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Legal Victory for CFPB: Implications for the Small Business Lending Data Rule


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The Consumer Financial Protection Bureau's (CFPB) small business lending data collection rule has cleared another significant legal obstacle, according to reports on August 26th. U.S. District Judge Randy Crane in McAllen, Texas, rejected a challenge backed by the banking industry that argued the rule's data collection method was flawed. The judge ruled that the challenge was essentially a disagreement with the CFPB's determinations rather than a dispute over the regulator's statutory authority to adopt the rule.


This ruling is particularly noteworthy as it comes in the wake of previous legal challenges to the rule. The CFPB had already extended compliance dates for the rule earlier this year due to a prior court stay pending a Supreme Court decision on the CFPB's funding mechanism.

cfpb rule 1071

The rule, initially released in March 2023, requires lenders who issue more than 100 small business loans annually to collect demographic, geographic, and other data about borrowers. This requirement effectively covers over 95% of small business loans issued in the United States.

In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress directed the Bureau to adopt regulations governing the collection of small business lending data. Section 1071 of the Dodd-Frank Act amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to compile, maintain, and submit to the Bureau certain data on applications for credit for women-owned, minority-owned, and small businesses.

The CFPB has already launched a beta platform for the small business lending data collection rule, inviting financial institutions and their technology partners to test the platform and provide feedback.


Industry stakeholders should note that this rule aims to create a comprehensive public database on small business financing practices. The CFPB intends to use this data to ensure fair lending practices and identify business and community development needs for small businesses, including those owned by women and minorities.


The rule's impact on lending practices, data collection processes, and technology infrastructure could be significant, making it a crucial area of focus for industry players in the coming months.

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