CFPB and plaintiffs enter into settlement of lawsuit alleging wrongful delay in Section 1071 implementation

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The CFPB has entered into a settlement to resolve the lawsuit filed against it in May 2019 seeking a declaration that the CFPB’s failure to issue regulations implementing Section 1071 of the Dodd-Frank Act violates the Administrative Procedure Act and an order requiring the Bureau to promptly issue such regulations.  The plaintiffs in the lawsuit, which was filed in a California federal district court, are the California Reinvestment Coalition, the National Association for Latino Community Asset Builders, and two individual small business owners.

Section 1071 amended the ECOA to require financial institutions to collect and report certain data in connection with credit applications made by women- or minority-owned businesses and small businesses.  Such data includes the race, sex, and ethnicity of the principal owners of the business.  The Stipulated Settlement Agreement and Order sets forth the following timetable for the Bureau to engage in rulemaking to implement Section 1071:

  • No later than September 15, 2020, pursuant to the Small Business Regulatory Enforcement Fairness Act (SBREFA), the Bureau will release an outline of proposals under consideration and alternatives considered.
  • No later than October 15, 2020, or as soon as practicable thereafter if panel members are not available to convene, the Bureau will convene a Small Business Advocacy Review (SBAR) panel.  The plaintiffs must make any recommendations of panel members by May 31, 2020.
  • Pursuant to SBREFA, the SBAR panel must complete its report within 60 days of convening.
  • The Bureau will promptly notify the plaintiffs of the completion of the SBAR report and the parties will thereafter meet and confer regarding a deadline for the Bureau’s issuance of a Notice of Proposed Rulemaking (Section 1071 NPRM). If the parties agree on a deadline, they will jointly stipulate to the agreed date and ask the court to enter that deadline.  Any time that is more than 30 days after completion of the SBAR report, the plaintiffs can notify the Bureau that they want to ask the court to set a deadline for issuance of a Section 1071 NPRM and within 7 days of such notice, the parties will file a joint statement setting forth their positions on a deadline.  The Bureau agrees not to propose or argue that the court should not set a deadline and the plaintiffs agree not to propose or seek a deadline that is less than 6 months after completion of the SBAR report.  The parties will make their submissions according to the briefing schedule set forth in the agreement and the parties will ask the court to enter a deadline for issuance of the Section 1071 NPRM based on the submissions.
  • After the closing of the comment period on the Section 1071 NPRM, the parties will meet and confer regarding a deadline for the Bureau’s issuance of a final rule implementing Section 1071 (Section 1071 Final Rule).  If the parties agree on a deadline, they will jointly stipulate to the agreed date and ask the court to enter that deadline.  Any time that is more than 75 days after the comment period closes on the Section 1071 NPRM, the plaintiffs can notify the Bureau that they want to ask the court to set a deadline for issuance of a Section 1071 Final Rule and within 7 days of such notice, the parties will file a joint statement setting forth their positions on a deadline.  The Bureau agrees not to propose or argue that the court should not set a deadline and the plaintiffs agree not to propose or seek a deadline that is less than 6 months after the comment period closes on the Section 1071 NPRM.  The parties will make their submissions according to the briefing schedule set forth in the agreement and the parties will ask the court to enter a deadline for issuance of the Section 1071 Final Rule based on the submissions.
  • The Bureau must submit status reports to the plaintiffs and the court every 90 days beginning 90 days after the filing of the Settlement Agreement until a Section 1071 Final Rule is issued.

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