The rule was enacted by the CFPB to increase transparency in small business lending and prevent unlawful discrimination.
12/05/2023 2:45 P.M.
3 minute read
The House voted 221-202 to nullify a Consumer Financial Protection Bureau rule requiring lenders to disclose credit applications they receive from small businesses, lending decisions and demographic data. Next it heads to the desk of President Joe Biden, who is expected to veto it, according to American Banker.
The resolution (PDF), originally sponsored by U.S. Sen. John Kennedy, R-La., and supported by Democrat and independent senators, passed in the U.S. Senate 53-44 in October, ACA International previously reported.
House members used the Congressional Review Act to overturn the rule. The Congressional Review Act allows Congress to reverse certain agency rules within 60 days of their release.
U.S. Rep. Roger Williams, R-Texas, led Republicans in the debate on the resolution, stating in a news release, “We must overturn the CFPB’s Small Business Lending Rule to ensure small businesses across America, who are the backbone of our country, have continued access to affordable credit to support and grow our economy. Access to affordable credit is key to ensuring communities across America remain vibrant. Unfortunately, the CFPB’s Small Business Lending Rule undermines the goal of affordable and available credit, which I think we all should share.”
Williams said the rule is overly broad and would require unnecessary collection of data when a small-business owner applies for credit.
“The CFPB’s rule is burdensome,” Williams said. “Community banks and credit unions across America already account for a majority of small business lending. They are doing their part. Despite claims from my colleagues across the aisle, this rule doesn’t go after big banks. It will have the biggest impact on the small community financial institutions already operating under the thinnest of margins because of runaway inflation and increased interest rates from the Federal Reserve.”
Williams and members of the House Financial Services Committee also discussed the rule in a Nov. 29 hearing with CFPB Director Rohit Chopra on the bureau’s semiannual report to Congress.
The committee’s ranking member, U.S. Rep. Maxine Waters, D-Calif., asked Chopra about the impact of rescinding the small business lending rule.
Chopra said it is an important way to prevent discriminatory practices in small business lending and that it has already been done with mortgage loans, adding that the bureau extended the compliance date and exempted some small institutions that do not issue a significant amount of small business loans, according to a summary of the hearing from Brownstein Hyatt Farber Schreck.
Waters opposed the resolution to rescind the rule in remarks on the House floor Dec. 1.
“The CFPB rule will allow small businesses to comparison shop between lenders and see how much other small businesses are being charged for their loans,” Waters said. “This price transparency is essential to a competitive and fair marketplace. Make no mistake, Senate Joint Resolution 32 is just another part of Republicans’ relentless attack on the CFPB. They have erroneously claimed that the CFPB is unconstitutional and unaccountable, and have even gone so far as to attempt to eliminate the agency altogether.”
Meanwhile, two district court cases put enforcing the rule on hold.
In Texas, an injunction granted in August means banks do not have to comply with the rule until the U.S. Supreme Court issues its decision in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited (CFSA), a case challenging the constitutionality of the bureau’s funding structure that originated in the 5th Circuit, ACA previously reported.
In September, a U.S. district judge serving in the Eastern District of Kentucky granted a plaintiff’s motion for a preliminary injunction (PDF), effectively putting a halt on the enforcement of the rule, ACA previously reported.
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