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#2287627 - 08/14/23 05:47 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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ABA & TBA sent a letter to the CFPB on August 2nd respectfully requesting they extend the stay to all FDIC-insured banks.

American Banker wrote on July 31st:

"Though the CFPB has a busy rulemaking agenda ahead, experts now say that no new major regulatory requirements are going to take effect because industry can file injunction in Texas to stop the CFPB from implementing rules until the Supreme Court makes a decision on its constitutionality."

I guess in the meantime, we may be able to expect more regulation by blog posts rather than the Federal Register?

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#2287632 - 08/14/23 06:44 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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Originally Posted by Sheldon Hendrix
I guess in the meantime, we may be able to expect more regulation by blog posts rather than the Federal Register?

Yes, which has worked so well in the past.
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#2287803 - 08/17/23 06:31 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
Len S Offline
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I spoke with a very high level CFPB person yesterday. He told me that since Dodd Frank passed 1071 there is a very clear legislative mandate to collect the data mandated in 1071. The CFPB was charged with that responsibility. So some way, somehow the mandate will be imposed on financial institutions. Perhaps some of the fields added by the Bureau could be nixed since there was a certain amount of regulatory discretion allowed by the law. But the 1071 mandate will eventually be imposed on lenders no matter the court decision about the CFPB itself.
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#2287864 - 08/18/23 09:52 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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It appears the Kentucky Bankers Assocation along with some member banks of theirs have filed a complaint in the U.S. District Court Eastern District of Kentucky challenging the authority of 1071, among other complaints against the rule.

Meanwhile, the Credit Union National Association (CUNA), Independent Community Bankers Association (ICBA) and Independent Bankers Association of Texas (IBAT) have joined the ABA/TBA/Rio Bank suit on behalf of its members as well.

While I agree with Len that (as most of us know) 1071 is baked into the Dodd-Frank statute, and therefore, we will have to comply with some form of it one way or another; I do think (my opinion) it is premature for banks covered by the stay to continue to incur unrecoverable costs of implementation of something that very well look different in the meantime.

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#2287886 - 08/21/23 04:32 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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Another big unknown is the impact on CRA reform. The banking regulators have publicly stated they will use the 1071 small business definition in CRA reform. Does that mean that reform is on hold until after the final rule? Or will the agencies just write the 1071 definition into a CRA rule without waiting? Or will they implement using the current (or some other rule) and revise once 1071 is settled?
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#2288191 - 08/30/23 05:08 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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Am I reading correctly that ICBA banks have been added to the motion as of Aug 15?

https://www.icba.org/docs/default-source/icba/news-documents/motion-to-intervene-court-order.pdf

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#2288194 - 08/30/23 05:59 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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They have been added to the case. They have asked the court for an injunction that would apply to their members and CFPB has opposed it. The court has yet to rule on that motion, so for now the injunction remains limited to its original group.
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#2288278 - 09/01/23 02:14 PM Re: U.S District Court Grants Injunction on CFPB 1071 rainman
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I am rather happy I am no longer in consulting. smile

What a mess!

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#2288701 - 09/14/23 09:44 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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Just heard some great news that in response to a 1071 suit filed by the Kentucky Bankers Association (KBA), that the injunction against 1071 is now nationwide until the Supreme Court rules on the CFPB's funding structure. Sounds like it will apply to all FDIC-insured banks and all lenders subject to the rule.

Be on the lookout for various press releases on the topic with more details.

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#2288709 - 09/15/23 02:58 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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Wow! Glad to hear it, simply for the consistency it provides. It would have been a circus otherwise. Thanks for sharing! smile
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#2288804 - 09/19/23 02:33 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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From BOL this morning:

Kentucky federal judge blocks enforcement of Section 1071 rule
A federal judge in Kentucky has issued a nationwide injunction preventing enforcement of the CFPB's Small Business Lending (Section 1071) final rule (subpart B of Regulation B) until the U.S. Supreme Court rules on the constitutionality of the Bureau's funding mechanism.

The Kentucky case was brought by the Kentucky Bankers Association and eight banks. They asked the court to block enforcement of the rule while SCOTUS considers CFPB v. Community Financial Services Association of America, which is scheduled to be argued in October. SCOTUS could release a decision any time before the end of June, 2024.

The Bureau has not yet updated the message on its Small Business Lending compliance resource page to acknowledge the order of the federal court in Kentucky.

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#2288852 - 09/19/23 07:47 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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So, even if the Kentucky order expands the injunction to all FDIC-insured institutions, it doesn't seem to extend the implementation timeline if the Supreme Court rules that CFPB funding is constitutional, correct? If that's the case, then this Kentucky order doesn't really gain us the ability to mitigate our upfront costs, as we're best-served to continue our preparation, right? If the SCOTUS doesn't deliver a decision until June, I wouldn't want to start preparing for an October deadline (IOW, 11.5 months prep is much better than 3-4 months prep time). Thoughts?

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#2288853 - 09/19/23 07:58 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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I totally agree, Rusty. Does anyone really want to "bet the bank" on the outcome?
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#2288858 - 09/19/23 08:26 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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Also, it is possible for SCOTUS to hold the funding mechanism unconstitutional but not to invalidate everything that CFPB has done up till now. That would leave the rule (and its deadlines) intact.
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#2288917 - 09/20/23 09:03 PM Re: U.S District Court Grants Injunction on CFPB 1071 RustyShackleford
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I'm no legal scholar, but since 1071 is part of the Dodd-Frank Act it's my understand the reporting requirement for the data points required by the Act will need to be collected regardless of the outcome of this case. The main question at issue is the other data points the CFPB added that weren't in the original legislation.

Please correct me if I'm wrong.

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#2288919 - 09/20/23 09:22 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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So, let's say the CFPB's funding is found unconstitutional, and by law, we have to report the original 13 data points. Who sets up the reporting system and enforces the law? Would it fall to the other regulators to each solve in their own way, considering the CFPB won't be able to do anything until they secure constitutionally-sound funding? Or would it fall on the FFIEC, similar to HMDA?

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#2288923 - 09/20/23 09:46 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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And if the CFPB's funding is unconstitutional because they're not budgeted by Congress, what does that say about the FRB, the FDIC, and the OCC, which are not budget items?
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#2288924 - 09/20/23 11:00 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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Those are all different from the CFPB. FRB is funded by income from operations (interest on securities and fees). OCC and FDIC are funded by fees on regulated organizations.

CFPB sets its own budget then tells FRB to fund that budget.
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#2288957 - 09/21/23 05:27 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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None of them are funded by Congress, however.
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#2288959 - 09/21/23 06:43 PM Re: U.S District Court Grants Injunction on CFPB 1071 Sheldon Hendrix
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No, but that's not really the issue - it's the expenditure of federal government funds without Congressional appropriation. The Fed's profits (what it doesn't need to fund operations) are distributed to the Treasury and become general government funds. So in essence, the argument is that the CFPB is spending government funds without any Congressional appropriation.
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#2289041 - 09/25/23 05:47 PM Re: U.S District Court Grants Injunction on CFPB 1071 InFairness, CRCM
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Originally Posted by InFairness, CRCM
None of them are funded by Congress, however.

Seems like a systemic problem.

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