Another court rules against CFPB’s 1071 rule

Another federal district court has ruled that the Consumer Financial Protection Bureau may not enforce its Section 1071 small-business rule until the Supreme Court rules on the constitutionality of the bureau’s funding structure.

Kentucky Ruling: In Monticello Banking v. CFPB, the U.S. District Court for the Eastern District of Kentucky generally enjoined the bureau from enforcing the 1071 final rule. While the court did not decide on the reach of its injunction, the order indicates the relief applies to all financial institutions nationwide.

Texas Case: The U.S. District Court for the Southern District of Texas previously granted limited injunctive relief to the parties in TBA v. CFPB. In a recent court filing in that case, ICBA, the Independent Bankers Association of Texas, and Texas First Bank asked the court for a preliminary injunction prohibiting the CFPB from enforcing the 1071 rule nationwide. The court previously granted a request by the groups to intervene in the case—a key procedural development—after they submitted a motion calling on the court to declare that the 1071 final rule is invalid.

Requests for CFPB Stay: ICBA previously sent a letter to the CFPB reiterating its call for the agency to stay the effective date of its 1071 rule pending the Supreme Court decision on the bureau’s constitutionality. Several Senate Banking Committee members have since asked the bureau to issue a nationwide stay of the rule given the court proceedings.

Why it Matters: While the CFPB is slated to implement the rule on a rolling basis between October 2024 and January 2026, the court rulings represent setbacks for the agency’s ability to enact it. The ultimate impact of the court challenges is likely to hinge on how the Supreme Court rules on the bureau’s constitutionality next year.

Grassroots Resources: Amid the CFPB’s various court challenges, ICBA continues encouraging community bankers to use its custom resources to speak out on the 1071 rule.

• ICBA offers custom resources, including social media content and a sample op-ed, to educate and engage customers on the impact of the rule.

• ICBA’s Be Heard grassroots action center allows community bankers to urge their members of Congress to support a House and Senate resolution to block the rule.

Compliance Resources: ICBA also offers a summary of the rule as well as more than 100 Q&As about it on the ICBA Compliance Vault, while the CFPB offers frequently asked questions and a small entity compliance guide.

More: A recent message to community bankers from ICBA President and CEO Rebeca Romero Rainey offers a full run-down of ICBA’s comprehensive efforts to challenge the 1071 rule.