Lawsuit Challenges Administration’s Refusal to Enforce Law Designed to Expose Discrimination in Small Business Lending

Washington, D.C. — A coalition of civil rights, small business, and economic justice advocates filed a lawsuit today in the U.S. District Court for the District of Columbia against the Consumer Financial Protection Bureau (CFPB) and Acting Director Russell Vought for unlawfully abandoning implementation of a small business lending data collection rule mandated by Congress to prevent discrimination and support underserved entrepreneurs.

The plaintiffs in this case include Rise Economy, the National Community Reinvestment Coalition, Main Street Alliance, and Iowa-based small business owner ReShonda Young, and are represented by Democracy Forward. The lawsuit argues that the Trump-Vance administration is violating the Administrative Procedure Act in its effort to dismantle the final rule implementing Section 1071 of the Dodd-Frank Act, a critical measure requiring the CFPB to collect and publish small business lending data.

“People of color, women, and LGBTQ small business owners have known through experience that it is harder or more expensive for them to access small business loans to start or grow their businesses,” said Paulina Gonzalez-Brito, CEO of Rise Economy. “The Dodd Frank Act sought to rectify this by mandating the collection of demographic data for small business loans in order to hold financial institutions accountable so that transparency and communities can push them to do better. The Trump administration has for too long prevented the collection of this critical data, and it is par for the course for an administration that sees our communities as less than worthy of equal treatment. Today we are suing the Trump administration for failing to collect this data. Small business owners deserve better and we will fight for them.”

“The American people deserve an economy where any entrepreneur can get a fair shake from lenders, which is only possible if we have the data that will be collected under Section 1071,” said Jesse Van Tol, President and CEO of the National Community Reinvestment Coalition. “This administration has made the decision to cast aside the American consumer and entrepreneur and provide refuge to financial institutions who have the resources to comply with this rule. We are suing to make them adhere to the law and fulfill their responsibilities to the American people.”

“Sunlight is the best disinfectant, but America’s entrepreneurs have been waiting far too long for a day to break,” said Shawn Phetteplace, National Campaigns Director for the Main Street Alliance. “Dodd-Frank passed in 2010, and yet 15 years later, small business owners and our allies are having to fight to implement Section 1071, a rule meant to ensure that good data is available on the race and gender of applicants for business loans.. The cultural or social bias of lenders shouldn’t determine who gets to start and expand a small business. The quality of the business plan, the creditworthiness, and the experience of the applicant should be the driving force. With this data, we can ensure this is the case, and craft policy solutions to ensure its application.” 

“The Dodd-Frank Act is critical for minoritized individuals and businesses to get a fair chance at achieving their financial and business goals. I’ve heard bankers say the 1071 rule creates too much work and costs too much money for them to adhere to. For those of us who are unfairly denied equal access to capital, banks not adhering to the 1071 ruling has hefty costs for us too. It costs us much more than money. The stress of trying to start and operate a business with insufficient capital costs us extra time, lots of stress, and often takes an undue emotional and physical toll on us. Any person or organization who thinks transparency in banking is too costly has never felt the true costs,” said Iowa-based small business owner ReShonda Young.

Congress directed the CFPB to collect lending data from financial institutions to ensure women-owned, minority-owned, and small businesses, including small farms, have fair access to credit. After years of delay, the agency finalized a rule in 2023, but under the Trump-Vance administration, the CFPB has reversed course, suspending enforcement and delaying compliance.

“The Trump-Vance administration wants to achieve through acquiescence in court litigation and regulatory evasion what they could not do through proper rulemaking: block implementation of a critical transparency and accountability tool to help people and small businesses thrive,” said Skye Perryman, President and CEO of Democracy Forward. “This is not just unlawful, it’s part of a coordinated effort to dismantle the CFPB itself, meant to protect people and small businesses. We are fighting back in court and every day to ensure people’s rights are safe, and fighting for economic fairness.”

Plaintiffs are asking the court to halt the administration’s unlawful actions and reinstate the lending transparency rule. Doing so would allow small business owners like Ms. Young, who has repeatedly experienced discriminatory lending practices in her efforts to build community-focused businesses, to finally get the data and protections she and small businesses deserve.

The case is Rise Economy et al v. Vought. The legal team at Democracy Forward for this case includes Rachel Fried, Pooja Boisture, and Robin Thurston.

Read the complaint here.

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Democracy Forward Foundation is a national legal organization that advances democracy and social progress through litigation, policy, public education, and regulatory engagement. For more information, please visit www.democracyforward.org.