On Monday, a federal judge granted an injunction against the CFPB’s enforcement of Dodd-Frank’s 1071 Rule. The basis that the funding of the CFPB is not constitutional, which is currently being litigated in a separate case. What this means is that the rule will be suspended until the Supreme Court decides the case. This injunction only applies to member of American Bankers Association and Texas Bankers Association, as well as Rio Bank of Texas.
The injunction will have a ripple effect that may delay the publication of the final CRA Rule, which as proposed, had a key provision that would replace the small business lending data reported currently under CRA with data to be collected under 1071 after the data is collected. The 1071 Rule provides for a phase-in of reporting with data commencing on October 1, 2024, for Tier I reporters and April 1, 2025, for Tier II reporters.
All lenders subject to Section 1071 are mandated to begin collecting the data January 1, 2026. The prudential regulators can’t be sure if the key data collection and reporting provisions in the 2022 CRA NPR will ever be implemented. Moreover, with the delay ordered by the injunction, even if the CFPB withstands the constitutional challenge, the implementation of the data collection schedule is sure to extend the initial date for which data would be available.
As a result, the issuance of the final new CRA Rule may be delayed until the CFPB challenge is settled by the Supreme Court in 2024.
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