On April 3, the CFPB informed a Florida federal district court that it plans to initiate new rulemaking to revise its small business lending data collection rule under Section 1071 of the Dodd-Frank Act. The Bureau agreed to stay the rule’s compliance deadlines in response to ongoing litigation brought by a trade group representing providers of sales-based financing.
The 2023 rule, entitled Small Business Lending Under the Equal Credit Opportunity Act, requires covered financial institutions to collect and report data on small business loan applications (previously discussed here). It was designed to facilitate enforcement of fair lending laws and improve public understanding of credit availability in underserved communities. Although it was mandated by the Dodd-Frank Act, the rule wasn’t finalized until 2023.
Opponents of the rule argued that the Bureau exceeded its authority in promulgating the rule and that it requests more information than is required under Dodd-Frank. They also contend that the rule will be a compliance nightmare and likely cause negative downstream effects for banks and small businesses alike, proving insurmountable for some lenders and ultimately leading to reduced access to credit for small businesses.
The Bureau noted it will issue a Notice of Proposed Rulemaking “as expeditiously as reasonably possible” and plans to provide periodic status updates to the court.
Putting It Into Practice: The CFPB’s decision to initiate a new rulemaking process reflects a broader shift away from initiatives finalized under the previous administration. The original rule has been subject to extensive litigation since its release in 2023 (previously discussed here, here, and here). Institutions that had been preparing for compliance with the now-paused rule should continue to track regulatory updates, particularly the forthcoming revision of the rule.
