CFPB Interpretative Rule on State Enforcement of Federal Consumer Protection Laws


On May 19, 2022, the Consumer Financial Protection Bureau (CFPB or Bureau) issued an interpretative rule (Section 1042 Interpretive Rule 5 19 2022) confirming that the Consumer Financial Protection Act of 2010 (CFPA) provides states with sweeping powers , independent of the Bureau — to enforce federal consumer protection laws.

Background

In a press release announcing the new rule (CFPB Strengthens State Enforcement Efforts), CFPB Director Rohit Chopra explained the Bureau’s motivation: “In the years leading up to the financial crisis, Federal regulators undermined states that sought to protect families and businesses from abuse in the mortgage market.Our action today demonstrates our commitment to promoting state enforcement, not choke him.

To this end, the Office states that its interpretative rule provides guidance and clarification on three topics:

  1. States are permitted to enforce the provision of the CFPA declaring it illegal for covered service providers to violate any provision of the Consumer Financial Protection Act;

  2. States have the power to pursue enforcement against a wider range of companies and individuals than the CFPB itself; and

  3. State enforcement actions can take place independently of and in parallel with CFPB enforcement actions.

The CFPB notes in this new rule that while many states have taken legal action on their own “to enforce a provision of the CFPA that prohibits unfair, deceptive, and abusive acts and practices in connection with the offer or the provision of consumer financial products or services,” or joined the CFPB in calling for the enforcement of federal consumer finance laws, “little [states] have pursued such claims in their own CFPA actions. With this introduction, the Bureau’s interpretation empowers states that wish to take on enforcement roles.

Analysis of the interpretative rule

1. Capacity of States to enforce the CFPA

The CFPB Interpretative Rule notes that in enacting the CFPA, Congress intended the states to have an “important role.” . . in the supervision of the consumer financial market. Thus, “Congress has provided the states with their own authority to enforce the Bureau” by allowing state attorneys general, after consultation with the Bureau, to bring actions to enforce the CFPA.

While the CFPB notes that states have already filed lawsuits for unfair and deceptive practices, the Bureau reminds states that the CFPA gives them broad authority to enforce federal consumer finance laws. These laws include the CFPA itself and 18 other federal laws listed therein (including FDCA, RESPA, FCRA, TILA, etc., to see 12 USC § 5481(12)), as well as any rules, orders, or regulations of the CFPB under the CFPA or under any of the 18 enumerated statutes. This includes, for example, the Bureau’s rules implementing the Real Estate Settlement Procedures Act (Regulation X), the Truth in Lending Act (Regulation Z), and the Fair Debt Collection Practices Act ( regulation F).

The Bureau also interprets the CFPA to allow states to seek enforcement of “consent orders and other final orders made by the Bureau” under certain other sections of the CFPA. This would allow a state to seek enforcement of a consent order between the CFPB and a private entity, even if that state was not a party to the order and even if the CFPB itself was not pursuing the execution.

2. States have the power to prosecute more people and entities than the Office

The Bureau’s rule also clarifies which persons or entities may be targeted by state enforcement action and asserts that state enforcement authority “is generally not subject to certain limitations applicable to the enforcement authority of the Bureau”. Under the CFPA, the Bureau limits its powers with respect to certain persons and entities, including “merchants, retailers, and other sellers of non-financial goods.” . . .” However, these limitations generally apply only to the “Bureau” or “Director” of the Bureau, and not to States. Accordingly, the Office is of the view that a State may bring an enforcement action against certain persons or entities, even if the Office itself is not authorized to do so.

3. State enforcement can be independent of the CFPB

In addition to granting broad enforcement powers to the states, the CFPB states that “state attorneys general and regulators may bring (or continue to bring) actions under [the CFPA] even though the Bureau is pursuing a concurrent action against the same entity” (emphasis added). According to the CFPB, this is because Congress “expressly” excluded competing CFPA actions regarding certain claims, and “limited states’ ability to enforce loan modification rules.” mortgage and foreclosure rescue services for the duration of enforcement activity by either the Bureau or the FTC Congress has not, however, limited the ability of states to concurrently enforce federal consumer finance laws .

Conclusion

This interpretative rule reinforces the authority long granted to states under Section 1042, encouraging states so inclined to increase their control and enforcement of federal consumer protection laws. The release of this interpretative rule underscores the Bureau’s previously stated intent to improve coordination between itself and other state and federal regulatory and law enforcement agencies. The interpretative rule and its announcement by the Bureau also encourage parallel proceedings that may arise from the same conduct. Although states must provide the CFPB with notice and the ability to intervene in actions brought under Section 1042, the CFPB rule appears to empower state attorneys general to independently enforce laws, regulations, and ordinances. consent of the Office of Federal Finance, among other things. It remains to be seen whether the states will accept this invitation and whether the federal courts will accept that the CFPA grants them such broad power.

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XII, Number 144

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