A federal court has denied a request for summary judgment in a lawsuit by the ABA, Texas Bankers Association and others challenging the CFPB's small business data collection rule. In his decision, Judge Randy Crane ruled that the CFPB did not exceed its authority in issuing the rule, nor did it violate the Administrative Procedure Act, or APA, which governs how agencies develop regulations. ABA and TBA plan to appeal the case to the Fifth Circuit Court of Appeals.

ABA last year joined a lawsuit brought by TBA and the McAllen, Texas-based Rio Bank challenging the CFPB's final rule implementing Section 1071 of the Dodd-Frank Act. Among other things, the plaintiffs argued that the bureau violated the APA by failing to consider and respond to industry feedback, and by failing to conduct a proper cost-benefit analysis of the rule.

Crane rejected those arguments in his decision. Regardless of "however ineffective or counterproductive the substance of the Final Rule may be," he wrote, the "administrative record is voluminous and its breakdown of the bureau's decisionmaking is comprehensive."

"In reaching this conclusion, the court expresses no opinion on the wisdom of the final rule," Crane wrote. "It may well be that the final rule proves ill-advised as a policy matter, but that possibility does not itself make the final rule unlawful under the APA."

In a joint statement, the plaintiffs said that given the significant harm small business owners and financial institutions face from the rule, "our legal fight challenging 1071 will not end here. Along with fellow co-plaintiffs, we are preparing for an appeal."

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