Texas Court Issues Stay for the CFPB 1071 Rule
The court order halts implementation of the rule and covers credit unions nationwide.
After seven months of pushback and more than two months after filing an emergency motion, credit union leaders have received some regulatory and compliance breathing room in the form of a court-ordered nationwide stay of the CFPB’s controversial 1071 rule.
The 1071 rule, which was finalized in March, requires 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.
On Thursday morning, the U.S. District Court for the Southern District of Texas issued an order that expanded its initial partial injunction, which only applied to members of the American Bankers Association, the Texas Bankers Association and Rio Bank. Thursday’s expanded order now includes a stay of the rule for all financial institutions covered by the rule – including credit unions.
In August, CUNA, the Cornerstone League and the Corpus Christi, Texas-based Rally Credit Union ($4.2 billion in assets, 221,137 members) filed a motion to intervene and later filed an emergency motion for a preliminary injunction “to obtain parity for credit unions” with the court’s stay.
Of Thursday’s ruling, CUNA President/CEO Jim Nussle said, “Today’s decision levels the playing field when it comes to implementing the CFPB’s rule, which is very important for credit unions facing large compliance costs due to this rule, while also working to serve members. 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, especially when credit union products and services are needed by members and businesses more than ever. Thank you to the Cornerstone League and Rally Credit Union for joining us in this victory for all credit unions that lend to small businesses.”
In a prepared statement, Cornerstone League EVP and Chief Advocacy Officer Jim Phelps said, “We are grateful for the opportunity to partner with CUNA and Rally Credit Union to stop the implementation of the 1071 rule. Credit unions were preparing for a significant compliance burden with this rule, so the court’s decision is welcome news indeed.”
Rally Credit Union President/CEO Dana Sisk added, “We appreciate the court’s decision to provide Rally the same relief from Rule 1071 as was provided to our bank peers. This decision helps Rally continue offering affordable financial services to small businesses across South Texas.”