As previously reported, in late December 2023 President Biden vetoed legislation adopted by the U.S. House of Representatives and U.S. Senate under the Congressional Review Act to override the CFPB’s final Section 1071 small business lending rule (1071 Rule). The vote in the House was 221-202 and the vote in the Senate was 53-44.… Continue Reading
Revenue Based Finance Coalition (RBFC), a trade group whose members include non-banks that provide sales-based financing to businesses, filed a lawsuit last week against the CFPB in a Florida federal district court challenging the CFPB’s final small business lending rule implementing Section 1071 of Dodd-Frank. The core argument made by RBFC is that because sales-based financing does not constitute “credit” within the meaning of the Equal Credit Opportunity Act (ECOA) and Regulation B, the CFPB did not have the authority to regulate sales-based financing as “credit” under the Rule.… Continue Reading
As previously reported, the U.S. House of Representatives, by a vote of 221-202, voted under the Congressional Review Act to override the CFPB’s final Section 1071 small business lending rule (1071 Rule), and the U.S. Senate, by a vote of 53-44, voted to do the same. As was expected, on December 19, 2023 President Biden vetoed the legislation.… Continue Reading
A California federal district court recently granted the motion for summary judgment filed by the California Department of Financial Protection and Innovation (DFPI) in the lawsuit filed by an advocacy organization seeking to enjoin the DFPI from enforcing its final regulations (Regulations) implementing California’s commercial financing disclosure law. SB 1235, which was signed into law in 2018, requires consumer-like disclosures to be made for certain commercial financing products, including small business loans and merchant cash advances. … Continue Reading
Last week, by a vote of 221-202, the House of Representatives voted to approve S.J. 32, the resolution introduced under the Congressional Review Act to override the CFPB’s final Section 1071 small business lending rule (1071 Rule). The Senate voted to approve S.J. 32 in October 2023. President Biden is expected to veto the resolution and there is unlikely to be sufficient votes to override his veto. … Continue Reading
The Federal Trade Commission recently prevailed on summary judgment in a case against Jonathan Braun and his company RCG Advances, LLC. The product at issue, merchant cash advances, generally provide small businesses with critical and timely financing, and there was no dispute that the defendants gave these businesses upfront lump-sums of money in exchange for the right to collect future receivables. … Continue Reading
The Texas federal district court hearing the lawsuit challenging the validity of the CFPB’s final rule implementing Section 1071 of the Dodd-Frank Act (Rule) has issued an order that preliminarily enjoins the CFPB from implementing and enforcing the Rule on a nationwide basis against all entities covered by the Rule. On July 31, the court had denied the request of the plaintiffs in the lawsuit for nationwide preliminary relief and instead issued an order that granted preliminary relief only to the plaintiffs and their members. … Continue Reading
Yesterday, by a vote of 53-44, the Senate voted to approve S.J. 32, the resolution introduced under the Congressional Review Act (CRA) to override the CFPB’s final Section 1071 small business lending rule (1071 Rule).
The Senators voting for the resolution included three Democratic Senators (Senators Hinckenlooper, Manchin, and Tester) and the two Independent Senators (Senators King and Sinema). … Continue Reading
On September 14, 2023, the CFPB released Frequently Asked Questions (FAQs) regarding the Small Business Data Collection Rule (the “Rule”). These FAQs are in addition to the set published in June 2023, which are dated. Some, but not all, of the FAQs are discussed below.
Covered Credit Transactions
A few of the updated FAQs relate to the definition of a “covered credit transaction,” which includes the following topics:
- Consumer-designated credit: The FAQs reiterate that consumer-designated credit is excluded from the Rule, even if the proceeds are used for business or agricultural purposes, as long as the credit is offered or extended primarily for personal, family or household purposes.
We recently reported that a federal district court in Kentucky enjoined the CFPB from implementing the small business data collection and reporting rule, also referred to as the 1071 rule based on the Dodd-Frank section requiring the rule (the “Rule”). Unlike a similar injunction against the rule issued by a federal district court in Texas, the preliminary injunction issued by the Kentucky court is not limited to the members of the plaintiff trade associations and the plaintiff banks.… Continue Reading