Congress Tries Again to Repeal Section 1071

Congress is once again considering repealing Section 1071 of the Dodd-Frank Act. On February 4 Congressman Roger Williams introduced legislation to repeal Section 1071. A similar proposal is expected in the Senate.

Banks are familiar with Section 1071, which imposes the following requirement:

[I]n the case of any application to a financial institution for credit for women-owned, minority-owned, or small business, the financial institution shall--

(1) inquire whether the business is a women-owned, minority-owned, or small business, without regard to whether such application is received in person, by mail, by telephone, by electronic mail or other form of electronic transmission, or by any other means, and whether or not such application is in response to a solicitation by the financial institution; and

(2) maintain a record of the responses to such inquiry, separate from the application and accompanying information.

15 U.S.C. § 1691c-2. The law further authorized the CFPB to promulgate regulations to implement this requirement. The CFPB prepared regulations regarding data collection, but the implementation was stayed by a federal court while the United States Supreme Court considered a challenge to the CFPB’s funding structure. The Supreme Court ultimately approved of the CFPB’s structure, which cleared the way for implementation of the 1071 regulations.

The CFPB has since revised the compliance dates. The new compliance deadlines are phased in starting July 18, 2025, through October 18, 2026, depending on the lender’s loan volume.

Many banks have expressed serious concerns over the burdensome data collection requirements.

Congress previously passed a repeal of Section 1071, but President Biden vetoed the resolution. This renewed effort may ultimately succeed in repealing Section 1071. However, until the legislation passes and is signed, banks will still need to plan to comply with the CFPB’s regulations.