As we reported earlier this week, the CFPB’s new Acting Director and Treasury Secretary, Scott Bessent, has directed Bureau employees not to make any filings or appearances in litigation, other than to seek a pause in the proceedings. This directive played out almost immediately this week—including in a case before the Fifth Circuit brought by several trade associations challenging the Bureau’s small business data collection final rule (“1071 rule”). The case was slated for oral arguments before the Fifth Circuit on February 3, but in light of the directive from the Acting Director, CFPB counsel appeared and, without addressing the merits of the case, notified the court that they had been instructed by new leadership not to make any appearances in litigation except to seek a pause in proceedings. The court then directed each side to announce, in writing, its posture regarding the current status of the case. In response, the CFPB stated in writing that it no longer opposes the plaintiffs’ motion to stay the 1071 rule’s compliance deadlines (the first of which is in July 2025) for 90 days to give the Acting Director time to consider the issues. Today, the Fifth Circuit issued an order granting plaintiffs’ motion for a stay pending the appeal, but subject to modification at any time. As a result, the 1071 rule’s compliance deadlines are tolled for plaintiffs’ and intervenors in the litigation.
Notably, this is the second time that the 1071 rule has been stayed by a federal court. We previously reported on the prior nationwide stay, which ultimately resulted in the Bureau delaying the original compliance deadlines by 290 days.
Although the stay is a welcome relief for covered small business lenders—many of whom have been working industriously to get ready for the July compliance deadline—it creates additional uncertainty in the industry regarding the implementation of the 1071 rule. Because the 1071 rule became effective in August 2023, it is not subject to the new administration’s regulatory freeze, nor is it subject to the Acting Director’s directive to halt new rulemakings that have not yet become effective. It remains to be seen what actions the Bureau’s new leadership may take with respect to the substantive requirements set forth in the 1071 rule.