Earlier this week, the Consumer Financial Protection Bureau (CFPB) announced an update to Section 1071, the small business lending rule, extending compliance deadlines following recent court rulings. This move, aimed at providing clarity and additional time for lenders, comes in the wake of the Supreme Court decision in CFPB v. CFSA.
Background of the Rule and Legal Proceedings
The small business lending rule, initially issued by the CFPB on March 30, 2023, faced a temporary halt due to a federal court’s stay in Texas. This stay was contingent on the Supreme Court’s decision in the case of CFPB v. CFSA, which has now been resolved. As per the Texas court’s directive, the CFPB has extended the rule’s compliance deadlines by 290 days to account for the stay period.
New Compliance Deadlines
The updated compliance deadlines are designed to offer a staggered timeline based on the volume of loans handled by lenders:
- High Volume Lenders: Must begin collecting data by July 18, 2025.
- Moderate Volume Lenders: Must begin collecting data by January 16, 2026.
- Low Volume Lenders: Must begin collecting data by October 18, 2026.
Despite these new collection dates, the deadline for reporting small business lending data remains June 1 following the calendar year for which data is collected. Consequently, high volume lenders will submit their first data by June 1, 2026, while moderate and low volume lenders will have their first submissions by June 1, 2027.
Flexibility and Support for Lenders
To aid in the transition, the CFPB is offering several accommodations:
- Optional Early Data Collection: Lenders are permitted to start collecting demographic data up to one year before their compliance date to test their systems and procedures.
- Grace Period and Good Faith Efforts: The CFPB has updated its grace period policy, reflecting the revised dates. No penalties will be assessed for reporting errors during the first 12 months of data collection. During this period, examinations will focus on helping lenders diagnose compliance weaknesses as long as they demonstrate good faith efforts.
Resources and Tools for Implementation
The CFPB is committed to supporting lenders through this transition. Resources to help implement the small business lending rule can be found on the Small Business Lending Database web page. Additionally, the CFPB’s small business lending data submission platform will be open for beta testing starting in August. Interested parties can sign up for updates and participate in the beta testing through the Small Business Lending Database page.
Here at COMPLIANCE RESOURCE, we’re proud to be leading the industry on Section 1071 training and if you need help preparing for Section 1071 or implementing process changes to accommodate it, we hope you’ll take these training opportunities into consideration:
- Section 1071 – Where Are We Now
- Frontline Bootcamp For Section 1071
- Conducting a Section 1071 Gap Analysis
- Comprehensive 3-Part Section 1071 Series