On February 26, 2020, a settlement agreement was filed in California Reinvestment Coalition et al. v. Kraninger et al., a lawsuit initiated by the California Reinvestment Coalition regarding the Consumer Financial Protection Bureau’s (the “Bureau”) failure to issue small-business data collection regulations under Section 1071 of the Dodd-Frank Act. Under Section 1071 of the Dodd-Frank Act, codified as 15 U.S.C. § 1691c-2, financial institutions are required to obtain and report certain data to the Bureau about lending to women-owned and minority-owned businesses to “facilitate enforcement of fair lending laws” and to “enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses.” Even though the law was passed in 2010, financial institutions are not currently required to comply with Section 1071 reporting obligations because the Bureau has yet to issue implementing regulations.
Under the terms of the settlement agreement, which has been approved by the court, the Bureau has agreed to a court-supervised process that includes public reporting and specific timetables for the development of the regulation. As a first step, the Bureau will convene a Small Business Advocacy Review (SBAR) panel, a means by which the Bureau can obtain input from small businesses that are likely to be directly affected by the regulation, no later than October 15, 2020. The SBAR panel must complete a report on the input received within 60 days of the panel convening. After completion of the report, the parties will be required to meet and confer regarding an appropriate deadline for the issuance of a Notice of Proposed Rulemaking. The settlement agreement also requires the Bureau to submit status reports to the plaintiffs and the Court every 90 days until the Bureau has issued the Section 1071 Final Rule.
Debate over the rulemaking is likely to be contentious. Section 1071 requires financial institutions to collect and report specific types of data; however, it also allows the Bureau to determine any additional data that would aid in the purposes of fulfilling the statute. Advocates of robust reporting requirements argue that the availability of more data will help women- and minority-owned small businesses access the capital they need. Opponents argue that financial institutions will pass on the cost of complying with burdensome reporting requirements to borrowers. While financial institutions should continue to monitor this rulemaking process, the Bureau is unlikely to issue a final rule in the near future. According to American Banker, Nitin Shah of Democracy Forward, a litigation group that represented the plaintiffs, has speculated that the issuance of a final rule could take between two and two and a half years.