Recent Developments in Consumer Financial Protection Bureau's Section 1071 Rule
The Consumer Financial Protection Bureau (CFPB) finalized its long-awaited Section 1071 rule, aimed at transforming small business lending reporting. Section 1071 was a key provision of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, and the financial services industry has been anxiously awaiting the finalized rule for years. Since the CFPB's small business data collection rule became effective earlier this year, small business lenders have been making plans to implement the new and extensive data collection requirements. At the same time, the final rule has been the subject of litigation, with several financial institutions and trade associations suing the CFPB to enjoin the rule’s implementation. On July 31, a Texas court granted a preliminary injunction preventing the CFPB from implementing or enforcing the rule against the plaintiffs and their members.
Guidehouse partner, Kathryn Rock joined Mayer Brown partners Tori Shinohara and Frank Doorley for an update on the pending litigation, and a discussion of compliance considerations for lenders in the process of developing policies, procedures and processes to comply with the final rule.
"While it is anticipated that the implementation date will be moved out, financial institutions should not sit back and watch."
— Kathryn Rock, Partner, Guidehouse Financial ServicesHow Guidehouse Can Help
Financial institutions should start examining the impacts of Section 1071 to their organization to ensure compliance. Guidehouse can help alleviate these constraints by supporting financial institutions through all aspects of Section 1071 implementation and compliance, including:
- Providing program management support
- Establishing strong and accountable governance structures
- Analyzing gaps in technology/systems, applications, data collection, and data management practices against Section 1071 requirements
- Prioritizing and managing updates to technology/systems, applications, data collection, and data management practices
- Drafting process flows and procedures, incorporating steps to provide decision audit trails
- Conducting comprehensive training for applicable employees
- Performing data quality reviews on collected data
- Conducting data control reviews
- Performing fair lending regression analyses on currently collected data
Read our article, Long-Awaited Section 1071 Final Rule Released on March 30th for a summary of the rule.
