CFPB Scales Back the 1071 Rule, and MCAs Are Officially Out
- F.I. Editorial Team
- May 3
- 4 min read
The CFPB published its revised Section 1071 final rule on May 1, 2026, dramatically narrowing the scope of small business lending data collection compared to the 2023 version. Merchant cash advances, agricultural lending, and loans under $1,000 are now expressly excluded, the coverage threshold has jumped from 100 to 1,000 originations per year, and the compliance date is set for January 1, 2028.
If you've been hearing about Section 1071 for the last few years and trying to figure out whether it actually applies to your business, the answer just got a whole lot clearer for a whole lot of lenders.
On May 1, 2026, the CFPB published its final revised version of the Section 1071 small business lending data collection rule. The original 2023 rule had been one of the most-fought-over pieces of small business lending regulation in years, challenged in three federal courts, stayed for many lenders, and revised twice for compliance deadlines before this final overhaul.
The new rule is dramatically narrower than the 2023 version. Here's what actually changed and what it means for the people on the ground.
The Big Win for Alternative Finance: MCAs Are Excluded
Let's start with the headline that matters most for the alt-finance world: merchant cash advances are not covered under the new 1071 rule.
This was the central fight in the Revenue Based Finance Coalition's lawsuit against the CFPB, and the Bureau effectively conceded the issue in its final rule. The CFPB confirmed that no MCA providers will be required to collect and report Section 1071 data since MCAs are not credit transactions.
That's a direct shift from the 2023 rule, which had swept MCAs into coverage. The Bureau's reasoning in the final rule is that MCAs are "structured differently from traditional lending products" and that the initial data collection should focus on core lending products before expanding.
For the MCA, sales-based financing, factoring, and revenue-based financing community, this is a clean exemption from federal 1071 compliance. State-level commercial finance disclosure laws still apply; that fight isn't over, but the federal data collection burden is off the table.
What Else Got Carved Out
Beyond MCAs, the final rule excludes:
Agricultural lending entirely
Loans under $1,000 (with adjustment for inflation over time)
Farm Credit System (FCS) lenders, as institutions, regardless of their volume
The Bureau drew a line, though. It explicitly declined to exclude other categories that lobbied for carve-outs, including various point-of-sale products, equipment finance, and other specialty finance models. If a product otherwise meets the definition of a covered credit transaction, it's in.
Who Has to Comply Now
The biggest single change from the 2023 rule is the coverage threshold. Under the original rule, lenders with as few as 100 covered originations had to comply. Under the new rule, that threshold jumps to 1,000 originations per year for two consecutive years.
In plain terms, most community banks, credit unions, and smaller non-bank lenders are now exempt from federal 1071 reporting altogether. Husch Blackwell's analysis confirms this exempts "most community banks, credit unions, and smaller non-bank lenders from coverage entirely."
Two other key threshold changes:
The definition of "small business" tightens, with a gross annual revenue ceiling dropping from $5 million to $1 million, focusing the rule on what the Bureau now calls "truly small businesses".
The number of data points lenders must collect is reduced. The rule removes discretionary fields, including pricing information, denial reasons, application method, application recipient, and number of workers
The New 1071 Rule Compliance Timeline
If you are above the 1,000-origination threshold and otherwise covered, here are the dates to mark:
Effective date: June 30, 2026
Compliance date (when data collection starts): January 1, 2028
First reporting deadline: June 1, 2029
Grace period through: December 31, 2028
That gives covered institutions roughly 18 months to build or refine their data collection infrastructure. The Bureau has said it plans to publish compliance resources well in advance, but lenders shouldn't wait for guidance to begin assessment work.
The Two Sides of the Reaction
Industry largely welcomed the rule. The American Bankers Association, which had sued the CFPB over the 2023 version, said it "applauds the CFPB for finalizing a streamlined Section 1071 rule that addresses significant legal and operational concerns from the prior rule."
Civil rights and consumer advocacy groups are not happy. Elena Babinecz, former CFPB manager of the Biden-era 1071 rulemaking and now a partner at Baker Donelson, told American Banker: "There will be much less information on potential fair lending issues and how lenders are serving their communities. Industry overall is happy where this landed, civil rights groups not at all."
Translation: with only the largest banks reporting and pricing/denial data stripped out, there will be significantly less visibility into lending patterns in rural communities and among minority- and women-owned businesses than the 2023 rule would have produced.
Litigation Outlook
Three industry-side lawsuits, Texas Bankers v. CFPB, Monticello Banking v. CFPB, and the RBFC v. CFPB case in Florida, are largely moot now that the rule has been narrowed. The RBFC case, in particular, is likely headed toward dismissal since the MCA exclusion was its core demand.
But on the consumer advocacy side, Rise Economy v. Vought in the D.C. district court is positioned as the most likely vehicle for a new APA challenge to the 2026 final rule from groups that wanted the broader 2023 version implemented. Expect a new complaint or amended pleading shortly.
The Practical Bottom Line
If you operate in MCAs, sales-based financing, factoring, or RBF, you're out. Federal 1071 compliance is not your problem. Focus on state commercial finance disclosure laws.
If you're a community bank, credit union, or smaller non-bank lender below 1,000 originations, you're likely out too. Confirm where you sit, then stop spending money on the 1071 build-out.
If you're a larger bank or non-bank lender above 1,000 originations and dealing in mainstream small business loans, lines of credit, or credit cards, January 1, 2028, is the date. Use the next 18 months wisely.
The Bureau has framed this as the first phase of what it expects to be a long-term, incrementally expanding regime, explicitly comparing it to HMDA's 50-year evolution. Whether future administrations expand or contract the rule remains to be seen. For now, this is the operative framework.
