In our profession, we’re constantly looking toward what’s next. We’re not necessarily looking forward to what is next in a jubilant way, but our eyes are metaphorically looking forward, and we’re preparing accordingly. The following are some key legislative updates from D.C. on their way to banks across the country.
1071: Early last year, the CFPB issued a final rule to implement section 1071 of the Dodd-Frank Act, which requires lenders to collect and report information about lending to women-owned, minority-owned, and small businesses to the CFPB. The purpose is to facilitate the enforcement of fair lending laws and community development efforts. The rule applies to lenders making at least 100 small business loans in the two preceding calendar years. Covered lenders will have to report 81 data fields on each covered transaction, which will substantially burden existing procedures. The compliance dates have been delayed for all financial institutions while the rule is being challenged in federal court. We anxiously await the Supreme Court’s ruling, which is generally expected to be released two to three months from this writing.
Cannabis Banking: Marijuana-related rules are a constant headache for banks. Currently, 38 states have legalized cannabis for medical purposes, and 24 states have approved adult use, but federal law remains the same: it is an illicit, illegal substance. For banks, that means that any proceeds generated by cannabis-related businesses are unlawful, even if the proceeds flow from legally operated businesses at the state level. Currently, Congress is debating the Secure and Fair Enforcement Regulation (SAFER) Banking Act, which has passed the Senate Banking Committee with bipartisan support. The House has passed the SAFE Banking Act multiple times in previous Congressional sessions. Formal implementation of either bill would allow banks to serve cannabis-related businesses legally, so we’re currently in the same holding pattern we’ve been in for years: waiting for congressional action from both houses of Congress.
CRA: As we previously covered, certain parts of the new CRA rule were due to go into effect on April 1st, but the agencies issued a last-second interim final rule delaying implementation of the new public file and facility-based assessment areas rule until the rest of the rule goes into effect: January 1, 2026. The new rule represents a significant regulatory shift and may ultimately reduce access to credit for mortgages, small business loans, and community development financing. It dramatically expands what constitutes a “community” where regulators will evaluate CRA performance. Even with a delay, and new litigation in this area, many are continuing with their preparations just the same.
Data Aggregation (1033): Data is ubiquitous. It has an ever-increasing role throughout the world, including banking. Section 1033 of the Dodd-Frank Act gives consumers the right to access their financial records in a standardized electronic format, with some exceptions, in a push towards “open banking.” The CFPB issued a proposed rule in October 2023, implementing Section 1033. Per the rule, banks will be covered data providers who will have to provide customers with their data upon request generally and will have to give access to authorized third parties with whom customers decide to share their data. It represents a significant shift in the way banks will handle customer data. The CFPB has indicated that a final rule should be released this fall.
More to come next week!