On August 18, the American Financial Services Association, Consumer Bankers Association, CRE Finance Council, Equipment Leasing and Finance Association, Mortgage Bankers Association, National Association of Federally-Insured Credit Unions, Truck Renting and Leasing Association, and the U.S. Chamber of Commerce (collectively “the Trades”) sent a joint letter to the Consumer Financial Protection Bureau (CFPB or Bureau) urging it to stay enforcement and implementation of the small business data collection and reporting final rule under § 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Final Rule) for all covered financial institutions to correct the current disparity between those institutions covered by the Texas Bankers Association et al v. CFPB injunction and those that are not covered.

The current situation … poses serious compliance challenges for the membership of the Trades, as institutions that are identically subject to the [Final] Rule are now effectively subject to different compliance and implementation dates. This situation is harmful to all stakeholders, and in order to preserve equity for covered financial institutions, the CFPB should act to establish new effective dates and compliance dates for all institutions subject to the [Final] Rule.

In addition, the Trades urge the CFPB to “pause the [Final] Rule’s effective date and tiered compliance dates until the various legal challenges are resolved, which is currently expected to be at the end of the 2023-2024 U.S. Supreme Court term expected in July 2024.”

As discussed here, on July 31, a federal district court in the Southern District of Texas issued an order enjoining the CFPB from implementing and enforcing the Final Rule against three plaintiffs — Texas Bankers Association (TBA), the American Bankers Association (ABA), and Rio Bank, McAllen, Texas and their members. However, the district court denied the plaintiffs’ request for a nationwide injunction. The plaintiffs’ complaint relied heavily on the Fifth Circuit’s decision in Community Financial Services Association v CFPB, currently pending before the U.S. Supreme Court, finding the CFPB’s funding structure unconstitutional and, therefore, rules promulgated by the Bureau invalid.

This partial injunction has led to calls from financial institutions to extend the stay to all institutions covered by the Final Rule. On August 2, the TBA and ABA sent their own letter to the CFPB requesting that it extend the stay outlined in the injunction order to all FDIC-insured banks. On August 4, Texas First Bank, Independent Bankers Association of Texas, and Independent Community Bankers of America, and on August 10, Credit Union National Association, Cornerstone Credit Union League and Rally Credit Union filed separate Unopposed Emergency Motions for Leave to Intervene (discussed here and here) in the Texas federal district court action arguing that they will suffer irreparable harm if the CFPB is not enjoined from enforcing the Final Rule against them as well. Both of those motions have since been granted. On August 8, bankers associations from all 50 states sent a joint letter to the CFPB urging it to stay enforcement of the Final Rule against banks nationwide to “be prudent and ameliorate confusion.”

Our Take

It is unclear whether the CFPB will respond favorably to these requests, and therefore we suspect that a great deal of activity will occur in the Texas Bankers Association case, as more trade associations and perhaps even individual creditors seek to intervene to try to avail themselves of the court’s injunction.