Table of Contents
- What’s the status of 1071?
- Will the CFPB’s 1071 rule be delayed by ongoing lawsuits?
- My financial institution is a small business lender that meets the thresholds for a Covered Financial Institution. What should we do about 1071?
- How is Ncontracts preparing for 1071 implementation?
Q: What’s the status of 1071?
A: The CFPB has announced new deadlines for compliance with Section 1071 of the Dodd-Frank Act one day after the Supreme Court ruled in its favor that the bureau’s funding structure is constitutional on May 16, 2024.
The new compliance deadlines are:
- Tier 1: July 18, 2025 (filing June 1, 2026)
- Tier 2: Jan 16, 2026 (filing June 1, 2027)
- Tier 3: Oct 18, 2026 (filing June 1, 2027)
The CFPB also released its beta 1071 platform in August – giving lenders and tech providers like Ncontracts the opportunity to upload sample data test files, review validation results and offer feedback on platform features. (Testing should not include actual customer data.)
Ncontracts will begin sending sample data files and providing the CFPB feedback on the transmittal and validation process to help ensure a smooth transmittal season for Tier 1 reporting clients. We’ll reach out to the CFPB with any questions, concerns, or issues.
Q: Will the CFPB’s 1071 rule be delayed by ongoing lawsuits?
A: In August a district judge in Texas ruled in favor of the CFPB in a challenge to the CFPB’s 1071 rule. The judge found that the CFPB is allowed to require covered lenders to report on more fields of data than the minimum required by the Dodd-Frank Act.
The court had delayed its decision until after the Supreme Court decision on the constitutionality of the bureau’s funding. With that settled, the court moved forward with a decision, disappointing those hoping for a new stay that would postpone the CFPB’s deadlines.
While an appeal of the Texas court’s decision is possible, the court's pointed opinion suggests a challenging road ahead.
Q: My financial institution is a small business lender that meets the thresholds for a Covered Financial Institution. What should we do about 1071?
A: Implementing 1071 is a big lift that will take a long time to implement. From planning to testing, 1071 data collection and reporting requires many steps, and no FI wants to rush compliance, especially when dealing with a significant and high-profile rule.
The majority of small business lenders we’ve spoken with are moving forward with their 1071 implementation plans. They see 1071 as inevitable, and they don’t think it’s worth the risk of putting off implementation on the small chance that it doesn’t come to pass. They want to take their time and get 1071 implementation right, especially because implementing 1071 will require budget planning. Putting off budget planning may mean an institution will not have necessary resource to execute its implementation plan. Asking for resources now vs. next year may be the difference between uninterrupted change management and an unsuccessful implementation as budgeting tends to be an annual activity.
On-Demand Webinar: Section 1071 Compliance: What Does the Final Rule Mean for Small Business Lenders Like You?
There are also other new rules on the horizon, including open banking, anti-money laundering (AML) and the Community Reinvestment Act (CRA). Putting off 1071 implementation may mean having to take on a significantly heavier burden of regulatory change management next year.
Free Whitepaper: How to Manage Regulatory Change at Financial Institutions
Therefore, if you’re a small business lender, we recommend making plans to implement 1071 and adding three to six months to your compliance deadlines to account for the delay of the Supreme Court decision.
Q: How is Ncontracts preparing for 1071 implementation?
A: Ncontracts’ N1071 solution will help commercial lenders comply with 1071 with software and services to guide lenders and help them comply with the new requirements.
It begins with a customizable model policy and procedure checklist created by Ncontracts experts to demonstrate how to implement 1071 from a governance and practical perspective.
Ncontracts software will help transmit 1071 data and analyze it for disparate impact. 1071 regulatory updates, enforcement actions, and guidance are built into the system.
Ncontracts will assist your organization in setting up software with appropriate data to reflect internal processes and provide unlimited remote training of users on system, policy, and procedures to ensure full utilization. Unlimited users have access to the software along with training modules with videos and knowledge checks to train business units, executives, and the compliance team on 1071.
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