CUNA, Cornerstone League & Rally CU Try to Intervene in 1071 Ruling

On Thursday, CUNA, the Cornerstone League and the $4.2 billion Rally Credit Union in Corpus Christi, Texas filed a motion to intervene with the U.S. District Court for the Southern District of Texas. The motion revolves around the court’s ruling earlier this month in which it ordered a preliminary injunction against the CFPB’s section 1071 rule – an injunction that only applied to members of the American Bankers Association – and the three credit union organizations want to be included in that ruling.

According to CUNA, the 1071 rule, which is slated to go into effect on Aug. 29, would require financial institutions to collect and report specific data on applications for credit for small businesses. Financial organizations have argued the rule is an unnecessary regulatory burden, especially for smaller institutions like credit unions.

CUNA President/CEO Jim Nussle said, “Our motion to intervene in the Texas suit is a critical step in protecting credit unions and the people we serve from an unfair and scattershot implementation of the 1071 Rule. Credit unions nationwide need and deserve the same injunctive relief granted to banks, while important questions about the constitutionality of the CFPB’s funding structure are being considered by the U.S. Supreme Court. This is an issue that affects all covered financial institutions who serve small businesses, and the injunction should apply broadly.”

Cornerstone League EVP and Chief Advocacy Officer Jim Phelps added, “We join CUNA and Rally Credit Union in our staunch opposition of the court’s narrow injunction as it gives an unfair advantage to banks and unfairly skews the grounds on which credit unions can serve their members. This is an issue that affects all financial institutions that serve small businesses and the injunction should unilaterally apply.”

Dana Sisk, president/CEO of Rally Credit Union said this rule could be a problem for the credit union’s more than 220,000 members. “As a not-for-profit credit union serving South Texas since 1955, Rally Credit Union is proud to provide affordable credit for women-owned, minority-owned and small businesses,” Sisk said. “We support the goals of the Consumer Financial Protection Bureau’s section 1071 rule, and we seek to provide all members with fair and equitable financial opportunities. However, we are concerned about the potential for those members to experience substantial increases in borrowing costs due to the burdensome data collection requirements of this rule.”

Sisk added, “We are asking the court to help us continue serving the borrowing needs of small business owners in South Texas by granting us the same relief that it granted to our banking peers in its recent ruling.”

According to a statement from CUNA, if the motion to intervene is accepted, implementation and enforcement of the 1071 rule “will be postponed until questions about the CFPB’s constitutional structure are resolved by the Supreme Court or the injunction is lifted.”