A group of banks in Kentucky is seeking to block the implementation and enforcement of the Consumer Financial Protection Bureau (CFPB)’s small business lending rule, the latest in a series of challenges brought by parties including legislators and industry groups.
The Kentucky Bankers Association and a coalition of banks in the state filed a preliminary injunction last week to block the rule from taking effect, according to court documents reviewed by HousingWire.
The rule, which was finalized in March, fulfills a mandate from Congress. It aims to increase transparency and reduce discrimination in lending, requiring lenders to collect and provide more details about the small business credit applications they receive, including geographic and demographic data.
Kentucky plaintiffs claim a nationwide preliminary injunction staying implementation and enforcement of the Final Rule is in place, referencing an earlier ruling from a Texas district court. The Texas ruling, however, only applies to members of the Texas Bankers Association and the American Bankers Association.
In July, a Texas judge ruled that lenders don’t need to comply with the rule while the U.S. Supreme Court deliberates on the agency’s funding. Some enforcement actions of the CFPB are being delayed pending the outcome of the Supreme Court case.
Kentucky plaintiffs claim certain banks in Kentucky were not granted relief by the ruling in Texas and need to be protected from “unrecoverable compliance costs pursuant to an invalid Rule, particularly when financial institutions located in Kentucky who are members of the American Bankers Association are currently receiving this injunctive relief,” the filing said.
A brief filed in the District Court for the Southern District of Texas by the Texas Bankers Association last week took issue with additional compliance costs associated with the new rule. The CFPB submitted an opposition filing relating to the Texas brief, and is required to file a response to the Kentucky case by September 5.
