NCRC Analysis of the CFPB’s Section 1071 Rule of 2026

A detrimental aspect of the CFPB’s 2026 rule was eliminating data reporting for thousands of lending institutions by exempting lenders that issued less than 1,000 loans annually. The previous threshold was 100 loans in the 2023 rule. Under the 2023 rule, the CFPB estimated about 1,700 depository institutions would have been covered, or approximately 17 percent of such institutions (banks, thrifts and credit unions).[5] After implementation of the 2026 rule, only 181 depository institutions, or just about 2 percent of all depository institutions, remain covered.[6] For context, approximately 4,279 banks and thrifts conduct business in the United States.[7]

The rule would also result in miniscule coverage of credit unions. The CFPB estimated that only 5 credit unions would be covered, or one tenth of one percent, of all credit unions under the 2026 rule.[8] Likewise, the reductions in the number of non-depository institutions reporting are steep. The 2026 rule reduced the number of non-depository institutions reporting data from about 610 to 31.[9]

The CFPB justified the reduction in the number of lenders by asserting that more than 90 percent of depository institutions’ lending would still be covered.[10] A critical aspect of the new rule, according to the CFPB, was that core lenders responsible for most lending activity were still covered. In contrast, the smaller lenders that would face the most costs were now exempt. However, the estimated costs were small for all lenders as discussed above.

In addition, as described in more detail below, the CFPB’s estimate that 90 percent of depository institutions’ lending would be covered is probably a considerable overestimate. Nevertheless, justifying a rule that will obscure lending trends in several counties across the country by asserting that most lending is still covered is disingenuous. One of the major purposes of the statute is to reveal whether community needs for credit are being met. A rule that does not facilitate investigation into credit needs for several geographical areas is not consistent with the purposes of the statute. 

Moreover, the concept of core lenders is misapplied. For smaller metropolitan areas and rural counties, the smaller lenders that the agency may not consider “core” lenders are quite important because small businesses rely upon them for service. Smaller banks excel at small business lending because they have firsthand knowledge of small businesses and have unique insights into judging their creditworthiness that quantitative underwriting used by larger lenders may lack. Exempting them from reporting data requirements misses a critical part of the market in medium size and smaller communities and thus prevents the Section 1071 data from assessing whether community needs continue to be met in these communities. In fact, NCRC’s spatial analysis in our comment letter on the proposed 2026 rule showed that counties experiencing sizable reductions in the percentage of reported loans (of at least 20 percent of loans issued in 2024) were clustered in the Midwest, mountain states and Appalachia.[11]

The CFPB itself acknowledged that under its 2026 rule, “25 percent of rural depository institution branches and about 63 percent of non-rural depository institution branches would be covered under the proposed rule (finalized in 2026). Under the baseline (in the 2023 rule), the Bureau estimates that about 65 to 68 percent of rural depository institution branches and about 84 to 85 percent of non-rural depository institution branches are covered.” The loss of coverage in rural and smaller communities is significant as the agency itself acknowledged.[12]

This reduction in Section 1071 coverage was similar to the CFPB’s decision to reduce coverage under the Home Mortgage Disclosure Act (HMDA) data that was overturned in a court case. In ruling against the CFPB in 2022 in a case involving raising the HMDA threshold for reporting institutions from 25 to 100 closed end loans, Chief Judge Beryl A. Howell stated that “An agency acts arbitrarily and capriciously when it ‘entirely fail[s] to consider an important aspect of the problem,’ offers an explanation for its decision that ‘runs counter to the evidence before the agency.’”[13]

She further explained that “…rather than look to gross transaction numbers as CFPB does, plaintiffs’ focus on the financial institutions newly exempt is more probative of the impact of the 2020 Rule on the ability of regulatory agencies, policymakers and HMDA users to identify problematic home lending practices at a community level, in furtherance of the statute’s express goals.”[14] The same reasoning applies in this matter since Section 1071 of the Dodd Frank law stipulates that the data must further the objectives of fair lending and community development.