The Consumer Financial Protection Bureau (“CFPB”) has settled a lawsuit seeking to compel it to undertake the rulemaking required by Section 1071 of the Dodd-Frank Act (“Section 1071”). Section 1071, 15 U.S.C. § 1691c-2, requires financial institutions to collect and maintain information about loan applications by women-owned, minority-owned and small businesses, and requires the CFPB to collect and publish this data annually. It also requires the CFPB to issue implementing regulations. The settlement sets forth a specific date by which the CFPB must begin the rulemaking process and establishes a framework for determining, along with plaintiffs or subject to court order, a final timeline for promulgation of the required rule. The settlement should result in a final rule in 2022, a dozen years after Congress first required the CFPB to act.
Although the CFPB has on occasion engaged in pre-rule activities (including holding a symposium in November of 2019, which we previously reported on here), it has not begun the rule-making process—even though Section 1071 was enacted nearly ten years ago. In light of the CFPB’s inaction, two community groups and two individuals filed suit last year to compel the agency to carry out the required rulemaking. After both sides briefed motions for summary judgment, the case has now settled.
The settlement lays out the following timeline for the CFPB to initiate a rulemaking:
- By September 15, 2020, the CFPB will release an outline of proposals under consideration, as required by the Small Business Regulatory Enforcement Fairness Act (“SBREFA”);
- By October 15, 2020, the CFPB will convene a Small Business Advocacy Review panel (“SBAR panel”), as required by SBREFA.
- The SBAR panel must complete its report within 60 days, at which point the CFPB will notify plaintiffs.
After that, the settlement no longer requires concrete actions by specific dates, but instead sets up a mechanism by which the CFPB and the plaintiffs can seek to negotiate a timeline for action, and the parties can go to the court if they can’t agree. Thus, in the first instance, the parties will seek to reach agreement on a deadline for the CFPB to publish a Notice of Proposed Rulemaking (“NPRM”); if they can’t agree, they will propose competing deadlines to the court, and the court will enter a deadline. Similarly, after the close of the comment period on the NPRM, the parties will seek to reach agreement on a deadline for issuance of a Final Rule; if they can’t agree, they will again propose competing deadlines to the court, and the court will enter a deadline. The settlement agreement also provides a mechanism for extensions of its various deadlines.
While the settlement does not provide a date certain by which the Section 1071 rule will be proposed or finalized, it does suggest that the end of the road is finally near. With ongoing court oversight over the rulemaking timeline, it appears that the CFPB can no longer endlessly delay its statutory obligation to engage in rulemaking under Section 1071. Given the September 2020 date to begin the rulemaking process, a notice of proposed rulemaking is likely to be promulgated sometime in 2021, with a final rule likely following in 2022.