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Financial Services Law Insights and Observations

CFPB opposes Texas bankers’ request to delay small biz lending rule

Courts CFPB Small Dollar Lending Section 1071 Dodd-Frank Funding Structure Administrative Procedure Act


The CFPB recently asked a district court in the 5th Circuit to deny a proposed injunction which would delay the implementation of its small-business lending data collection rule, arguing that plaintiffs have failed to establish standing or meet the requirements for preliminary relief. As previously covered by InfoBytes, plaintiffs (including a Texas banking association and a Texas bank) sued the Bureau, challenging the agency’s final rule on the collection of small business lending data. The small business lending rule, which implements Section 1071 of the Dodd-Frank Act, requires financial institutions to collect and provide to the Bureau data on lending to small businesses with gross revenue under $5 million in their previous fiscal year.

Plaintiffs explained in their complaint that the goal of invalidating the final rule is premised on the argument that it will drive from the market smaller lenders who are not able to effectively comply with the final rule’s “burdensome and overreaching reporting requirements” and decrease the availability of products to customers, including minority and women-owned small businesses. Plaintiffs also argued that the final rule is invalid because the Bureau’s funding structure is unconstitutional and that certain aspects of the final rule allegedly violate various requirements of the Administrative Procedure Act. Last month, plaintiffs filed a preliminary injunction motion asking the court to enjoin the final rule and stay the compliance deadlines.

Claiming plaintiffs failed to establish standing for preliminary relief, the Bureau argued that the Texas bank has not demonstrated that it would even have to comply with the final rule. The Bureau further maintained plaintiffs have also not satisfied all four factors required for preliminary relief, including that plaintiffs “have not shown that irreparable harm is imminent or that the balance of equities favors the requested relief,” which would lead to the postponement of reporting requirements mandated by Congress more than ten years ago. With respect to the funding structure constitutionality concerns raised by plaintiffs, the Bureau argued that “even assuming that [p]laintiffs have shown a likelihood of ultimately succeeding on the merits … that factor standing alone would not be enough to warrant preliminary relief.” The Bureau asked the court to, at a minimum, tailor any relief to apply only to plaintiffs and members who would face imminent harm absent such relief.