The United States Court of Appeals for the Fifth Circuit has granted a stay on compliance deadlines for a controversial Consumer Financial Protection Bureau (CFPB) rule, Section 1071, that required financial institutions to compile and disclose loan-pricing data, including the gender, race and LGBT status of business owners applying for loans. The decision, issued today, pauses enforcement of the rule for plaintiffs and intervenors in the case, pending further court orders.

The lawsuit, led by the Texas Bankers Association, several banking institutions and financial industry groups, argued that the rule imposed undue regulatory burdens and raised privacy concerns. The plaintiffs had previously lost at the district court level, prompting an appeal and a request to halt compliance deadlines until the case is resolved.

New Administration Shifts CFPB’s Approach

A pivotal moment in the case came just before oral arguments on February 3, 2025, when the CFPB, under new leadership following the January 20 presidential inauguration, informed the court that its legal team had been instructed “not to make any appearances in litigation except to seek a pause in proceedings.” This policy shift marked a stark departure from the CFPB’s previous stance under the prior administration.

As a result, only the plaintiffs presented arguments before the court, and the CFPB later indicated it would not oppose a temporary stay to allow its acting director to review the matter. The court granted the motion, tolling compliance deadlines for plaintiffs and intervenors but stopping short of a broader ruling that would affect all financial institutions nationwide.

Implications for the Equipment Finance and Specialty Finance Industries

The stay provides immediate relief for lenders in the equipment finance and specialty finance sectors, which had expressed concerns about compliance costs and operational disruptions stemming from the CFPB’s rule. The rule’s requirement to collect and report data on the sexual orientation and gender identity of business owners had been particularly contentious, with critics arguing it could discourage lending or lead to legal challenges over privacy rights.

For equipment finance firms and specialty lenders, the court’s decision alleviates near-term regulatory uncertainty. However, the limited scope of the ruling — applying only to the plaintiffs and intervenors — means that other institutions remain subject to the rule until further legal action or regulatory guidance clarifies the broader industry impact.

Next Steps and Industry Reaction

Industry groups such as the Equipment Leasing and Finance Association and the Credit Union National Association, both intervenors in the case, welcomed the ruling as a critical pause in what they view as an overreach by the CFPB. Meanwhile, financial institutions not party to the lawsuit may seek additional clarity on whether they too can delay compliance without facing penalties.

The Fifth Circuit’s order mandates that the CFPB provide a status update within 30 days, a move that could signal the agency’s intent regarding the rule’s future. With the new administration taking a more cautious approach to litigation, some industry analysts speculate that the rule could be withdrawn or significantly revised before the case is ultimately decided.

For now, the decision represents a temporary victory for the plaintiffs while leaving broader questions about the rule’s legality and long-term viability unresolved.

Stay tuned for further updates as this case continues to unfold.