The wheels of regulation often move slowly, but 2023 marked the advancement of new regulations under Section 1071 of the Dodd-Frank Act, which required equipment vendors to gather data on borrower demographics.
Opponents have argued Section 1071 will have far-reaching implications for equipment vendors’ workloads and access to capital.
Here’s a look at the key milestones of 1071’s advancement this year:
Many trade groups, including the American Financial Services Association (AFSA), the Equipment Leasing and Finance Association (ELFA) and the Independent Community Bankers of America (ICBA) publicly addressed concerns for the rule, while U.S. Rep. Maxine Waters (D-Calif.), who drafted the provision 13 years ago and is the top Democrat on the House Financial Services Committee, commended the CFPB’s rule.
Many lenders started leaning on their dealer partners and service providers to gather the required data, further burdening already tight margins at dealerships. Software providers that could assist in gathering demographic data also were sought after.
The final chapter of the 1071 saga came at the end of October when The United States District Court for the Southern District of Texas issued an expanded, nationwide injunction of the rule’s implementation.
The court issued an injunction on Oct. 26 for all covered financial institutions against the implementation of Section 1071. The court’s action followed a preliminary injunction issued July 31 by the Southern District of Texas on behalf of the American Bankers Association, Texas Bankers Association and McAllen, Texas-based Rio Bank.
The U.S. Supreme Court decision on the constitutionality of the CFPB’s funding structure in CFPB v. Community Financial Services Association of America, which is expected before June 2024, is the linchpin around which the Southern Districts of Texas’ national injunction rests and will be the next mile marker in the ongoing saga.