On October 31, 2023, the U.S. District Court for the Southern District of Texas expanded the prior injunction that prevents the CFPB from enforcing the 1071 Small Business Rule to financial institutions who were not named in the original lawsuit. Chief Justice Crane indicated that the injunction would be in effect until the United States Supreme Court rules on the constitutionality of the independent funding of the CFPB. The United States Supreme Court heard oral arguments on October 3, 2023, in the case of Community Financial Services of America vs CFPB but is not expected to rule on the case until late Spring of 2024.
The expanded injunction applies to all financial institutions, banks, credit unions, and fintechs under the CFPB’s purview.
It is possible the rule could be modified from its current format, removed in its entirety, or delayed. It is least likely that the rule will be removed in its entirety, so financial Institutions should be diligent in preparing for the rule but responsive to any fundamental changes to the application of the rule. Steve H. Powell & Company will continue to update clients on any changes or progress made in the legal system.
Author: Steve Shepherd, CRCM