This summer, Representative Roger Williams (R-Texas) and Senator John Kennedy (R-La.) introduced identical Congressional Review Act (CRA) resolutions in the U.S. House and Senate (H.J. Res. 66 and S. J. Res. 32, respectively) disapproving the Consumer Financial Protection Bureau’s (CFPB or Bureau) implementation of the small business data collection and reporting final rule under § 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Final Rule). Currently, the Senate resolution has not moved beyond introduction, but the House Financial Services Committee recently approved the House resolution to advance. If the resolutions are adopted by both houses of Congress and signed by the President, the Final Rule would be overturned. While that outcome appears unlikely under the current Democratic administration, letters submitted to Congress by banking and credit union trade groups supporting the joint resolution do appear to confirm the nearly unanimous industry opposition to the Final Rule.
Under the Congressional Review Act (CRA), a rule promulgated by an administrative agency “shall not take effect (or continue), if the Congress enacts a joint resolution of disapproval.” A CRA disapproval resolution can be passed by a simple majority vote within each chamber. Generally, Congress has 60 days to pass a resolution of disapproval under the CRA. However, that timeline shifts in circumstances when rules are submitted to Congress within 60 legislative days of adjournment. But the clock is ticking.
Several banking and credit union trade associations have written letters to Congress expressing support for the joint resolutions, including the American Bankers Association (ABA), Independent Community Bankers Association, National Association of Credit Unions, and Credit Union National Association. For example, yesterday, the ABA sent a letter to Senate leaders expressing support for the joint resolutions to overturn the CFPB’s Final Rule by citing to compliance burden as well as privacy concerns. “While industry fully supports complying with the nation’s fair lending laws, the enormity of the data points to be collected and the 100-loan threshold for determining which lenders must report means compliance with this new ruling will place significant burden on banks, especially community banks.” The ABA further stated that the Bureau’s plan to publish the 1071 data also raised privacy risks for small business owners. “Publication will create privacy concerns for small businesses that do not want their information made public and will not have a say in it.”
Conversely, consumer advocacy groups have written to members of Congress rejecting the joint resolutions and arguing to retain the Final Rule. In a July 25 letter to both houses of Congress, the National Community Reinvestment Coalition (NCRC) on behalf of itself and 150 other organizations touted the potential benefits of the Final Rule. “By increasing transparency of pricing, terms and conditions, and action taken on applications, 1071 data is likely to curb excessive pricing, reduce abusive terms, and increase access to credit for traditionally underserved small businesses. Lenders will also realize benefits in terms of improved ability to gauge their competitive position in the market and opportunities for them to identify untapped market segments and serve new customers.” The NCRC also downplayed the estimated costs of lenders complying with the Final Rule. “Furthermore, the estimated compliance costs are minimal when compared to the net income lenders generate from originating small business loans.”
Our Take:
Even if the resolutions were to pass both houses of Congress (which seems more likely in the House with its slim Republican majority), we think it’s highly unlikely the joint resolution would be signed into law by President Biden. Therefore, the Final Rule will likely stay on the books and proceed toward implementation. Nonetheless, this Congressional initiative underscores the banking and credit union industry’s concerns that the CFPB has created extra compliance burden beyond the mandate of § 1071 of the Dodd-Frank Act by adding additional data points to the collection and reporting requirements and publishing the results in a way that could lead to privacy risks for small business owners.
As discussed here, the partial preliminary injunction granted by a federal district court in Texas Bankers Association v. CFPB on July 31 has led to a letter-writing campaign by trade associations advocating that the CFPB should suspend compliance dates for the Final Rule for all small business lenders, not just those covered by the court’s order. The trade groups argue that not extending the stay to all small business lenders creates an un-level playing field and will make varying compliance dates difficult for the Bureau to administer. It is unclear how the CFPB will respond to these requests, so we expect a great deal of activity will occur in the Texas Bankers Association case as more trade associations seek to intervene and avail themselves of the court’s injunction.