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1071 Update – May 2024

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2 min read
May 23, 2024

Table of Contents 

Q: What’s the status of 1071? 

AThe 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)

It’s possible that these dates will be delayed by a federal court in Texas. In October 2023, a federal court in Texas issued an injunction delaying 1071 implementation deadlines for all covered institutions until after the Supreme Court’s decision. With that settled, the Texas court still has to decide if the CFPB exceeded its authority in implementing 1071. The court may decide to issue a new stay while it decides the case – which would postpone the CFPB’s new deadlines.  

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? 

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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