In a huge win for small business credit union lenders, recently a federal district issued a nationwide injunction prohibiting the CFPB from implementing or enforcing its Small Business Lending Rule. The rule is stayed for all financial institutions covered by the rule.
Initially, a federal court in Texas issued a narrower injunction only applying to the Texas Bankers Association and its members, the American Bankers Association and its members and Rio Bank. CUNA and several other trade associations and financial institutions filed motions to intervene and asking to expand the scope of the previously issued injunction. The federal district court in Kentucky issued a nationwide injunction after reconsidering the logic of the earlier ruling granting narrower relief to the original plaintiffs. The federal court’s order enjoins the CFPB from both implementation and enforcement of the rule until after the Supreme Court’s decision in the CFSA Community Financial Services Association v. CFPB case, which found the CFPB’s funding structure unconstitutional.
As suspected, the rule from its initial release has been met with tremendous opposition and legal challenges, including a resolution under the Congressional Review Act that recently passed in the Senate and was awaiting vote in the House.
For the time being, the Section 1071 rule is on hold and credit unions will not be expected to meet the initial compliance dates. However, it would be wise for credit unions to continue with their implementation plans of the final rule. We are monitoring this situation and will keep you advised as the situation develops.
For further information about items in this L & T Bulletin, please contact ICUL’s Compliance & Advocacy Office: