The fight for fair and reasonable regulation in small business lending took a significant turn on February 7, when the 5th Circuit Court of Appeals granted a stay in the case challenging the Consumer Financial Protection Bureau’s (CFPB) Section 1071 Small Business Lending Rule. This decision is a major victory for ELFA members and other intervenors, as it temporarily halts the rule’s compliance deadlines, sparing lenders from an onerous regulatory burden while litigation is ongoing.
A Hard-Fought Win
Achieving this stay was no small feat. Over the last several months, ELFA has worked tirelessly to advocate for its members and ensure that their concerns were heard at the highest levels. Our government relations and legal teams engaged in extensive discussions with industry stakeholders, legal experts, and policymakers to highlight the sweeping impact Section 1071 would have on small business lending.
At the heart of our advocacy was a simple but critical message: the rule, as structured, imposes excessive reporting requirements that could stifle access to capital for small businesses. By mandating extensive data collection on credit applicants, the CFPB’s rule risked reducing credit availability, increasing costs, and creating compliance nightmares for lenders. We knew that without intervention, many lenders—especially smaller ones—would face substantial operational challenges and legal risk.
A pivotal moment came when Secretary Bessent, in his short-lived tenure as the CFPB’s Acting Director, directed the CFPB to not defend the case, signaling a shift in the Administration’s approach. With the CFPB stepping away from the fight, the 5th Circuit had a clear path to issue the stay, effectively halting compliance deadlines while the case is on appeal. While there were multiple factors at play, it’s undeniable that our advocacy efforts helped elevate the issue and contribute to the environment that made this decision possible.
What the Stay Means
The 5th Circuit’s decision grants temporary relief by pausing the compliance deadlines for ELFA members and other challengers. Should the appeal be resolved within 100 days, the compliance deadlines will be extended by that same period, effectively pushing back the clock. This tolling arrangement mirrors the nearly 300-day delay secured during the District Court case, underscoring the effectiveness of our legal strategy.
While the stay provides much-needed breathing room, it is important to recognize that this battle is far from over. However, the litigation position taken by the CFPB indicates that the Administration may be reconsidering the impact of this rule and acknowledging the problems it presents for lenders and borrowers alike.
The Power of Advocacy
This outcome is a testament to what can be achieved when industry leaders, legal experts, and trade associations come together with a clear and unified voice. ELFA’s efforts—both in the courts and in the policy arena—have played a pivotal role in securing this stay. We have leveraged every tool at our disposal, from direct engagement with lawmakers to filing legal interventions that ensured our members’ perspectives were represented in the proceedings.
This victory did not happen overnight. It is the result of over a decade of dedicated advocacy, careful legal positioning, and coalition-building. Our long-term efforts put us in a position to capitalize on this opportunity when it arose. By consistently raising awareness of the rule’s unintended consequences and maintaining strong relationships with policymakers, we ensured that when the moment came, we were ready to act.
Looking Ahead
As the legal battle over Section 1071 continues, ELFA stands ready to fight for our industry. While we continue to push for regulatory solutions, we are also pursuing a legislative path to permanently repeal this burdensome provision. To support this effort, we encourage our members to visit the grassroots section of our website and urge their legislators to sign on to this critical initiative.
Stay tuned for further developments as we navigate the road ahead.