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AFSA Calls on CFPB to Address 1071 Disparities

AFSA Calls on CFPB to Address 1071 Disparities

Last week, the American Financial Services Association (AFSA) led a group of trade associations in submitting a comment letter to the Consumer Financial Protection Bureau, urging the agency to address the disparities that exists for financial institutions working to implement the Bureau’s Small Business Lending Data Collection Rule (the “1071 Rule”) by pausing the 1071 Rule’s effective date and tiered compliance dates until the various legal challenges are resolved.

The letter notes that the recent federal court decision in Texas Bankers Association et al v. Consumer Financial Protection Bureau et al has created serious compliance challenges and disparities among financial institutions and businesses that operate identically. The issue: a preliminary injunction in Texas Bankers Association prohibits “all implementation or enforcement: the “1071 Rule” against the plaintiffs and its members and the court ordered that all deadlines for compliance with the rule be stayed, creating a disparity for financial institutions subject to the 1071 Rule.

“For the plaintiffs in Texas Bankers Association and their memberships, no implementation or enforcement of the 1071 Rule is allowed. … But for everyone else, the timelines in the 1071 Rule are unaffected.”  The result: laws being enforced inconsistently, contrary to the statutory objectives of the CFPB.

The letter highlights other harms as a result of the disparities, including the upending of the Bureau’s staggered compliance dates designed to give smaller institutions more time to implement the 1071 Rule. As well, otherwise similarly covered financial institutions, serving identical markets will be asking for different information during the application process. “One group will have a more traditional application process,” the letter notes, “The other’s application process would include asking the applicant for highly sensitive and private personal information required under Subpart B. This would cause irreparable harm to the group having to ask for this additional information and will result in perceived discrimination by applicants all of which is contrary to the statutory objectives of the CFPB.

The trades note that if the CFPB fails to act to restore parity for 1071 Rule compliance, it will force other institutions to consider alternative remedies, including judicial relief. “Managing more litigation is not the most efficient use of anyone’s resources when the CFPB has the ability to provide uniform treatment to all covered institutions subject to the 1071 Rule,” the letter concludes.

August 21st, 2023 by

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