TBA files suit to block CFPB’s Sec. 1071 Final Rule

The Texas Bankers Association (TBA), America’s largest state-based banking trade group, today filed suit against the Consumer Financial Protection Bureau (CFPB) to block the agency’s implementation of its Final Rule of the Dodd-Frank Act’s Section 1071.

TBA President and CEO Chris Furlow made the following statement following a request by TBA and co-plaintiff Rio Bank, a minority depository institution based in McAllen, Texas, for declaratory and injunctive relief in the Southern District of Texas:

“CFPB has taken 3 pages of legislation requiring 13 data points and turned it into nearly 900 pages of regulation requiring 81 data points. CFPB repeatedly exceeds its authorities and ignores required rulemaking law because its unconstitutional funding and leadership structure make it accountable to no one. 

The rule will require practically all small business borrowers to be questioned on personal information then reported back to CFPB, which recently exposed data on nearly a quarter million consumers.

CFPB has failed to accurately account for, or simply ignored, the real impact that 1071 will have on small business borrowers and community banks, instead proffering a methodological explanation so bureaucratic and unintelligible that it would be laughable if it were not so serious.

Even the Biden Administration’s own Small Business Administration said of CFPB’s 1071 rule plans, quote: ‘CFPB’s approach may be unnecessarily burdensome to small entities, may impact the cost of credit for small businesses and may lead to a decrease in lending to small, minority- and women-owned businesses.’ 

The 1071 Final Rule will be an albatross to community banks, forcing them to purchase costly systems to support flawed data schemes, and they will have to put more personnel and resources toward reporting to Washington rather than lending in the community. 

It is unfortunate that the courts are currently the only recourse to challenge a virtually untouchable agency that believes it can hold everyone to account but itself.”

Rio Bank Chief Executive Officer and TBA Chairman A. Ford Sasser III said:

“As a community bank, we are frustrated by CFPB’s refusal to realistically assess the consequences for small business customers and the bureaucratic burden this will have on community banks. 

Does expanding the original 13 data points set by the Congress into 81 make it easier for small business borrowers?  Does forcing community banks to collect 81 data points make them spend more resources on lending or compliance?  It doesn’t take a statistician to figure out that the 1071 final rule will hurt both small business borrowers and community banks.  

We are proud to be a minority depository institution and I can tell you that providing all of this bureaucratic make-work to Washington will only complicate things for borrowers and drive resources away from serving our customer base in the Rio Grande Valley.” 

TBA and Rio Bank have also asked the court to enjoin CFPB’s 1071 implementation in light of the Fifth Circuit’s ruling that the CFPB’s funding structure “violates” the U.S. Constitution and is void in Texas and other states.  As a consequence, numerous CFPB-related actions in Texas and elsewhere have already been stayed pending the anticipated Supreme Court hearing later this year and a decision in 2024. The responsible action by the CFPB would have been to delay the finalization of the 1071 Rule rather than set in motion the vast and very costly compliance requirements.

The TBA-Rio Bank complaint can be viewed here.