The bureau’s interim final rule extends the compliance deadlines for small businesses amid court orders in litigation challenging the rule. The litigation was primarily tied to the outcome of the Supreme Court case on the bureau’s funding structure.
06/27/2024 2:55 P.M.
3 minute read
The Consumer Financial Protection Bureau announced dates for small businesses required to comply with its small business lending rule, which was extended after several lawsuits.
The rule requires lenders to disclose credit applications they receive from small businesses, lending decisions and demographic data “in light of court orders in ongoing litigation,” ACA International previously reported.
The rule is to implement Section 1071 of the Dodd-Frank Act directing the bureau to adopt regulations governing the collection of small business lending data.
The final version was released in March 2023 to “to increase transparency in small-business lending, promote economic development, and combat unlawful discrimination.”
Compliance dates for businesses are extended by 290 days, according to a news release from the CFPB
Legal challenges, one in the Eastern District of Kentucky and one in the Southern District of Texas, fought enforcement of the rule because the constitutionality of the CFPB’s funding structure was under review by the U.S. Supreme Court and therefore, the bureau shouldn’t have the authority to enact the regulations.
Judges in the Kentucky and Texas cases granted plaintiffs’ injunctions to put the small business lending rule on hold until the Supreme Court decision in Consumer Financial Protection Bureau v. Community Financial Services Association of America Ltd. was issued.
The 290 days is the time that has passed between the Texas court’s first stay of the rule last year and the Supreme Court’s decision in the CFPB case in May 2024.
The compliance dates are as follows:
- Lenders with the highest volume of small business loans must begin collecting data by July 18, 2025.
- Moderate volume lenders must begin collecting data by Jan. 16, 2026.
- The smallest volume lenders must begin collecting data by Oct. 18, 2026.
According to the CFPB:
“The deadline for reporting small business lending data to the CFPB remains June 1 following the calendar year for which data is collected.
Thus, high volume lenders will first submit data by June 1, 2026, while moderate and low volume lenders will first submit data by June 1, 2027.
Under the interim final rule, lenders may continue using their small business originations from 2022 and 2023 to determine their initial compliance date, or instead use their originations from 2023 and 2024.”
Lenders may also choose to start collecting data earlier—up to one year before their compliance data to test their policies and procedures.
There is also a grace period associated with the updated compliance dates.
“The CFPB does not intend to assess penalties for reporting errors for the first 12 months of collection, and it intends to conduct examinations only to assist lenders in diagnosing compliance weaknesses, so long as lenders engage in good faith compliance efforts,” it reports.
Members of Congress are divided on the rule along party lines, and Republicans in the House and Senate have passed resolutions to overturn the rule.
The Supreme Court has now issued its decision in the funding structure case, leaving the state cases open to resume and requirements for compliance with the rule to continue.
While it was pending, the Supreme Court decision was connected to many challenges to CFPB actions and a delay in some actions by the bureau as well—such as the small business lending rule.
The bureau also advanced its Notice of Proposed Rulemaking on the Fair Credit Reporting Act and announced its final rule on a registry of nonbanks with enforcement actions. A rule to create a registry on supervised nonbank entities with arbitration agreements in their contracts is pending.
More information about the small business lending rule compliance date extension is available here.
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