Injunction Issued on Small Business Lending Rule

On October 26, 2023, the U.S. District Court for the Southern District of Texas issued a nationwide injunction that prohibits the implementation or enforcement of the Small Business Lending Rule. Credit unions will not be expected to implement the rule until litigation is concluded. The CFPB created the Small Business Lending Rule intending to address the provisions of Section 1071 of the Dodd-Frank Act. The rule in question would impose a significant reporting burden on credit unions that make at least 100 business loans of any size in a year.  

The case, Texas Bankers Association v. CFPB, filed by the Texas Bankers Association, American Bankers Association, and associated banks protested the unconstitutional funding structure of the CFPB but the injunction was only applied to members of the Texas Bankers Association and the American Bankers Association. Over the summer, CUNA and the Cornerstone League filed a motion to intervene in the case, a filing that in essence made them parties to the case, as well. Because of pleadings from credit unions and their affiliates, the injunction has been applied to all financial institutions subject to the rule.  

Relief from the rule will remain in place until the U.S. Supreme Court reviews the constitutionality of the CFPB’s structure and funding in CFPB v. Community Financial Services Association of America. The rule may still go into effect, though should the U.S. Supreme Court find that the CFPB is constitutional, the compliance deadline will be extended to compensate for the stay on the rule.