CFPB Declines Enforcement of Small Business Data Rule

The Consumer Financial Protection Bureau (CFPB) announced it will not enforce its small business lending data collection rule, which would have required financial institutions to gather demographic information from small business borrowers. The rule, finalized under the Biden administration and mandated by Section 1071 of the Dodd-Frank Act, faced significant opposition from banks and lenders, who argued that compliance would impose burdensome costs and deter lending. The CFPB cited a desire to focus resources on more pressing threats to consumers, particularly servicemen and veterans, as well as concerns about inconsistent regulatory treatment following court-issued stays. The rule has been the subject of ongoing litigation, with some lawmakers and banking groups challenging its scope and privacy implications, while advocacy groups argue it is essential for curbing discriminatory lending practices. The decision effectively pauses enforcement nationwide, despite the rule being upheld in court and its compliance deadline approaching. Critics of the CFPB's move argue the agency should not alter enforcement of congressionally mandated rules through press releases.