CFPB Signals Continued Progress Toward Dodd-Frank 1071 Notice of Proposed Rulemaking

Bradley Arant Boult Cummings LLP

Bradley Arant Boult Cummings LLP

On the heels of CFPB Acting Director Dave Uejio’s recently released statement to agency staff members, the Bureau again signaled that it is making progress toward issuing a Notice of Proposed Rulemaking (NPRM) enacting Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). Specifically, in late February, the CFPB filed its fourth status report in the United States District Court for the Northern District of California as part of a legal settlement. This latest status report indicates that the Bureau is moving closer towards issuing to enact these important regulations.

Dodd-Frank 1071 will require creditors who make certain business loans to collect and report various data points to the CFPB. Under 1071, lenders must identify women-owned, minority-owned, and small businesses, and collect data relating to the race, sex, and ethnicity of these business owners. Lenders must also identify the purpose of the loan, the action taken with regard to the loan application, the business’s gross annual revenue, and “any additional data that the [CFPB] determines would aid in fulfilling the purposes of this section.”

Although Section 1071 was included in 2010 in the Dodd-Frank Act, the CFPB has not yet issued enacting regulations. Because of this delay, in May 2019, several public interest groups sued the CFPB arguing that the Bureau violated the Administrative Procedures Act and the Dodd-Frank Act by delaying implementation. In February 2020, the parties entered a stipulated settlement whereby the CFPB agreed to an implementation timetable and committed to status reports every 90 days.

This most recent status report is notable because it is the first issued by President Biden’s CFPB, and because it suggests that the Bureau is moving rapidly towards issuing an NPRM. Specifically, the report states that:

the Bureau is continuing to work on the significant legal and policy issues that must be resolved to issue the 1071 regulations. As part of that process, the Bureau’s rulemaking staff has begun briefing the Bureau’s new leadership regarding those issues to obtain policy decisions that are necessary for the preparation of the Notice of Proposed Rulemaking for the 1071 regulations.

In addition, the report contains a subtle (if not unsurprising) suggestion that the Bureau’s new leadership may take a different approach to Section 1071 than their Trump administration predecessors. Specifically, in September 2020, the agency released its mandatory Small Business Advocacy Review panel outline (the SBREFA outline). The SBREFA outline, issued by former director Kathleen Kraninger’s CFPB, suggested that the regulation would be relatively narrow in scope and would contain various exemptions. Although the CFPB’s status report does not state that the CFPB is revisiting these recommendations, the report does state that the Bureau is reviewing both the SBREFA panel’s recommendations along with the “issues raised in feedback received from other stakeholders in response to the SBREFA outline.” We would not be surprised if the final NPRM contains a broader scope of applicability and is more closely aligned with the interests of consumer protection groups.

The parties continue to discuss “an appropriate deadline for issuance of the Section 1071 NPRM” and, if an agreement is reached, the parties will file a joint stipulation to the court regarding the agreed date. In light of Uejio’s recent comments regarding the expeditious implementation of 1071, we anticipate an NPRM sooner rather than later. Compliance with this new data collection and reporting rule will require a great deal of time and resources. As such, all stakeholders should be prepared to develop a good understanding of the NPRM once it is issued. We will continue to monitor for new developments.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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