#2023-17, August 4, 2023

Federal Court Injunction on Consumer Protection Financial Bureau’s (CFPB) Section 1071

There’s been a development in the Texas Bankers Association (TBA) and American Bankers Association (ABA) legal challenge to the CPFB Section 1071 final rule. This week, a federal judge granted an injunction delaying the compliance dates for the final rule while the Supreme Court hears a separate case – involving the same parties - weighing the constitutionality of the CFPB’s funding structure. 

The ruling, reportedly made in recognition of potential significant compliance costs that banks are already incurring in anticipation of becoming Section 1071 compliant and beyond, is, at this time, limited to members of ABA and TBA, and allows member institutions belonging to either Association to have the option of delaying their Section 1071 implementation until the funding structure case is decided. Furthermore, with the Supreme Court’s final decision in the CFPB constitutionality case not likely until the first half of 2024, the CFPB is also now expected to be required to recalculate new Section 1071 compliance dates for those institutions that opt to delay their implementation -- to allow for the same amount of time to comply in recognition of the order.

As the delay is optional for members of ABA or TBA, MBA plans to continue to offer our “1071 Small Business Data Collection” webinar program scheduled for August 12, 2023, to better familiarize members on the final rule itself and its potential compliance-related impacts.

Additionally, ABA is hosting an update for its members tomorrow, Friday, August 4 from 11:00- 11:45am on the latest developments in its legal challenge to CFPB’s Section 1071 final rule and discussion of next steps. You can register for that session here.

For more information on the injunction click the links below:

• ABA/TBA Letter to CFPB on 1071 Injunction | American Bankers Association - August 3, 2023
• Federal judge delays Section 1071 compliance dates; temporary relief applies only to ABA, TBA members | ABA Banking Journal
• Joint Statement – ABA and TBA

The Association continues to closely monitor this issue and will provide members with updates as they develop. In the meantime, please do not hesitate to reach out to us if you have any questions.

American Bankers Association Summary of the Staff Analysis on Section 1071

The proposed implementation of Section 1071 of the Dodd-Frank Act, which requires reporting of detailed data on small business lending, will have far-reaching implications for how lenders approach their small business credit decisions, according to a new staff analysis published by ABA’s economic research team. The analysis notes that while promoting access to capital to minority and women-owned small businesses is a worthwhile public policy goal, it is increasingly evident that achieving that goal through regulatory reporting would simultaneously increase borrowing costs for all small businesses.

The staff analysis illustrates the importance of a dynamic banking system for small-business lending, examines deficiencies in the bureau’s 1071 regulatory analysis, and warns of some of the unintended consequences associated with this rulemaking.

• Read the ABA staff analysis.
• Access a shareable link for small business customers.
• Read ABA’s letter of support for the CRA resolution. 

Suit Challenging FDIC NSF Fee Rule Impacting Represented Items

The Minnesota Bankers Association (MBA) filed suit against the Federal Deposit Insurance Corp. (FDIC) last week over its new rule relating to NSF fees (FIL-40-2022). The suit alleges that the FDIC wrongly found repeated nonsufficient funds fees – also known as representment fees – to be “unfair or deceptive acts or practices” violations under the Federal Trade Commission Act and that the FDIC violated the Administrative Procedure Act in promulgating the 2022 rule.

The “other MBA” is seeking both declaratory and injunctive relief from the court. Specifically, they’ve requested a declaration stating FIL 40-2022 is a legislative rule issued without observance of procedure required by law; is arbitrary, capricious, and an abuse of discretion; and exceeds FDIC’s statutory authority. Additionally, the Minnesota Bankers have asked the court to vacate FIL 40-2022 and permanently enjoin its application or enforcement, amongst other requests. FDIC’s answer to MBA’s complaint is due Sept. 18, 2023. To download and view the Minnesota Bankers’ complaint, please click here.

The Association continues to closely monitor this issue and will provide members with updates as they develop. In the meantime, please do not hesitate to reach out to us if you have any questions.

Credit Card Competition Act (CCCA) Excluded from Senate Defense Bill

Last week, the United States Senate passed the National Defense Authorization Act (NDAA) without an amendment to the legislation that would have included the CCCA.

As you know, the Massachusetts Bankers Association echoed the American Bankers Association’s (ABA) call on bankers to contact their United States Senators to urge them to oppose the inclusion of the CCCA in the National Defense Authorization Act bill.

The U.S. House and U.S. Senate must reconcile the differences between the two defense bills passed by each respective chamber. There is a possibility the CCCA language is added to the final bill. The MBA submitted letters to the MA Congressional Delegation thanking each member for not co-sponsoring the CCCA and urged them to not support the bill in any form. To read our letter to the MA Congressional Delegation, click here.

We will keep you posted as developments arise.

Update: Washington Update

August is typically a slow month at the U.S. Capitol with few formal legislative sessions scheduled and as legislators conduct business in their districts. As such, there may not be a Washington Update each week. We look forward to being back in your email inbox on a weekly basis after Labor Day!

As always, don’t hesitate to reach out to us directly with any questions.