This rule—commonly referred to as Small Business Lending Under the Equal Opportunity Act or Section 1071 of the Consumer Financial Protection Act—was originally issued during the Biden administration and requires banks, small business lenders, and other financial institutions to report data on their small-business loans, including applicant demographics, pricing, and approval rates.

In a court filing responding to a challenge brought by a merchant cash advance group, the CFPB indicated its intent to reissue the rule, citing the agency’s new leadership as a basis for its decision.

“New leadership has been assessing the Final Rule and the issues that this case presents to determine the CFPB’s position. CFPB’s new leadership has directed staff to initiate a new Section 1071 rulemaking,” according to the agency’s filing. “The CFPB anticipates issuing a Notice of Proposed Rulemaking as expeditiously as reasonably possible.”

The start of the Trump administration brought a change in the CFPB’s leadership. New leadership arrived at the CFPB on January 31, 2025, when Scott Bessent was named Acting Director of the CFPB, and again on February 7, when Russell Vought replaced Scott Bessent as Acting Director.

Under the Biden administration, the rule faced many legal challenges claiming that it was too burdensome and invasive. While many were against the rule, many supported it on the basis that it reinforced fair lending enforcement.

Although the CFPB previously prioritized defending the rule against legal challenges during the Biden administration, its recent filing indicates a shift in approach, suggesting it will no longer defend the original rule and instead modify and reissue it.

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The original lawsuit alleged that multiple Whole Food managers regularly transferred costs from one department to another in order to circumvent its “Gainsharing” program, which provides bonuses to employees whose departments come in under budget. The managers effectively reallocated expenses from deficit-running teams to those with surpluses in order to reduce the reported surpluses and avoid triggering bonus payments tied to them.

After the lawsuit was filed, Whole Foods fired nine managers in Washington D.C., Maryland, and Virginia who were alleged of engaging in the cost transfers. The lawsuit additionally claimed that the grocery chain’s unlawful practice ranged nationwide and “a decision made at the executive level … to pad company profits.” While Whole Foods admitted to wrongdoing tied to the nine managers, it denied the claim that such actions occurred nationwide.

This settlement comes after the judge of the case denied the workers’ request to certify a class of all employees that had not received proper compensation under the Gainsharing program. The class was to consist of more than 5,000 employees from the nine stores and more than 147,000 employees nationwide. The judge ultimately denied the request stating that it would be too difficult to certify the class since each employee had his or he own individual issue. Additionally, the workers did not show that all potential class members were not properly paid by Whole Foods alleged practice.

The workers and Whole Foods requested 60 days in order to finalize the terms of the settlement as they have not done so already.  

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According to Uyeda, Gensler was too quick to enact rules. The “shortcuts” Gensler took led to numerous legal challenges which posed unnecessary expenses, according to Uyeda.

The Acting SEC chair now wants to adopt a different approach to SEC rulemaking- one that he believes will be more efficient and effective in its purpose. “Turning to future rulemaking, the Commission should act like a super-sized freighter, not a speed boat — and that means returning to a smoother regulatory course than the rapid changes that have been promulgated over the last four years, “Uyeda said.

The Administrative Procedure Act requires proposed rules to have a “notice and comment” period. While the duration of such a period is not explicitly provided, a comment period of at least 60 days has been endorsed by the Administrative Conference of the United States for significant regulatory actions. However, Uyeda pointed out that a large number of proposals were afforded comment periods well below 60 days under Gensler. “45-day, and even 30-day, comment periods were the norm… which “represented a significant deviation from everything that I had been taught about rulemaking as a member of the staff in my nineteen years with the Commission,” according to Uyeda.

Uyeda’s Steps Toward Implementing the “Blueprint” to Reform SEC Rulemaking

Uyeda has already taken a number of actions in pursuit of his “blueprint’s” implementation. The SEC Chair granted private fund advisers additional time to comply with newly expanded reporting requirements and extended compliance deadlines for a marketing rule aimed at environmental, social, and governance (ESG)-focused funds.

He also directed his staff to develop recommendations on re-proposing certain aspects of the recently-adopted Form N-PORT reporting requirements. This requirement mandates that certain funds regularly report their holdings to the SEC, with last year’s update requiring more frequent and detailed disclosures.

“Commenters raised concerns about more-frequent public disclosure of funds’ portfolio holdings,” Uyeda said in connection to the Form N-PORT changes. “Among other issues, are these concerns heightened by continuing advances in artificial intelligence?”

Uyeda also mentioned a possible change to crypto regulations including the added requirement for investment advisers to place customers’ crypto assets with a qualified guardian.

