U.S. Sen. Thom Tillis (R-NC) and several of his fellow Republicans urged the Biden administration’s Consumer Financial Protection Bureau (CFPB) to issue a nationwide stay of the effective date of its Section 1071 rule for all credit unions and FDIC-insured banks, including community banks.
This action, say the lawmakers, would provide “a crucial measure of certainty” to small businesses and community banks while a final determination is made regarding the validity of the Section 1071 rule by the courts, according to an Aug. 31 letter the lawmakers sent to CFPB Director Rohit Chopra.
The Dodd-Frank Section 1071 small business data collection rule would require banks to collect personal data on small business owners when they seek a loan, according to their letter, which was also signed by seven other lawmakers, including U.S. Sen. Steve Daines (R-MT).
A current injunction requested by the CFPB applies only to certain lenders, including some of the largest banks in the U.S., and does not cover the majority of small, community banks, wrote Sen. Tillis and his colleagues, who noted that this places local banks at a government-created disadvantage.
“At your agency’s request, a recent ruling in the U.S. District Court has created a situation where only some lenders, including large systemically important lenders, will receive a temporary reprieve from working towards implementation of the CFPB’s Section 1071 small business data collection rule, while others, including many community banks and all credit unions, must seek further relief from the judicial system,” wrote the senators.
Sen. Tillis and the senators wrote that they “harbor deep concerns” about the potential adverse impacts of the CFPB rule to implement Dodd-Frank Section 1071, noting that they think that the CFPB’s funding structure is in violation of the Appropriations Clause of the U.S. Constitution.
“In October 2022, the U.S. Court of Appeals for the Fifth Circuit concurred with this viewpoint, and the Supreme Court will be reviewing this matter in October,” they wrote. “In light of these recent developments, we respectfully urge the CFPB to exercise its existing legal authority by issuing a nationwide stay of the effective date of its Section 1071 rule.”