Legislative & Regulatory Update

​Loan interest rate ceiling extended; judge rules CFPB can proceed with small business data-collection rule; and a ViClarity webinar for new compliance officers. 

by John Alexander, Director of Legislative & Regulatory Affairs

Permissible Loan Interest Rate Ceiling Extended
The NCUA Board has voted to extend the 18% interest rate ceiling for federal credit union loans until March 10, 2026. This decision, made on July 18, 2024, maintains the current cap, providing stability in the lending environment (24-FCU-02). Despite calls from America’s Credit Unions for a floating rate, the Board chose to keep the 18% ceiling, allowing credit unions to continue offering higher-rate payday alternative loans at up to 28%.

Credit Unions Lose Legal Challenge to CFPB Data Rule
In a significant legal setback for credit unions and banks alike, a federal judge in Texas ruled that the Consumer Financial Protection Bureau (CFPB) can proceed with its small business data-collection rule, which was challenged by America's Credit Unions, the Cornerstone League, Rally Credit Union, and various banking groups. This ruling follows the U.S. Supreme Court's decision in May affirming the constitutionality of the CFPB’s structure and its funding through the Federal Reserve.

The contested rule, rooted in Section 1071 of the 2010 Dodd-Frank Act, mandates that financial institutions collect and report data on credit applications from women-owned, minority-owned, and small businesses. Despite strong opposition from financial institutions, who argue that the rule imposes unnecessary burdens without clear benefits, the rule is set to take effect in July 2025.

The opposition groups, including America's Credit Unions, had previously filed a motion for summary judgment, criticizing the CFPB for ignoring warnings about the high costs associated with the rule. They contended that the requirement to collect and report 81 data points was excessive and unsubstantiated. However, the Texas court's ruling on Monday permits the CFPB to move forward with its implementation.

Unless successfully appealed, the rule's compliance deadlines are set as follows:

• Tier 1 institutions (highest volume lenders): July 18, 2025, is the new compliance date, with June 1, 2026, as the first filing deadline;
• Tier 2 institutions (moderate volume lenders): January 16, 2026, is the new compliance date, with June 1, 2027, as the first filing deadline; and
• Tier 3 institutions (smallest volume lenders): October 18, 2026, is the new compliance date, with June 1, 2027, the first filing deadline.

​The American Bankers Association (ABA) has already announced its intention to appeal the ruling, stating, "Given the significant harm small business owners and financial institutions face from this rule, our legal fight challenging 1071 will not end here." As the situation develops, credit unions and banks alike will be closely monitoring the appeals process and preparing for the potential impact of this rule on their operations.

Compliance 101 Webinar
Head back to the classroom with the ViClarity compliance team! This LIVE two-day webinar is designed to equip new and aspiring credit union compliance officers with the skills to excel as a compliance officer. Register by September 6 to receive discounted pricing of just $299 for league members! After September 6, the price will be $349. Limited spots are available, so be sure to reserve your spot early!

As always, feel free to contact me with any legislative or regulatory questions.