Rule are authorized by the Dodd-Frank Act and are necessary to fulfill the purposes of the Act.
In its cross-motion, the CFPB makes the following key arguments:
1. The CFPB's authority to include additional data points was expressly mandated by Dodd-Frank, which allowed the Bureau to identify data points that would aid in fulfilling the purposes of Section 1071.
2. The CFPB acted reasonably in including the additional data points, explaining how each piece of data would contribute to the statutory purposes, such as offering insights into underwriting disparities and facilitating fair lending enforcement.
3. The CFPB reasonably considered the costs and benefits of the Rule, taking into account feedback from financial institutions and small businesses, and implementing exceptions to lighten the compliance burden, especially for smaller entities.
The Bureau also challenges the plaintiffs' assertions that the Rule's data collection requirements are inappropriate for the small business lending industry and that the Rule will lead to a decrease in credit availability for small businesses.
The plaintiffs' response and reply to the CFPB's cross-motion is due by May 10, 2024, with the CFPB's reply to plaintiffs due by June 7, 2024. The outcome of the case, along with similar challenges in Kentucky and Florida, will be influenced by the Supreme Court's ruling in CFSA v. CFPB regarding the constitutionality of the CFPB's funding structure.
Our Opinion:
Alternative lenders should closely monitor these legal developments, as the 1071 rule, if implemented, could require significant changes to their data collection and reporting practices. The resolution of these cases will provide greater clarity on the regulatory landscape and compliance requirements for small business lenders in the coming years.
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