Court rejects challenge to CFPB’s Sec. 1071 rule

A Federal court on Aug. 27 denied a request for summary judgment in a lawsuit by the American Bankers Association, Texas Bankers Association and others challenging the Consumer Financial Protection Bureau’s small business data collection rule.

In his decision, Judge Randy Crane ruled the CFPB did not exceed its authority in issuing the rule, nor did it violate the Administrative Procedure Act, or APA, which governs how agencies develop regulations. ABA and TBA plan to appeal the case to the Fifth Circuit Court of Appeals.

ABA last year joined a lawsuit brought by TBA and the McAllen, Texas-based Rio Bank challenging the CFPB’s final rule implementing Section 1071 of the Dodd-Frank Act. Among other things, the plaintiffs argued that the bureau violated the APA by failing to consider and respond to industry feedback, and by failing to conduct a proper cost-benefit analysis of the rule.

Crane rejected those arguments in his decision. Regardless of “however ineffective or counterproductive the substance of the Final Rule may be,” he wrote, the “administrative record is voluminous and its breakdown of the bureau’s decision-making is comprehensive.”