The Consumer Financial Protection Bureau’s small business lending data collection rule is now on pause nationwide after a Texas federal judge expanded an order that previously applied only to certain banks.
Chief Judge Randy Crane of the US District Court for the Southern District of Texas in July imposed a preliminary injunction stopping the CFPB from requiring members of the American Bankers Association, Texas Bankers Association, as well as Rio Bank of McAllen, Texas, to comply with the regulation. Crane said the injunction would hold until the US Supreme Court made its ruling on the constitutionality of the CFPB’s independent funding.
But a host of industry groups, including the Independent Community Bankers of America and the Credit Union National Association, filed motions to intervene in the case, arguing they were put at a competitive disadvantage by Crane’s move to spare some, but not all, companies subject to the rule.
Crane expanded the injunction nationwide on Thursday, covering all banks, credit unions, fintechs, and other lenders under the CFPB’s purview. Allowing some lenders to avoid complying with the new data collection law “leaves non-exempted lenders subject to the discretion of an agency whose very ability to act is a matter of constitutional concern pending resolution on a nationwide scale,” Crane said.
The CFPB opposed a nationwide ban, arguing it would bar the agency from answering compliance questions raised by lenders. Crane said in his order the CFPB could still field questions and post compliance bulletins and other information on its website.
The CFPB declined to comment.
“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 and CEO Jim Nussle said in a statement.
The CFPB’s small business data collection rule, which went into effect in August, was mandated under Section 1071 of the Dodd-Frank Act. It requires lenders that make at least 100 small business loans a year to collect the race, gender, and other demographic characteristics of borrowers, similar to data they collect for mortgages.
A Kentucky court imposed its own nationwide injunction on the rule in September, pending the Supreme Court’s ruling in Community Financial Services Association of America v. CFPB. The high court is expected to rule in the first half of 2024.
The Senate voted Oct. 18 to overturn the CFPB’s rule using the Congressional Review Act, which would also block similar regulations in the future. Several Democrats joined with Republicans in the chamber to pass the measure (S. J. Res. 32), which drew a White House veto threat.
The case is Texas Bankers Association v. CFPB, S.D. Tex., No. 7:23-cv-00144, Order Granting Intervenors’ Motion for a Preliminary Injunction 10/26/23.
