Section 1071, a new regulatory challenge that equipment lenders have been gearing up for, may have just vanished into thin air.
The new Department of Government Efficiency, led by billionaire Tesla founder Elon Musk, effectively shut down the Consumer Financial Protection Bureau (CFPB) over the weekend.
Acting CFPB Director Russell Vought on Saturday ordered all employees to cease operations unless specifically approved by the agency’s chief legal officer. The move came roughly one week after President Donald Trump fired former CFPB Director Rohit Chopra.
Shuttering the CFPB signals that Section 1071 of the Dodd-Frank Act, which directs financial institutions to collect and report data from loan applications by small businesses to the CFPB, is “likely dead” for the foreseeable future, Ryan Thompson, of counsel at national law firm Womble Bond Dickinson, told Equipment Finance News.
The decision is also likely to end any litigation questioning the CFPB’s authority to enact Section 1071, originally set to take effect July 18 this year.
“The administration can take one of several approaches, including asking for the litigation to be dismissed or even possibly asking for the courts to rule 1071 illegal,” Thompson said.
However, it’s possible that the decision to halt the CFPB’s actions will be challenged in court, he said.
Section 1071 was expected to create “significant paperwork and data management burdens that slow down credit access for those small businesses,” Crest Capital President Mark French previously told EFN. Some equipment financiers were preparing to cut back on loans to small businesses due to the anticipated challenges of the rule.
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