(As first published in nvla LeaseWire)

As previously reported, the Consumer Financial Protection Bureau (CFPB) issued the final Small Data Collection Rule promulgated under Section 1071 of the Dodd-Frank Act on March 30, 2023 (Rule 1071). Under this final rule, covered financial institutions are required to collect certain specific data points for reporting to the CFPB to determine practices related to lending to minority, women and LGBTQ+ owned small businesses.

Compliance dates under the rule are staggered commencing in October of 2024 for institutions with 2500 or more transactions to January 2026 for institutions with 100 such transactions in 2024 and 2025. However, on October 26, 2023, the United States District Court for the Southern District of Texas issued an injunction preventing the CPFB from enforcing the 1071 Rule. The stay was issued in a case brought by a consortium including the American Bankers Association. Several additional institutions intervened and succeeded in convincing the court that enforcement of Rule 1071 had to be delayed until the United States Supreme Court decides a pending case challenging the constitutionality of the CFPB. The Supreme Court will make its decision by about June of 2024. Until that time, the CFPB will not be able to enforce Rule 1071.

A covered financial institution is one that engages in financial activity and includes both depository and non-depository institutions such as online lenders, platform lenders, independent and captive equipment and vehicle finance companies and commercial finance companies. Motor vehicle dealers are exempt from compliance under the rule. Depending on your company’s activities it may be exempt.

Covered credit transactions are extensions of credit for business, commercial or agricultural purposes such as lines of credit and loans. True leases are among the transactions exempt from coverage.

Generally, the rule requires collection of data from businesses with $5 million or less in gross annual revenue for the preceding fiscal year.

Financial institutions are breathing a sigh of relief that the CFPB cannot enforce Rule 1071 for now. Some are asking whether they can postpone the compliance preparations which are complex. Depending on what happens with the Supreme Court case pending, it is very possible that Rule 1071 compliance will be necessary even if it is delayed. For this reason, you should not delay consulting legal counsel to determine whether Rule 1071 compliance is applicable to your company and the transactions it generates.

Sloan Schickler is a partner in the commercial finance law firm, Schickler & Schickler PLLC. Schickler, a veteran vehicle leasing, finance and bank attorney and the attorneys in her firm have decades of experience representing and protecting lessors, banks, captive and independent finance companies in all facets of the vehicle leasing and financing business. She has served as the NVLA Legal and Legislative counsel since 2017, is currently the only woman on the board of directors and is a supporter of Leasing News and sits on its Advisory Board. Sloan can be reached at sloan.schickler@schicklerlaw.com or 212-262-5297.