Ultimately, Uyeda emphasized how SEC rulemaking must “respect the limits of our statutory authority.” He understands that while this may take some time and patience, it is significantly more important that the SEC “take the time to do things carefully and methodically, rather than rush and risk actions that are not fully thought through.” This approach will ultimately help the SEC mitigate legal challenges, reducing costs, and most importantly, ensure that the agency stays within the scope of its authority.  

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Trump’s firing has mainly come under question due to the 110-year-old precedential case of Humphrey’s Executor v. United States. The Supreme Court in this case ruled that the president cannot fire an FTC Commissioner unless the president finds “good cause” such as malfeasance or neglect of duties. Under this rule, FTC commissioners cannot be removed at will, making President Trump’s actions a direct contradiction to the case’s established protections.

However, succeeding cases seemingly put the main holding in Humphrey’s Executor at risk of being overruled. The Court’s ruling in Seila Law v. CFPB indicated that there may be an exception to the Humphrey ruling in holding that it is unconstitutional for an administrative agency to be headed by a single director not removable by the president at will. Many point to the distinction that in Seila Law, the agency in question was headed by one director whereas the FTC has multiple commissioners.

This is not the first time that President Trump has called Humphrey’s Executor into question. In February, the Trump administration fired former National Labor Relations Board member Gwynne Wilcox and Hampton Dellinger from the Office of Special Counsel. However, a District Court reversed the firings under the principles set out by Humphrey’s Executor. Although the court did rule against President Trump, his administration appealed the ruling which will most likely end up in the Supreme Court’s hands for a final decision.

Trump’s Firings Elicited Both Criticism and Support

Bedoya and Slaughter announced that they will challenge this termination as they claim it goes beyond the President’s executive authority to remove officers. “I woke up this morning, as I have every day for nearly the last seven years, eager to get to work on behalf of the American people to make the economy more honest and fair,” Slaughter said in a statement. “But today the president illegally fired me from my position as a Federal Trade Commissioner, violating the plain language of a statute and clear Supreme Court precedent. Why? Because I have a voice. And he is afraid of what I’ll tell the American people.”

Although President Trump’s action draw controversy, many view Humphrey’s Executor as wrongly decided on the basis that it goes against constitutional principles that grant the president broad control over the government. “President Trump has the lawful authority to manage personnel within the executive branch,” White House spokesperson Taylor Rogers said. “President Trump will continue to rid the federal government of bad actors unaligned with his common-sense agenda the American people decisively voted for.”

FTC Chair Andrew Ferguson adding onto the support of President Trump’s firings stated that he has “no doubts about Trump’s constitutional authority to remove Commissioners, which is necessary to ensure democratic accountability.”

Ultimately, President Trump’s firings challenges a major Supreme Court decision, an action that rightfully invites both criticism and support. While these firings will certainly face legal challenge and end up in a district court, the issue is likely to reach the Supreme Court, which may ultimately decide whether to overturn the landmark case of Humphrey’s Executor.  

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The lawsuit specifically alleged that giant real estate company offered referrals to those who directed clients toward the mortgage lender, Rocket mortgage. One of those who took advantage of Rocket Homes’ incentive was Jason Mitchell, founder of the Jason Mitchell Group. The CFPB claimed that Mitchell provided gift cards to his agents who made a significant number of referrals to Rocket Mortgage. The agency explicitly claimed that Mitchell’s agents were trained to manipulate clients into thinking that Rocket Mortgage’s mortgage options were the only available and viable options.

After becoming aware of the dropped charges, Rocket Homes released a statement expressing its gratitude that the charges were dismissed. “It was good to see the truth come to light,” the company said. “This case was a misrepresentation of the facts, as we have said from the day the suit was filed. It was an empty claim brought forth by former CFPB director [Rohit] Chopra for the sole purpose of seeing his name in headlines during the final days in public office.”

CFPB Dismisses Multiple Cases After Litigation Funds Freeze

On the same day that it dropped the Rocket Homes lawsuit, the CFPB also announced that it voluntarily dismissed lawsuits against Capital one, Berkshire Hathaway, and the Pennsylvania Higher Education Assistance Agency, a student loan servicer. These dismissals come shortly after having its litigation and enforcement investigation funds frozen by its newly acting director, Scott Bessent.

President Trump has made it known that his administration aims to eliminate the CFPB as a result of the agency’s alleged politicization. His administration explicitly stated that it intends to create and more “streamlined and efficient CFPB” as a result of this “politicization.” While many view this as a positive step, many others perceive it as providing an outlet to corporations who are engaging in illegal activities.

