ARTICLE
16 May 2025

CFPB Won't Make Small Business Reporting Rule A Priority

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Ballard Spahr LLP

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The CFPB has announced it will not make enforcement of its rule requiring financial institutions to report their lending to women-owned, LGBTQI+-owned and minority-owned small businesses a priority.
United States Finance and Banking

The CFPB has announced it will not make enforcement of its rule requiring financial institutions to report their lending to women-owned, LGBTQI+-owned and minority-owned small businesses a priority.

"The bureau takes this step in the interest of focusing resources on supporting hard-working American taxpayers, servicemen, veterans, and small businesses," the bureau said, in announcing the move. "Even absent resource constraints, the Bureau would deprioritize enforcement of this rule because of the unfairness of enforcing it against entities not protected by the court's stay but similarly situated to parties that are protected by the stay."

That stay only applies to plaintiffs and intervenors in a lawsuit challenging the rule. The plaintiffs include, among others, members of the American Bankers Association, the Independent Community Bankers of America, and America's Credit Unions.

In March, 2023, the CFPB finalized the small business reporting rule, informally known as the "Section 1071 Rule." It refers to the Section of Dodd-Frank that creates the reporting requirement.

Only financial institutions that originated at least 100 covered small business loans in each of the two preceding calendar years are subject to the rule. The revised compliance dates for the rule, which vary based on small business lending volume, are July 18, 2025, January 16, 2026 and October 18, 2026. The initial compliance dates were stayed based on a ruling of the U.S. District Court for the Southern District of Texas in a lawsuit filed by a Texas banking trade association and Texas bank, with other parties later intervening. The suit was based on various arguments, including that the funding structure of the CFPB was unconstitutional, and that the bureau exceeded its statutory authority and relied on inaccurate data to estimate implementation costs. As previously reported, the U.S. Supreme Court held in May 2024 that the funding structure is constitutional, so the district court then turned its attention to the other arguments of the plaintiffs.

In September 2024, the district court issued a summary judgment in favor of the CFPB. The plaintiffs appealed to the U.S. Court of Appeals for the Fifth Circuit and asked for a stay pending appeal and for the appeals court to toll compliance deadlines.

"A new President was inaugurated January 20, 2025," the appeals court said. "This case had already been set to be orally argued on February 3, 2025. The morning of oral argument, CFPB notified the court that '[c]ounsel for the CFPB has been instructed' by new leadership 'not to make any appearances in litigation except to seek a pause in proceedings.'" Additionally, the CFPB dropped its opposition to the request for a stay, and the Fifth Circuit Court of Appeals issued a stay.

The rule also is under attack on Capitol Hill. House Republicans are pushing legislation introduced by House Small Business Committee Chairman Rep. Roger Williams, R-Texas. That bill, H.R. 976, simply would repeal the rule altogether.

During the last Congress, the House and Senate voted to nullify the rule using the Congressional Review Act, but then-President Joe Biden vetoed it.. While legislation under the Congressional Review Act is not subject to a filibuster in the Senate, a bill to repeal section 1071 would be subject to a filibuster, so 60 votes would be needed for legislation to repeal the rule.

As previously reported, the CFPB has indicated that it will reopen rulemaking on the Section 1071 rule.

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