Cornerstone, CUNA, and Rally Credit Union file motion to join injunction challenging CFPB rule

Cornerstone League, together with Credit Union National Association and Rally Credit Union, filed a motion to intervene in litigation challenging the Consumer Financial Protection Bureau’s section 1071 rule in the U.S. District Court for the Southern District of Texas.

The court issued a preliminary injunction prohibiting implementation and enforcement of the rule. However, it limited the scope of the injunction to only members of the American Bankers Association (ABA) and Texas Bankers Association (TBA), which filed the initial challenge requesting a broader national injunction. Cornerstone League says the injunction overlooks credit unions’ vital role in the financial services landscape. 

By submitting the motion, Corpus Christi-based Rally Credit Union, Cornerstone League, and CUNA are fighting for parity on behalf of all credit unions so that the courts and the CFPB consider credit unions’ unique member-owned cooperative structure and give them equal relief to what the court has already given to members of the ABA and TBA.

The CFPB’s 1071 rulemaking requires financial institutions to collect and report certain data on applications for credit for small businesses. The implementation would affect all covered financial institutions that provide business loans, and the motion aims to broaden the preliminary injunction to cover all affected entities, including credit unions.

“We join CUNA and Rally Credit Union in our staunch opposition of the Court’s narrow injunction as it gives an unfair advantage to banks and unfairly skews the grounds on which credit unions can serve their members,” said Jim Phelps, EVP and chief advocacy officer at Cornerstone League. “This is an issue that affects all financial institutions that serve small businesses, and the injunction should unilaterally apply.”

“As a not-for-profit credit union serving South Texas since 1955, Rally Credit Union is proud to provide affordable credit for women-owned, minority-owned, and small businesses,” said Dana Sisk, president/CEO, Rally Credit Union. “We support the goals of the Consumer Financial Protection Bureau’s section 1071 rule, and we seek to provide all members with fair and equitable financial opportunities. However, we are concerned about the potential for those members to experience substantial increases in borrowing costs due to the burdensome data collection requirements of this rule.”

The rule is scheduled to go into effect Aug. 29, with staggered compliance dates depending on certain criteria. The preliminary injunction will postpone implementation, and enforcement of the rule will be postponed until the Supreme Court resolves the questions about the CFPB’s constitutional structure or the injunction is lifted, whichever comes first.