“We’re getting a very strong message here that if you’re a bank, if you’re a student loan servicer, and you’re violating the law, the CFPB is not only not going to pursue you, they’re going to let you out of your case scot-free, ” according to the director of consumer protection at the Consumer Federation of America, Erin Witte. Public Citizen, a consumer advocacy group, echoed Director Witte’s statement, cautioning that unchecked misconduct could drive the U.S. “hurtling down the path that led to financial crises in the past.”

The CFPB isn’t the only federal agency scaling back enforcement under the new administration. The Securities and Exchange Commission announced that it has closed or paused regulatory enforcement against several cryptocurrency platforms, signaling a shift toward a more crypto-friendly stance under Trump.  

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The CWIT’s complaint alleges that those executive orders infringe on its constitutional rights to free speech and due process. The group also claims that Trump’s executive orders are in violation of separation of powers.

CWIT, an organization dedicated to promoting women’s employment in skilled trades, believes that as a result of not adhering to such executive orders, the Trump administration is essentially punishing those “for espousing viewpoints with which the administration disagrees.”

The lawsuit’s complaint begins with a strong statement made by CWIT expressing the group’s support for DEI programs. “Diversity is not illegal. Equity is not illegal. Inclusion is not illegal,” the complaint states. “Diversity, equity, and inclusion are aspirational ideals that have for centuries been fundamental to our progress as a nation. Efforts to promote them do not violate federal civil rights laws.”

The lawsuit specifically targets two executive orders that aimed at eliminating DEI programs. The first executive order, titled “Ending Radical and Wasteful Government DEI Programs and Preferencing,” declared programs promoting diversity, equity, and inclusion “illegal and immoral discrimination.” The second order, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” echoed the first order in declaring programs supporting diversity, equity, and inclusion “that can violate the civil-rights laws of this Nation” as “dangerous, demeaning, and immoral.”

The Foundations of the Lawsuit

CWIT alleges that these executive orders violate its right to free speech since they “impermissibly chill the exercise of CWIT’s constitutionally protected speech, based on its content and viewpoint.” The group emphasizes how these orders essentially force the nonprofit to conform with the viewpoint that promoting ideas of diversity, equity, inclusion, and accessibility or environmental justice are “illegal and immoral,” which violates free speech principles.

CWIT also argues that these orders violate due process on the basis that they are vague and do not offer any guidelines as to analyze whether a DEI program constitutes illegal discrimination. The organization believes that by utilizing its vagueness, President Trump can ultimately eliminate all DEI programs which would divest the CWIT of any purpose.

In regard to the separation of powers claim, the lawsuit claims that since the executive orders would allegedly impose “a sweeping funding restriction,” President Trump is exceeding the constitutional limits of his executive authority. Under such a principle, the President and executive branch have no authority to dictate government spending or place conditions on the spending power that is vested in the legislative branch. However, in imposing these executive orders, CWIT claims that the Trump administration is engaging in spending activity that was not authorized by Congress.

“The president and executive branch, absent Congressional authorization, have no authority to dictate government spending or place conditions on the spending power that is vested in the legislative branch,” CWIT said in the lawsuit. “The constitution does not permit the president or his subordinate executive branch officials to unilaterally terminate ‘equity-related’ grants and contracts’ without express statutory authority.”

This lawsuit represents the latest one aimed at abolishing the Anti-DEI orders. A group of teachers brought a similar lawsuit against the Trump administration, arguing the orders suppress free speech and hinder inclusion efforts. The outcomes of these lawsuits will ultimately have widespread implications for DEI programs as well as executive authority.  

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The leaders of the proposed legislation argue that the original rule, which aimed to protect consumers from high fees, had negative impacts on consumers and diminished their financial protections. “The CFPB’s actions on overdraft is another form of government price controls that hurt consumers who deserve financial protections and greater choice,” said House Financial Service Committee Chairman French Hill. “Our [rule] will help overturn this harmful rule and is a next step toward ensuring the CFPB halts all ongoing rules until it answers to Congress, just like any other non-independent federal agency.”

The effort to repeal the overdraft fees cap has received much support from various Bankers Associations. “Millions of hardworking Americans, including the one in five without access to credit, rely on overdraft services as a valuable financial lifeline, yet the Biden-Chopra CFPB’s overdraft rule threatens to cut off their access to this essential bank product,” Consumer Bankers Association President Lindsey Johnson said in a statement.

