Pub. 14 2019-2020 Issue 6

NEBRASKA BANKERS ASSOCIATION 15 CFPB to publish a Notice of Proposed Rulemaking (“NPRM”); if they can’t agree, they will propose competing deadlines to the court, and the court will enter a deadline. 4 After the close of the comment period on the NPRM, the parties will seek to reach agreement on a deadline for issuance of a final rule; if they can’t agree, they will again propose competing deadlines to the court, and the court will enter a deadline. 5 The settlement agreement also provides a way to extend its various deadlines. The settlement agreement, however, does not resolve the question of how the CFPB will treat the Section 1071 statutory requirements in any rule. Section 1071 requires banks to collect and report specific types of data; however, it also allows the CFPB to determine any additional data that would aid in the purposes of fulfilling the statute. The battle over the substance of the final rule andwhich infor- mation should be collected is expected to be fierce. Advocates for small businesses are calling for robust reporting requirements – arguing that the availability of more data will help women- and minority-owned small businesses access the capital they need. Lenders maintain that the CFPB should take a narrow approach to the Final Rule – citing the costs of a broad requirement and arguing that those costs would be passed along to small business borrowers. “The CFPB fully recognizes the sensitivities here,” said current CFPB Director Kraninger, “and we know that the rule needs to be done with great care and consideration.” 6 These “sensitivities” will now be put to the test. While the settlement does not provide a date certainwhen the Section 1071 rule will be proposed or finalized, it does suggest unfinished business will eventually get done and that the end of the road is at least in sight. With ongoing court oversight over the rulemaking timeline, it now appears that there is a mecha- nism in place for action on Section 1071. Given the September 2020 date to begin the rulemaking process, a notice of proposed rulemaking is likely to be promulgated sometime in 2021, with a final rule possibly in 2022.  1 This data about lending to women-owned and minority-owned businesses is collected to “facilitate enforcement of fair lending laws” and to “enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses.” 15 U.S.C. § 1691c-2. 2 Late in former CFPB Director Richard Cordray’s tenure, the CFPB did conduct pre-rulemaking activities but the CFPB has failed to move the rulemaking process forward during the terms of former acting Director Mick Mulvaney and current Director Kathy Kraninger. For example, in April 2011, the CFPB promised to act “expeditiously” in issuing rules implementing Section 1071. In May 2017, the CFPB issued a Request for Information (“RFI”) regarding the small business lending landscape in order to “augment the Bureau’s expertise in this space.” Although the RFI suggested that the CFPB would move quickly to implement Section 1071, its Fall 2018 agenda reclassified Section 1071 implementation as a long-term action item. However, in mid-2019, the CFPB issued its spring regulatory agenda in which it endeavored to “recommence work...to implement [S]ection 1071.” 3 In May 2019, the California Reinvestment Coalition and the National Association for Latino Community Asset Builders, represented by consumer group Democracy Forward, sued the CFPB in federal court in Northern California for failure to issue small-business data collection regulations under Section 1071. California Reinvestment Coalition et al. v. Kraninger et al., Case No. 4:19-cv-02572-JSW (2019). 4 For example, the CFPB will promptly notify the plaintiffs of the completion of the SBAR report and the parties will thereafter meet and confer regarding a deadline for the CFPB’s issuance of a NPRM. If the parties agree on a deadline, they will jointly stipulate to the agreed date and ask the court to enter that deadline. Any time that is more than 30 days after completion of the SBAR report, the plaintiffs can notify the CFPB that they want to ask the court to set a deadline for issuance of a NPRM and within 7 days of such notice, the parties will file a joint statement setting forth their positions on a deadline. The CFPB agrees not to propose or argue that the court should not set a deadline and the plaintiffs agree not to propose or seek a deadline that is less than 6 months after completion of the SBAR report. The parties will make their submissions according to the briefing schedule set forth in the settlement agreement and the parties will ask the court to enter a deadline for issuance of the NPRM based on the submissions. 5 After the closing of the comment period on the NPRM, the parties will meet and confer regarding a deadline for the CFPB’s issuance of a final rule implementing Section 1071 (“Final Rule”). If the parties agree on a deadline, they will jointly stipulate to the agreed date and ask the court to enter that deadline. Any time that is more than 75 days after the comment period closes on the NPRM, the plaintiffs can notify the CFPB that they want to ask the court to set a deadline for issuance of a Final Rule and within 7 days of such notice, the parties will file a joint statement setting forth their positions on a deadline. The CFPB agrees not to propose or argue that the court should not set a deadline and the plaintiffs agree not to propose or seek a deadline that is less than 6 months after the comment period closes on the NPRM. The parties will make their submissions according to the briefing schedule set forth in the settlement agreement and the parties will ask the court to enter a deadline for issuance of the Final Rule based on the submissions. 6 See CFPB Forced to Complete Small-Business Lending Rule, American Banker (February 28, 2020). For more information, contact Jeff Makovicka at Kutak Rock LLP: (402) 346-6000 or jeff.makovicka@kutakrock.com. Mr. Makovicka is a member of Kutak Rock LLP’s banking practice group, where he concentrates on bank matters. In my experience, “why?” can be a very powerful question. I know several bank boards that have greatly benefited from a few independent thinking directors in the past years that lead up to the current economic downturn. Those directors had the insight and the courage to question the popular belief of the booming real estate market.