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CFPB Files Answer in Lawsuit Challenging Delay in Section 1071 Implementation

The CFPB has filed an answer in the lawsuit filed in May 2019 in a California federal district court by the California Reinvestment Coalition, the National Association for Latino Community Asset Builders, and two individual small business owners seeking a declaration that the CFPB’s failure to issue regulations implementing Section 1071 of the Dodd-Frank Act violates the Administrative Procedure Act (APA) and requiring the CFPB to promptly issue such regulations.

Section 1071 amended the ECOA to require financial institutions to collect and maintain certain data in connection with credit applications made by women- or minority-owned businesses and small businesses.  Such data includes the race, sex, and ethnicity of the principal owners of the business.  In April 2011, the CFPB issued guidance indicating that it would not enforce Section 1071 until it issued implementing regulations.  In its Spring 2019 rulemaking agenda, the CFPB indicated that it expects to resume Section 1071 pre-rulemaking activities in 2019.

The CFPB’s answer asserts two affirmative defenses.  First, the CFPB asserts that the plaintiffs lack standing to bring the action.  Second, the CFPB asserts that the plaintiffs’ APA claim in Count II of their amended complaint that “by informing financial institutions not to [comply with Section 1071],” the CFPB has acted arbitrarily and capriciously and not in accordance with law is barred by the applicable statute of limitations.

Copyright © by Ballard Spahr LLP

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Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

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