ICBA Urges Court and CFPB to Grant Relief from 1071 Small-Business Rule

Washington, D.C. (Aug. 4, 2023)—The Independent Community Bankers of America (ICBA), the Independent Bankers Association of Texas (IBAT), and Texas First Bank today filed a motion and complaint calling on a federal court to declare that the Consumer Financial Protection Bureau’s Section 1071 final rule is invalid and unenforceable and seeking preliminary and permanent injunctive relief.

In a motion to intervene and in a separate complaint filed with the U.S. District Court for the Southern District of Texas, the groups explained that the limited injunctive relief the CFPB requested from the court, which was granted, does not extend to all community banks. Given the substantial burden that community banks and small-business customers across the country will face due to the 1071 rule, the groups are broadly seeking injunctive relief for community banks not protected by the court’s prior injunction.

Additionally, ICBA today sent a letter to the CFPB reiterating its call for the agency to stay the effective date of its 1071 rule for all covered financial institutions pending a court challenge to the constitutionality of the bureau’s funding structure. The U.S. Supreme Court this year agreed to review the U.S. Court of Appeals for the Fifth Circuit’s October 2022 decision that the CFPB’s funding structure violates the Constitution’s appropriations clause and separation of powers. As ICBA told the CFPB in a March letter, granting a stay will provide certainty to community banks and small businesses while the courts decide on the constitutionality of the bureau’s funding model.

“Community banks nationwide should be covered by the U.S. District Court order granting temporary injunctive relief from the Consumer Financial Protection Bureau’s Section 1071 final rule given the significant impact of the rule on community banks and small businesses from coast to coast,” ICBA President and CEO Rebeca Romero Rainey said. “In today’s motions to the court and letter to the CFPB, ICBA is reiterating what it has long said — the implementation of the bureau’s 1071 rule should be suspended until the courts decide on the constitutionality of the agency’s funding structure. By arguing that the U.S. District Court for the Southern District of Texas preliminary injunction should apply only to the plaintiffs in the case before that court, the CFPB has created an unlevel regulatory playing field that poses harm to community banks and small businesses across the country. While the court addresses its recent temporary injunction, the CFPB should do the right thing and stay its final rule.”

The CFPB’s 1071 rule requires lenders to collect and report data on credit applicants, including the race, sex, and ethnicity of the principal owners as well as gross annual revenue. While the CFPB has the authority to exempt any class of financial institutions from the standards it develops and to limit mandatory data points to those required by the law, it has opted to apply the rule to the vast majority of community banks and to require data points far exceeding those required by law.

ICBA has long opposed the 1071 small-business data collection and reporting requirements and strongly supports a congressional resolution to nullify the rule. Introduced by Rep. Roger Williams (R-Texas) and recently passed by the House Financial Services Committee, H.J.Res.66 would provide for congressional disapproval of the 1071 rule and dictate that it has no force or effect. In a recent letter to committee members, ICBA said H.J.Res.66 — and Sen. John Kennedy’s (R-La.) S.J.Res.32 in the Senate — would reverse the harm of the rule and require the CFPB to craft a new rule that preserves the flow of credit to small businesses.

ICBA will continue working with policymakers to enact relief from the 1071 rule for community banks nationwide to ensure these local institutions can continue meeting the needs of the nation’s small businesses.

About ICBA

The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. ICBA is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education, and high-quality products and services.

With nearly 50,000 locations nationwide, community banks employ nearly 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding $5.8 trillion in assets, $4.8 trillion in deposits, and $3.8 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers' dreams in communities throughout America. For more information, visit ICBA's website at www.icba.org.

###