NEFA: Section 1071 troubles lenders 

HUNTINGTON BEACH, Calif. — Financial disclosure regulations remain a thorn in the equipment finance community’s side, and lawyers for industry trade groups say they continue to push for exemptions as states continue to roll out new guidelines.  

The Equipment Leasing and Finance Association (ELFA) is in the midst of a nationwide legal battle that seeks to challenge the final rule implementation of Section 1071 of the Dodd-Frank Act. ELFA’s attorneys at Padfield & Stout filed a motion for summary judgment in the Southern District of Texas on March 1.  

Section 1071 would require equipment financiers of varying sizes to report more information to the federal government about their borrowers, including demographic information and other consumer data. Lenders argue that Section 1071 is too burdensome as it requires covered financial institutions to create and maintain systems for reporting 81 different customer data points to prove they don’t discriminate, putting them at a potential disadvantage when closing deals.   

Following calls from ELFA to expand a preliminary injunction issued in July 2022, the court in October 2023 issued an injunction applicable to all financial firms implicated by the new ruling. The expanded injunction gave companies 10 more months before they were subject to reporting under Section 1071.   

Other trade groups including the American Financial Services Association (AFSA) and Independent Community Bankers of America (ICBA) also oppose the ruling.   

Separately, the association is working to educate lenders on new financial disclosure laws that are rolling out in various states.  ELFA vice president of government relations Scott Riehl said at the National Equipment Finance Association conference today that ELFA is actively tracking the issue and maintains a live map of current laws.  

“The first issue that’s on everybody’s mind these days are financial disclosures, or enhanced financial disclosure regulations that are sweeping across the country,” Riehl said.         

Seven states have passed disclosure laws with exemptions that ELFA requested, including easing requirements for when small and large institutions have to report, allowing them to work solely off applicant-provided information instead of verifying it, and removing requirements to infer the ethnicity of an applicant. 

But several states still debating the law have delayed the progress NEFA hopes to make on exemptions; these states include Pennsylvania, New Jersey and Maryland, where ELFA is actively engaging with Senate bill sponsors. 

Editor’s note: This story was updated on March 28 to clarify the distinction between state and federal regulations.  

Registration is now open for Equipment Finance Connect, the nation’s only dealer-centric equipment lending and leasing event, which will take place May 5-7 in Nashville, Tenn. Learn about the event and free dealer registration at EquipmentFinanceConnect.com.