Credit unions are now protected by a nationwide injunction preventing implementation of the Consumer Financial Protection Bureau’s (CFPB) Section 1071 rule, thanks to quick legal action by the Credit Union National Association (CUNA), the Cornerstone League, and Rally CU of Corpus Christi, TX.
The U.S. District Court for the Southern District of Texas issued an order expanding its initial injunctive relief Thursday, meaning the CFPB’s 1071 rule is stayed for all financial institutions covered by the rule.
The court initially issued only a partial injunction applying to American Bankers Association members Texas Bankers Association members, and Rio Bank. CUNA, the Cornerstone League, and Rally Credit Union filed a motion to intervene Aug. 10, then a joinder to an emergency motion for preliminary injunction on Aug. 14 to obtain parity for credit unions.
“Today’s decision levels the playing field when it comes to implementing the CFPB’s rule, which is very important for credit unions facing large compliance costs due to this rule, while also working to serve members,” said CUNA President/CEO Jim Nussle. “The burdensome requirements of this rule — combined with the significant questions about the constitutionality of the CFPB’s funding — created too much uncertainty in the marketplace, especially when credit union products and services are needed by members and businesses more than ever. Thank you to the Cornerstone League and Rally Credit Union for joining us in this victory for all credit unions that lend to small businesses.”
“We are grateful for the opportunity to partner with CUNA and Rally Credit Union to stop the implementation of the 1071 rule,” said Jim Phelps, Cornerstone League EVP and chief advocacy officer. “Credit unions were preparing for a significant compliance burden with this rule, so the court’s decision is welcome news indeed.”
“We appreciate the court’s decision to provide Rally the same relief from Rule 1071 as was provided to our bank peers,” said Dana Sisk, CEO of Rally CU. “This decision helps Rally continue offering affordable financial services to small businesses across South Texas.”
CUNA wrote an August 7 letter together with the National Association of Federal Credit Unions (NAFCU) before taking legal action urging the CFPB to voluntarily delay implementation of 1071 for all covered lenders. The letter outlined how an uneven implementation of the rule is in violation of the purpose of both the rulemaking and the Bureau itself. The Bureau declined to do so.
The 1071 rule — finalized in March — requires credit unions to collect and report certain data on applications for credit for women-owned, minority-owned, and small businesses.
CUNA has consistently voiced concerns with the overly broad scope of the rule, its burdensome data collection, and significant potential for increased costs in small business borrowing. Cornerstone, Rally and CUNA each detailed the substantial cost and impact of the 1071 rule in support of the filing.