The overdraft rule was finalized in December under former CFPB Director Rohit Chopra. According to Chopra, this rule was purposed to ensure that junk fees were not the source of a billion-dollar revenue stream. The CFPB perceives the rule as an effort to balance the power between those charging the junks fees and those being charged.

Although the bill is aimed at protecting consumers, the House and Senate’s efforts to nullify the rule has received some criticism. Many consumer advocates hope that the bill does not get passed. They view the overdraft cap as means to protect lower-income families from “junk fees.”

“For too long, banks have gouged economically vulnerable consumers with costly overdraft fees that make it harder for them to stay on track financially,” said Chuck Bell, advocacy program director at Consumer Reports. “The CFPB’s new rule imposes reasonable limits on overdraft fees so they are in line with a bank’s actual costs instead of a way for banks to pad their profits at the expense of those least able to afford it.”

Various banking industry groups have challenged the rule in court on the basis that the CFPB did not have proper authority to impose such a rule. The case remains open but is expected to be thrown out now that the House and Senate intend to invalidate it.

Although the rule seeks to invalidate the overdraft fees rule, it has not effectively done so yet. This bill was enabled by the Congressional Review act, which permits Congress to either nullify or approve new agency rules. The Act authorizes Congress to pass a joint resolution of disapproval if it seeks to invalidate the rule. If the joint resolution of disapproval approved by both houses of Congress and signed by the President, or if Congress successfully overrides a presidential veto, the rule at issue cannot go into effect or continue in effect.  

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The SEC announced its decision in a Staff Legal Bulletin, rescinding a previous bulletin that had restricted companies from excluding proposals with “broad societal impact.” Due to this rescission, the SEC is expected to take a more company-specific approach and as a result, companies are expected to be increasingly successful in excluding such proposals.

An Overview of Shareholder Proposal Exclusion Rules

The exclusion of shareholder proposals is governed by Rule 14a-8 of the SEC. Although this rule has many factors to it, the SEC’s announcement mainly focuses on Rule 14a-8(i)(5) and Rule Rule 14a-8(i)(7).

Rule 14a-8(i)(5), also known as the “Economic Relevance” rule, provides that a company may exclude a shareholder proposal if the proposal relates to operations that account for less than 5% of the company’s total assets at the end of its most recent fiscal year, and for less than 5% of its net earnings and gross sales for its most recent fiscal year, and is not otherwise significantly related to the company’s business.

Under the former Legal Bulletin, the SEC was directed to analyze whether a proposal fell under this rule by focusing on whether the issue covered by the proposal has broad societal impact rather than the significance of the issue to the company. Under the new framework, proposals that raise issues of social or ethical significance may now be excludable, despite their importance in the abstract.

Meanwhile, Rule 14a-8(i)(7), also known as the “Ordinary Business” rule, provides that a company may also exclude a shareholder proposal if the proposal deals with a matter relating to the company’s ordinary business operations.

When analyzing whether a proposal fits such a description, the significant question is whether a proposal raises matters that are “so fundamental to management’s ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight.”

With the SEC’s announcement, its staff will take a company-specific approach in evaluating significance, as opposed to focusing solely on whether a proposal raises a policy issue with broad societal impact or whether particular issues or categories of issues are universally significant.

“A policy issue that is significant to one company may not be significant to another,” according to the bulletin. “The Division’s analysis will focus on whether the proposal deals with a matter relating to an individual company’s ordinary business operations or raises a policy issue that transcends the individual company’s ordinary business operations.”

The SEC is seemingly shifting towards a pro-company approach when analyzing an exclusion of certain shareholder proposals. In support of its change in policy the Commission provided its interpretation of Rule 14a-8.

“Because the rule allows exclusion only when the matter is not ‘otherwise significantly related to the company,’ we view the analysis as dependent upon the particular circumstances of the company to which the proposal is submitted,” the bulletin states. “That is, a matter significant to one company may not be significant to another. On the other hand, we would generally view substantive governance matters to be significantly related to almost all companies.”  

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The memo states that its purpose is to encompass programs, initiatives, or policies that discriminate, exclude, or divide individuals based on race or sex. It does not prohibit educational, cultural, or historical observances or similar events that celebrate diversity, recognize historical contributions, and promote awareness without engaging in exclusion or discrimination

According to the memo, the “DoJ’s Civil Rights Division will investigate, eliminate and penalize illegal [DEI] and DEIA preferences, mandates, policies, programs and activities in the private sector and in educational institutions that receive federal funds.”

The memo additionally instructs the Civil Rights Division and Office of Legal Policy to jointly submit a report containing recommendations or enforcing federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including policies relating to DEI.

