U.S. Senator Bill Hagerty (R-TN) signed a letter urging the Biden administration’s Consumer Financial Protection Bureau (CFPB) to pause the effective date of the Dodd-Frank Section 1071 small business data collection rule.
The rule would compel banks to gather private information on small business owners who apply for loans.
Hagerty and six other U.S. senators sent a letter last week to Rohit Chopra, the director of the CFPB, voicing “deep concerns” about the potential adverse impacts of the CFPB rule to implement Dodd-Frank Section 1071.
“Today I joined Senator John Kennedy and six Senate GOP colleagues in urging the CFPB to pause the effective date of the Dodd-Frank Section 1071 rule, that would require banks to collect sensitive personal data on small business owners, the cornerstone of our economy, when they seek a loan,” Hagerty said.
The U.S. District Court for the Southern District of Texas issued a preliminary injunction for the rule, which only applies to American Bankers Association members. The Credit Union National Association, the Cornerstone League, and Rally Credit Union have filed to join an emergency motion for a preliminary injunction to include all credit unions.
In the letter, the lawmakers highlight several key areas of concern regarding the CFPB rule, including the current legal challenge facing CFPB at the U.S. Supreme Court.
“At your agency’s request, a recent ruling in the U.S. District Court has created a situation where only some lenders, including large systemically important lenders, will receive a temporary reprieve from working towards implementation of the CFPB’s Section 1071 small business data collection rule (‘the 1071 rule’), while others, including many community banks and all credit unions, must seek further relief from the judicial system,” the senators wrote.
The senators also note that they believe that the CFPB’s funding structure violates the U.S. Constitution.
“As you are aware, we harbor deep concerns about the potential adverse impacts of the Consumer Financial Protection Bureau’s (CFPB) rule to implement Dodd-Frank Section 1071. Furthermore, we believe that the CFPB’s funding structure is in violation of the Appropriations Clause of the U.S. Constitution. In October 2022, the U.S. Court of Appeals for the Fifth Circuit concurred with this viewpoint, and the Supreme Court will be reviewing this matter in October,” the lawmakers said.
Considering these concerns, the lawmakers urge the CFPB to issue a nationwide stay of the effective date of its Section 1071 rule.
“In light of these recent developments, we respectfully urge the CFPB to exercise its existing legal authority by issuing a nationwide stay of the effective date of its Section 1071 rule for all credit unions and FDIC-insured banks, including community banks. This action would provide a crucial measure of certainty to small businesses and community banks, which are the cornerstone of the American economy, while we await a final determination of the validity of the Section 1071 rule by the Courts,” the lawmakers said.
Other cosigners of the letter include U.S. Senators Cynthia Lummis (R-WY), Thom Tillis (R-NC), Steve Daines (R-MT), John Kennedy (R-LA), J.D. Vance (R-OH), Mike Crapo (R-ID), and Kevin Cramer (R-ND)
U.S. Congressman Mark Green (R-TN-07) applauded Hagerty for signing on to the letter and said he agrees that the CFPB needs to stay its effective date.
“Thank you, Senator Hagerty, I am right there with you,” Green said.
The Credit Union National Association (CUNA) said supports the Senate Republicans’ efforts to rein in the CFPB.
“CUNA fully supports your efforts to rein in the CFPB and its imposition of this burdensome regulation on credit unions and other community financial institutions,” CUNA said.
The Tennessee Star contacted Hagerty and the National Federation of Independent Businesses for comment but did not receive a reply before press time.
October 1, 2024, is the earliest compliance deadline for the Dodd-Frank Section 1071 small business data collection rule.
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Hannah Poling is a lead reporter at The Ohio Star, The Star News Network, and The Tennessee Star. Follow Hannah on Twitter @HannahPoling1. Email tips to [email protected]
Photo “Bill Hagerty” by Bill Hagerty. Background Photo “Consumer Financial Protection Bureau Building” by Ted Eytan. CC BY-SA 2.0.
