The Consumer Financial Protection Bureau (CFPB) has issued its final rule implementing Section 1071 of the Dodd-Frank Act. This long-anticipated rulemaking provides clarity for the industry and marks a significant step toward establishing a more practical regulatory framework.
The Equipment Leasing & Finance Association appreciates the Administration and the Bureau for revisiting the 2023 rulemaking and finalizing this important regulation. The final rule represents progress, ensuring that small businesses nationwide have fair and equitable access to the financing they need to grow and thrive, while also striving to provide a framework that is clear and operationally feasible for industry participants.
Several notable aspects of the final rule related to the persistent advocacy by ELFA and its members include:
- A meaningful opt-out for customers, eliminating the concept that customer opt-outs are an indication of “discouragement”
- An exemption for true leases
- Streamlined operational compliance by permitting post-credit decision data collection in indirect lending transactions
- Removal of many discretionary data points that were included in the 2023 rulemaking, focusing on core data points aligned with statutory data collection requirements
- A decreased threshold defining “small business” from $5 million to $1 million in gross annual revenue
- An increased annual origination exemption threshold for covered financial institutions, from 100 transactions and under to 1,000 transactions and under
- Adding agricultural lending to the list of exempted transactions, which includes the funding of agricultural machinery and equipment
- A transition from a tiered compliance schedule to a single compliance start date beginning, January 1, 2028 for data collected in 2028
- The final rulemaking adopts a new special transitional rule that allows, but does not require, financial institutions to use calendar years 2025 and 2026 instead of 2026 and 2027 for determining whether they must comply with the rule beginning January 1, 2028
As a statutory requirement under the Dodd-Frank Act, Section 1071 will ultimately need to be implemented and enforced. ELFA will continue to engage constructively with regulators and other stakeholders during implementation, advocating for additional guidance and clarifications to aid ELFA members.
We also remain engaged with policymakers to advance legislation that further reduces the scope and application of Section 1071, addressing the regulatory burden on the equipment finance industry and promoting access to credit for small businesses. This includes House Financial Services Committee Chairman French Hill’s (R-AR) Small LENDER Act, which passed out of the House Financial Services Committee earlier this month and the PROTECTED Act, companion legislation introduced by Senator Katie Britt (R-AL).
As a plaintiff in the 2023 lawsuit, Texas Bankers Association et al. v. CFPB, and through the Court of Appeals for the Fifth Circuit, we continue to remain in a judicial stay as of April 2nd. We will continue to monitor the Courts' review of the lawsuit as this rulemaking has been finalized by the CFPB.
ELFA remains committed to representing the interests of its members and the millions of small businesses that depend on equipment finance to succeed. We will be providing additional analysis of the rule to members in the coming weeks.
As we move into the implementation phase of this rule, we welcome your input and encourage you to share feedback with ELFA’s Senior Vice President of Policy and Government Affairs, Susan Sullivan Kinney at [email protected] and Vice President of Federal Government Affairs, Allyson Gale, at [email protected].
Thank you for your continued partnership and engagement on this important issue.