Specifically, the report should address the following:

• Key sectors of concern within the Department’s jurisdiction;
• The most egregious and discriminatory DEI and DEIA (“A” stands for accessibility) practitioners in each sector of concern
• A plan including specific steps or measures to deter the use of DEI and DEIA programs or principles that constitute illegal discrimination or preferences, including proposals for criminal investigations and for up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars; and
• Additional potential litigation activities, regulatory actions, and sub-regulatory guidance; and
• Other strategies to end illegal DEI and DEIA discrimination and preferences and to comply with all federal civil-rights laws.

AG Bondi’s memo follows President Trump’s executive order, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” that is purposed to eliminate any DEI policies within the federal government that violate anti-discrimination law as well as encourage those in the private sector to end illegal DEI discrimination and preferences.

Companies must Reexamine Their DEI Policies 

Due to the expected prioritization of anti-DEI enforcement, many companies are now reassessing their DEI programs to analyze whether its program is compliant while others continue to stand by their DEI policies.

Given the expected civil and criminal investigations, many companies such as Amtrack, Lowe’s, and Harley-Davidson announced that it would no longer allocate money and other resources to its DEI program. These companies are now examining their policies to determine whether they are legally compliant.

Although DoJ anti-DEI enforcement is  expected to increase, the DoJ’s actions pertaining to the memo will likely face legal analysis as courts have typically upheld employers’ rights to promote DEI. While the DOJ is optimistic that the Supreme Court’s decision in Students for Fair Admissions v. Harvard, which struck down affirmative action, provides a sufficient basis for issuing this memo, its validity remains to be seen.  

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Chopra was appointed as director during the Biden administration in 2021, committing himself to making the financial system more reasonable for consumers and opposing any regulations or practices that undermined this goal.

The CFPB was created in the aftermath of the 2008 global financial crisis, which was caused in part by banks’ irresponsible lending and securitization practices. The agency’s mandate is to protect consumers from financial frauds and scams, to fight unfair banking and financial practices, and to offer a recourse for consumers who have been scammed or defrauded.

Although Chopra was initially given a five-year term for his position, the Supreme Court ruled in the case of Seila Law v. CFPB that such a director should be treated as an at-will employee for the purposes of presidential removal. As a result, it was within the President’s constitutional authority to fire Chopra and designate a new director for the Bureau.

During his tenure as CFPB Director, Chopra removed medical debt from credit reports, limited overdraft penalties, and limited credit card late fees. The former director also led an initiative which would ultimately provide consumers with more easy access to and privacy of their financial data.

Under the leadership of Chopra, the CFPB also brought numerous actions against some of the nation’s biggest banks such as Wells Fargo, JPMorgan, and Bank of America, for failing to protect consumers from widespread fraud. The case remains ongoing but seeks to impose a heavy penalty on the banks and implement measures to prevent similar violations in the future.

Although Chopra’s termination fell within President Trump’s executive authority, his administration has faced some criticism over the move. Many critics have pointed to Chopra’s success as support for the argument that President Trump was in the wrong.

President Trump’s Move Faces Praise and Criticism

“One of the most effective consumer champions in government in American history, Rohit Chopra worked tirelessly to protect vulnerable citizens from financial predators. The CFPB under Chopra eliminated many junk fees, capped credit card late charges, reformed reporting of medical debt, sued giant corporations, and elevated the total relief to consumers beyond $21 billion,” according to Co-President of Public Citizen, Lisa Gilbert. “An administration that retreats from the many advances the agency made while under his leadership will betray working Americans. That Trump’s oligarchs want this agency ‘deleted’ attests powerfully to Chopra’s effectiveness and the need for the CFPB – and Trump’s firing of Chopra is as clear a sign as there could be of whose side Trump is on.”

However, many groups praised the President’s move as they saw it as a step in the right direction for the Bureau. “The longer Director Chopra stays, the harder it will be for this pro-growth administration to undo the politically-driven, government-price setting agenda that former President Biden’s appointee has engaged in over the last several years at the Bureau,” according to Consumer Bankers Association press secretary, Weston Loyd.

The CFPB has faced a large number of challenges in the previous years. Many brought challenges seeking to undermine the agency. The challenges were brought on a constitutional basis in which it was argued that the agency is funded illegally.

While most agencies are funded by an annual budget process in Congress, the CFPB is funded directly by the Federal reserve. Although it may be argued that such funding violated the Appropriations Clause of the Constitution—a law of Congress that provides an agency with budget authority—the Supreme Court rejected ultimately such the argument and held that it was not in fact a violation.  

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