A rule that would require banks and credit unions to report specific data about small-business loan applicants has been put on hold nationwide.
A federal court has extended an injunction on the Consumer Financial Protection Bureau's small-business lending data rule to apply nationwide pending the outcome of a Supreme Court case
The ruling Wednesday by the U.S. District Court for the Southern District of Texas comes three months after a judge granted a limited preliminary injunction to members of two trade groups and a private bank that had sued the CFPB to keep the rule from going into effect.
Earlier this month, the full Senate voted 53-44
Trade groups claimed the rule is burdensome, would significantly increase borrowing costs and potentially restrict credit to small businesses that the rule was purportedly designed to help.
"The U.S. District Court has rightfully expanded its temporary injunctive relief from the CFPB's Section 1071 final rule to all community banks across the country," said Rebeca Romero Rainey, president and CEO of the Independent Community Bankers of America.
The small-business data collection rule, known simply as "1071" for its section in the Dodd-Frank Act, was finalized in March. It requires banks, credit unions and small business lenders to collect and report data on applications for credit for women-owned and minority-owned small businesses.
In April, the Texas Bankers Association, the American Bankers Association and Rio Bank, an $814.7 million-asset private bank in McAllen, Texas, had argued that they should not have to comply with the rule because the 5th Circuit Court of Appeals
The rule has long been contentious, even though mortgage lenders have been subject to similar requirements for decades to collect data on home loan applicants under the Home Mortgage Disclosure Act of 1975.
The CFPB dragged its feet on issuing a rule for more than a decade and ultimately was forced to finalize a rule after it was
"The burdensome requirements of this rule — combined with the significant questions about the constitutionality of the CFPB's funding — created too much uncertainty in the marketplace," said Jim Nussle, president and CEO of the Credit Union National Association in a press release.
In August, CUNA — joined by the Cornerstone League credit union group and Rally Credit Union in Corpus Cristi, Texas — filed a motion to intervene and an emergency motion for a preliminary injunction to get nationwide relief for credit unions.
