Deputizing State AGs: CFPB Issues Broad New Interpretive Rule on States’ Ability to Enforce Federal Consumer Protection Laws

On Might 19, 2022, the Consumer Monetary Protection Bureau (CFPB or Bureau) issued an interpretive rule (Section 1042 Interpretive Rule 5 19 2022) confirming that the Consumer Monetary Protection Act of 2010 (CFPA) supplies states with wide-ranging powers—impartial of the Bureau—to implement federal client safety legal guidelines. 

Background

In a press launch saying the brand new rule (CFPB Bolsters Enforcement Efforts by States), CFPB Director Rohit Chopra defined the Bureau’s motivation: “In the years leading up to the financial crisis, federal regulators undermined states seeking to protect families and businesses from abuses in the mortgage market. Our action today demonstrates our commitment to promoting state enforcement, not suffocating it.” 

To that finish, the Bureau states its interpretive rule supplies steerage and readability on three matter areas:

  1. States are permitted to implement the CFPA’s provision declaring it illegal for coated service suppliers to violate any provision of client monetary safety regulation;

  2. States have authority to pursue enforcement in opposition to a broader vary of firms and people than the CFPB itself; and

  3. State enforcement actions can proceed independently and alongside CFPB enforcement actions.

The CFPB notes on this new rule that, whereas many states have introduced enforcement actions on their very own “to enforce a provision of the CFPA that prohibits unfair, deceptive, and abusive acts and practices in connection with the offering or provision of consumer financial products or services,” or have joined with the CFPB to search enforcement of federal client monetary legal guidelines, “few [states] have pursued such claims in their own CFPA actions.” With this introduction, the Bureau’s interpretation provides larger energy to states wishing to take on enforcement roles.

Evaluation of Interpretive Rule

1.  States’ Ability to Enforce the CFPA

The CFPB’s interpretive rule stresses that, in enacting the CFPA, Congress envisioned states having an “important role . . . in overseeing the consumer financial marketplace.” Thus, “Congress provided States with their own Bureau enforcement authority” by allowing states’ attorneys normal, after session with the Bureau, to convey actions to implement the CFPA.

Whereas the CFPB notes that states have already introduced enforcement actions for unfair and misleading practices, the Bureau is reminding states that the CFPA confers broad authority upon them to implement federal client monetary legal guidelines. These legal guidelines embrace the CFPA itself and 18 different federal legal guidelines enumerated therein (together with the FDCA, RESPA, FCRA, TILA, and so on., see 12 U.S.C. § 5481(12)), together with any CFPB rule, order, or regulation underneath the CFPA or underneath one of many 18 enumerated legal guidelines. This contains, for instance, the Bureau’s guidelines implementing the Actual Property Settlement Procedures Act (Regulation X), the Fact in Lending Act (Regulation Z), and the Truthful Debt Assortment Practices Act (Regulation F). 

The Bureau can be deciphering the CFPA to allow states to search enforcement of “consent orders and other final orders issued by the Bureau” underneath sure different sections of the CFPA. This could permit a state to search enforcement of a consent order between the CFPB and a non-public entity, even when that state was not a celebration to the order and even when the CFPB itself was not pursuing enforcement. 

2.  States Have Authority to Carry Enforcement Actions Towards a Broader Number of People and Entities than the Bureau

The Bureau’s rule additionally clarifies which people or entities could also be focused by state enforcement motion and affirms that state enforcement authority “is generally not subject to certain limits applicable to the Bureau’s enforcement authority.” Beneath the CFPA, the Bureau has limits on its authority with respect to sure people and entities, together with “merchants, retailers, and other sellers of nonfinancial goods . . . .” These limitations, nonetheless, typically apply solely to the “Bureau” or the Bureau’s “Director,” not to states. Accordingly, the Bureau’s view is {that a} state could convey an enforcement motion in opposition to sure people or entities, even when the Bureau itself is prohibited from doing so.

3.  State Enforcement Might Be Unbiased of the CFPB

As well as to conferring broad enforcement energy to states, the CFPB states that “state attorneys general and regulators may bring (or continue to pursue) action under [the CFPA] even if the Bureau is pursuing a concurrent action against the same entity” (emphasis added). In accordance to the CFPB, it is because Congress has “expressly” precluded concurrent CFPA actions with respect to sure claims, and it has “limited states’ ability to enforce rules relating to mortgage loan modification and foreclosure rescue services during the pendency of enforcement activity by either the Bureau or the FTC.” Congress didn’t, nonetheless, restrict states’ potential to concurrently implement federal client monetary legal guidelines.

Conclusion

This interpretive rule reinforces the authority lengthy afforded to states underneath Part 1042, encouraging these states so inclined to improve their scrutiny and enforcement of federal client safety legal guidelines. The issuance of this interpretative rule underscores the Bureau’s beforehand said intent to improve coordination between itself and different state and federal regulators and enforcement businesses. The interpretative rule and the Bureau’s announcement of it additionally encourage parallel proceedings that will come up out of the identical conduct. Though states should present the CFPB with discover and a possibility to intervene in actions introduced underneath Part 1042, the CFPB’s rule seems to empower state attorneys normal to independently implement federal client monetary legal guidelines, laws, and Bureau consent orders, amongst different issues. Whether or not states will settle for this invitation, and whether or not federal courts will agree that the CFPA grants them such broad authority, stays to be seen.

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