On June 18, 2025, the CFPB published its 2025 Section 1071 Interim Final Rule. Lenders covered by the 2024 Section 1071 Interim Final Rule should know what the 2025 Rule is changing, how it affects them and what they can and should do.
Who is affected by the 2025 Interim Final Rule
All “covered lenders”, even those not included in the 3 different court cases litigating the legality of the 2023 Final Rule, are affected by the changes in the 2025 Rule. This clarifies an ongoing question about the compliance dates for litigants and non-litigants. All covered lenders, whether they participated in any of the court cases or not, will be affected by the changes in the 2025 Interim Final Rule.
What the 2025 Rule is changing
The 2025 Interim Final Rule is changing the compliance dates that were published in the 2024 Interim Final Rule. The “compliance dates” refer specifically to data collection and reporting requirements. Those compliance dates vary by what “tier” a lender is included in.
For Tier 1 lenders (those with 2,500 or more small business originations for 2 consecutive years) the new compliance date for commencement of data collection changes from July 18, 2025, to July 1, 2026, and the first reporting date moves from June 1, 2026, to June 1, 2027.
For Tier 2 lenders (those with 500 or more small business originations up to 2,499 originations for 2 consecutive years) the new compliance date for commencement of data collection changes from January 16, 2026, to January 1, 2027, and the first reporting date moves from June 1, 2027, to June 1, 2028.
For Tier 3 lenders (those with 100 or more small business originations up to 499 originations for 2 consecutive years) the new compliance date for commencement of data collection changes from October 18, 2026, to October 1, 2027, and the first reporting date moves from June 1, 2027, to June 1, 2028.
Problems with the delayed compliance dates
There are a number of problems caused by the 2025 Interim Rule’s compliance dates. First, Tier 1 and Tier 3 lenders will be collecting and reporting data for partial years. Tier 1 lenders will initially collect and report data for only activity in the last 6 months of 2026 (to be reported June 1, 2027). Tier 3 lenders will initially collect data for only the last 3 months of 2027 and report that activity by June 1, 2028. Tier 2 lenders will first report activity for all of 2027 by June 1, 2028.
Partial year data is worthless for data analysis. This means that the first data reported by Tier 1 by June 1, 2027, and Tier 3 by June 1, 2028, cannot be used (except maybe as practice) since those reports will be for only partial years. Moreover, since each Tier is affected differently and the first time an entire year’s worth of activity will be reported for all covered lenders will be on June 1, 2029, all Section 1071 activity reported on June 1, 2027, and June 1, 2028, will be unusable for analytical purposes because the data reported will include different parts of a year for different tier lenders.
Complicating matters even more is that until the Section 1071 reported data is usable, the 2023 CRA Rule will continue to mandate the collection and reporting of small business loans based on an entirely different definition of a “small business loan”. Section 1071 defines a small business loan based on a business borrower’s gross annual revenues (“GAR”) up to $5 million whereas the CRA definition of a small business loan has nothing to do with a borrower’s GAR but is rather based on the loan not exceeding $1 million. Therefore, the Section 1071 data can’t replace the CRA data until the 2028 Section 1071 activity is reported by June 1, 2029. Until then reporting lenders will need to report “small business” loans under 2 different regulations with 2 different definitions. This is a prescription for confusion and misreporting.
Other issues for possible comments to the Bureau
Aside from the timing issues and usability issues, there are other issues that could be submitted to the CFPB. While no changes other than the compliance date changes are in the 2025 Section 1071 Interim Final Rule this may be a good time to make sure that the Bureau will address other important parts of the 2023 Section 1071 Rule and the related 2024 Interim Final Section 1071 Rule when it submits its intended NPR for revisions to the Rule later this year or next year.
The required sequestering of the “protected demographic information” should be commented upon. If that information is not available to the credit decision makers it makes it more difficult to analyze, understand and correct patterns of lending bias and creates a needless and costly process that is counterproductive. The HMDA data does not require the isolation of borrower demographic data for residential mortgage borrowers from lenders. Why should Section 1071 “protected demographic” information be “protected” for Section 1071 data when it has never been protected for consumer mortgages reported under HMDA?
Finally, it may be a good time to submit comments regarding the 68 fields of additional data mandated by the rule compared to the 13 data points mandated by statute.
These additional comments will not affect the 2025 Interim Final Rule but will help set the stage for the Bureau’s NPR for substantial changes to the Final Rule and increase the likelihood that the Bureau will consider those comments when developing potential changes to the Section 1071 Rule.
