On November 15, the U.S. District Court for the Southern District of Texas overseeing the ongoing legal challenge to the CFPB’s Section 1071 small business lending rule (previously discussed here, here, here, and here), issued an order denying the plaintiff trade groups’ motion to toll the deadlines of the rule while an appeal moves through the Fifth Circuit.
In denying the motion to stay the rule, Judge Crane (who had previously granted the CFPB’s motion for summary judgment) acknowledged the possibility that the rule might be seen as ill-advised, but that alone did not make it unlawful. Since the rule is considered valid, the judge stated that the trade groups failed to show that delaying the compliance date was warranted. He also pointed out that the Fifth Circuit Court has expedited the appeal process and that the case would likely be resolved before the compliance deadline.
The rule requires lenders to provide data on small-business loan applications, which the CFPB will use to support fair lending enforcement and community development. The trade groups contend in their challenge to the rule that Congress never intended for such sensitive commercial information to be made public and that business loans were exempted from similar disclosure requirements under the Truth in Lending Act. The appeals court will hear oral arguments on the matter on February 3, 2025.
Putting It Into Practice: As the litigation progresses, and with compliance deadlines on the horizon (see here for our previous discussion on the amended and current compliance dates), it will be interesting to see what the new Trump administration has planned for the rule. We expect, at the very minimum, that the rule will be paused and re-examined, so that it comports with the new CFPB’s Director’s priorities.
This post was originally published on here
