The rule at the heart of the Kentucky and Texas lawsuits was finalized to implement Section 1071 of the Dodd-Frank Act, which instructed the CFPB to begin collecting small-business loan applicant data for uses including fair lending oversight.
Under the rule, the CFPB would begin collecting that information from banks, fintech firms and other small-business lenders, including details about their applicant demographics, pricing and approval decisions.
But the industry group lawsuits allege the rule exceeded the CFPB’s authority and should be struck down. The agency wants far more data than Section 1071 actually called for and will overburden lenders in the process, the groups say.
There is also a third pending lawsuit against the rule in Florida federal court. That case — which was brought in December by the Revenue Based Finance Coalition, an industry group representing firms that offer merchant cash advances and similar products — challenges the rule’s application to providers of “sales-based financing.”
