The New York Department of Financial Services (DFS) Acting Superintendent Linda Lacewell announced in late April the creation of a new Consumer Protection and Financial Enforcement Division. The reorganization likely signals a decision by DFS to (1) prioritize and expand its investigations of nonbank consumer financial services providers, including those that the DFS does not supervise, and examine like debt collectors and lead generators, and (2) enforce its cybersecurity rule.
Katherine A. Lemire has been appointed to head the new division, which "is responsible for protecting and educating consumers and fighting consumer fraud, as well as ensuring that regulated entities comply with New York and federal law in relation to their activities serving the public." Moreover, "it is responsible for developing investigative leads and intelligence in furtherance of the Department's efforts to enforce the Banking, Insurance and Financial Services laws, with particular focus on the review and response to cybersecurity events and the development of supervisory, regulatory and enforcement policy and direction in the area of financial crimes."
The division encompasses the Enforcement Division; Investigations and Intelligence Division; Civil Investigations Unit; the Producers Unit; the Consumer Examinations Unit; the Student Protection Unit; and the Holocaust Claims Processing Office. In recent years, the DFS has conducted active investigations in a number of consumer protection areas, including banking, payday loan debt collection and loan servicing, lead generation, mortgage lending, the bail bond industry, title insurance, insurance claims settlement practices, virtual currency, and cybersecurity at financial institutions.
DFS has authority under New York law to investigate activities that may constitute violations of laws governing financial services, banking, and insurance, among other New York statutes, and to levy civil penalties.
DFS also licenses and supervises banks and nonbank financial services providers, including mortgage lenders and brokers, insurance companies, money transmitters, budget planners, and others. Supervision by the DFS may entail chartering, licensing, registration requirements, and examination. In addition, DFS has been active in promulgating new regulations, including a rule to regulate debt collection, 23 NYCRR 1, which covers third-party debt collection and debt buying, and took effect in 2015; and DFS's first-in-the-nation cybersecurity regulation, 23 NYCRR 500, which became effective on March 1, 2017.
Of particular note, and as illustrated by this recent organizational change, the DFS has taken steps to fill the perceived regulatory void created by the rollback of initiatives at the Consumer Financial Protection Bureau.