Senate Kills Attempt to Block CFPB Small Business Rule

The attempt to override President Biden’s veto of the nullification resolution failed

Congress will not block a Consumer Financial Protection Bureau rule requiring financial institutions to report demographic information about their small business lending, but an injunction issued by a federal judge means the agency still cannot implement the rule now.

On Wednesday, the Senate failed to override President Biden’s veto of a resolution, S. J. Res 32, that would have killed the rule. The override vote was 54-45, far short of the two-thirds margin needed to override the veto.

The CFPB rule, which has been criticized by financial services trade groups, is intended to look for potential discrimination in small business lending. It would require financial institutions to report demographic information from small business loan applicants.

During debate on the override attempt Wednesday, Sen. John Kennedy, R-La., was blunt in his criticism of the CFPB and its rule. “If you ever want to understand why the American people hate the Federal Government, just look at the output of the CFPB,” he said. “I mean it. Common sense is illegal there.”

He added, “If you believe in fairness, if you believe in privacy, if you believe in the freedom of the American people, if you have taken your meds today, if you have any semblance of common sense left, you will see that this proposal by President Biden is like a rock, only dumber.”

Kennedy was a sponsor of the Congressional Review Act resolution that would have voided the rule. The House and Senate approved the resolution by majority votes, but President Biden vetoed it. To override the veto, both houses had to pass it by a two-thirds vote.

Following the vote, Senate Banking Committee Chairman Sen. Sherrod Brown, D-Ohio, praised the failed override vote. “The outcome of today’s vote is a win for the engines of our economy: small businesses and entrepreneurs,” he said.

But the rule cannot yet go into effect. A federal judge in Texas has blocked implementation of the rule until the U.S. Supreme Court rules on the constitutionality of the CFPB’s funding mechanism. The CFPB is not funded through the appropriations process. Instead, it is funded by the Federal Reserve. If the court rules that the funding mechanism is unconstitutional, justices also could void CFPB enforcement and supervisory actions, including the small business lending rule.