On February 7, the U.S. Court of Appeals for the Fifth Circuit indefinitely stayed a case challenging the CFPB’s small business lending data rule, based on a recent directive issued by the CFPB’s new leadership. The appellate court’s order also tolled the plaintiffs’ and intervenors’ deadlines for compliance with the rule.

The rule, which went into effect in August 2023 and implemented new requirements to Section 1071 of the Dodd-Frank Act, required financial institutions to collect and report data to the CFPB regarding credit applications for small businesses, including those that are women-owned, minority-owned, and LGBTQ+-owned. According to the CFPB, the rule aims to create the country’s first “comprehensive database regarding lending to small businesses, including small farms,” which will help federal, state and local law enforcement agencies “assess potential areas for fair lending enforcement,” and allow stakeholders to “better identify … community development needs and opportunities for small businesses,” among other goals.

The rule’s legality has been challenged by trade and industry organizations in the district court, and an appeal is currently pending in the Fifth Circuit. On the day oral argument was scheduled, the CFPB informed the appellate court that it was ordered by the new Bureau leadership to not “make any appearances in litigation except to seek a pause in proceedings,” including the present challenge to the small business lending data rule. As such, the appellate court granted the plaintiffs’ motion for stay pending appeal and tolled the deadlines for compliance with the rule for the plaintiffs and intervenors only. The appellate court noted its order was not to be interpreted as opining on the “ultimate merits of the underlying litigation.”