The Consumer Financial Protection Bureau is “assessing” its 2023 small-business data collection rule with an eye toward retooling it, the agency said in a Thursday filing with the U.S. District Court for the Southern District of Florida.
“The CFPB anticipates issuing a Notice of Proposed Rulemaking as expeditiously as reasonably possible,” the bureau told the court, which is hearing Revenue Based Finance Coalition’s case against the bureau. “Because the anticipated rulemaking process may moot or otherwise resolve this litigation, holding this matter in abeyance would conserve the Court’s resources.”
Revenue Based Finance Coalition is seeking a stay of the compliance for the rule that requires financial institutions making at least 100 small-business loans a year to collect race, gender and demographic data from borrowers.
The rule, finalized in March 2023, touched off a flurry of litigation. Within a month, a Texas bank and the state’s banking trade group sued the CFPB over the rule.
Chief Judge Randy Crane of the U.S. District Court for the Southern District of Texas exempted members of the suing bank, trade group and American Bankers Association from having to implement the rule — then extended that exemption to lenders nationwide — on the thought that if the Supreme Court were to declare the CFPB’s funding structure unconstitutional, a subsequent judicial action could void the rule entirely.
The Supreme Court ultimately upheld the CFPB’s funding structure in May 2024.
Ahead of that, however, the Senate and House each voted to repeal the rule, led by Republicans who contended the data collection would violate privacy and create a paperwork nightmare for lenders. But then-President Joe Biden vetoed the matter.
The CFPB, under then-Director Rohit Chopra, last June extended by 290 days the compliance deadlines associated with the rule. Under the update, lenders originating 2,500 or more small-business loans per year must begin collecting data by July 18, 2025, the bureau said at the time. Those that originate at least 500 per year must collect data by Jan. 16, 2026. Lenders that originate at least 100 each year must comply by Oct. 18, 2026.
Crane then rejected the Texas and ABA claims that the CFPB is overstepping its authority with the data-collection rule. “An agency does not fail to ‘consider’ a concern or suggestion simply because it reached a different conclusion,” Crane wrote last August. “It may well be that the final rule proves ill-advised as a policy matter, but that possibility does not itself make the final rule unlawful.”
The CFPB on Thursday noted that two other courts have stayed compliance dates in connection with challenges to the small-business data collection rule.
“In light of those stays, there is even more reason for the Court to grant Plaintiff the same relief, as subjecting similarly situated entities to different compliance dates … would not serve the public interest,” the CFPB said Thursday.
The bureau proposed that it give the court “status reports every 90 days during the pendency of the rulemaking and … promptly inform the Court when the rulemaking process is complete.”
The CFPB suggested that the parties in the Florida case confer within 30 days after the rule is issued “and notify the Court of whether and how they wish to proceed.”
