Wednesday, July 24, 2024

Federal court halts Section 1071 implementation

A Texas federal judge issued an order today for an injunction against the Consumer Financial Protection Bureau’s Section 1071 final rule.

The injunction, which came at the request of the American Bankers Association, the Texas Bankers Association and McAllen, Texas-based Rio Bank, is ONLY for member banks of the ABA and/or TBA. Although both trade associations asked for the injunction to apply to ALL lenders, the judge did not accept the request.

The order blocking enforcement of the Section 1071 rule will be in place while the U.S. Supreme Court hears a challenge to the constitutionality of the CFPB’s funding structure. The challenge is scheduled to be argued later this year, with a decision expected sometime in the first half of 2024. At that point, new compliance deadlines would be issued for ABA and TBA members.

“We believe the injunction is a recognition of the complexity of the 1071 final rule and the significant costs and burdens it places on our members, particularly community banks, which provide much of the country’s small business lending,” ABA, TBA and Rio Bank said in a statement. “While we sought an injunction covering all institutions covered by the rulemaking, this ruling spares TBA and ABA members across the country from being forced to incur unrecoverable expenses while the Supreme Court is considering whether the CFPB has the authority to promulgate the 1071 final rule at all.”