State AG Enforcement of Consumer Financial Protection Law Gains CFPB Backing

6 min

At a recent national meeting of state attorneys general, CFPB Director Rohit Chopra outlined his vision for cooperation between the CFPB and state attorneys general and presented his views on the "dangers of preemption." He promised to take steps to promote enforcement of consumer protection laws by state attorneys general, rein in repeat offenders, and prevent companies from bypassing state and federal oversight.

Expanding State Attorney General Authority

Chopra said he wants to encourage state attorneys general to bring actions under the Consumer Financial Protection Act, particularly when federal protections are stronger than state statutes.

"To encourage more state enforcement of federal consumer financial protection statutes, I have directed CFPB staff to explore ways that states could be able to get more out of the remedies available under the Consumer Financial Protection Act—for example, by seeking civil penalties that the states could then use to bolster deterrence in their states," Chopra said in a speech to the National Association of Attorneys General (NAAG) Capital Forum. He said he also asked CFPB staff to explore how the Bureau could make the CFPB's victims relief fund available to compensate victims identified in state enforcement actions. The fund has a balance of approximately $411 million and is available only in matters where the agency takes part in an enforcement action.

The steps and public statements signal a desire by Chopra to multiply and accelerate enforcement actions and bolster support available to a state's consumers in such actions. Under the Consumer Financial Protection Act (CFPA), states can bring enforcement actions by giving notice to the Bureau prior to filing a complaint.

Reining in Repeat Offenders

Chopra also said he wants to work with states to stop repeat offenders, including those that violate agency or court orders entered at the federal and state levels. While Chopra has previously signaled that repeat offenders are a priority, his remarks provide more clarity and are reflective of an approach he had advocated while a commissioner at the FTC.

"I am concerned that corporate recidivism has become normalized and calculated as a cost of doing business," Chopra said. In his view, repeat offenders "deprive consumers of protections in the marketplace and saddle them with the direct and downstream costs of non-compliance…. In other words, consumers end up subsidizing corporate malfeasance."

  • Exploring All Possible Remedies and Targeting Senior Management – To address repeat corporate offenders, Chopra said the CFPB is exploring all possible remedies, including those directed at the senior management and executive levels and structural reforms to reshape behavior and incentives. "Executives and managers must know that they will face repercussions for illegal acts they direct."
  • Alerting State Enforcers and Regulators of Noncompliance – Chopra also said the CFPB and states "cannot allow companies to weave in and out of state and federal regulatory oversight. We need to look after one another's orders, so in CFPB investigations, we will alert state enforcers and regulators when we find their orders are being flouted."

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The CFPA confers broad powers to prevent "unfair, deceptive, abusive acts or practices" relating to "consumer financial products or services." CFPA Section 1042, 12 U.S.C. § 553l(a). The CFPA empowers state attorneys general and bank regulators to bring civil actions to enforce federal consumer law against any company offering consumer financial products or services. CFPA Section 1042, 12 U.S.C. § 5552(a)(l). CFPA Section 5536(a)(3) further provides that it is unlawful for "any person to knowingly or recklessly provide substantial assistance to a covered person or service provider in violation of the provisions of section 5531 of this title, or any rule or order issued thereunder, and notwithstanding any provision of this title, the provider of such substantial assistance shall be deemed to be in violation of that section to the same extent as the person to whom such assistance is provided."

The CFPB has broad investigatory authority and has brought over 300 enforcement actions, including several in conjunction with state attorneys general. In addition, there have been a handful of state enforcement actions brought by state attorneys general and financial services regulators asserting claims under the CFPA, 12 U.S.C. §§ 5531(a), and 5536(a)(1)(B) and where the Bureau was not a plaintiff, including here and here. CFPA Section 1016(c)(7) requires "an assessment of significant actions by state attorneys general or state regulators relating to Federal consumer financial law." The CFPB reports in its semi-annual reports to Congress data concerning significant actions by state attorneys general or state regulators relating to federal consumer financial law. For purposes of the Section 106(c)(7) reporting requirement the CFPB determined that any actions asserting claims pursuant to Section 1042 of the CFPA are "significant."

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For more information, please contact Jonathan L. Pompan at 202.344.4383 or jlpompan@Venable.com, Erik Jones at 312.820.3411 or ecjones@Venable.com, or Alex Megaris at 212.370.6210 or amegaris@Venable.com.

Jonathan L. Pompan, a partner in the Washington, DC office of Venable LLP, co-chairs the firm's Consumer Financial Protection Bureau (CFPB) Task Force. His practice focuses on providing comprehensive legal advice and regulatory advocacy to a broad spectrum of clients, such as nonbank financial products and services providers, including fintechs, lenders, debt buyers and collectors, advertisers and marketers, and trade and professional associations, before the CFPB, the Federal Trade Commission, state attorneys general, and regulatory agencies.

Erik C. Jones, a partner in the Chicago and Washington, DC offices of Venable LLP, helps lead the firm's State Attorneys General and Congressional Investigation practice groups. His practice focuses on representing clients in government investigations and providing legal advice and regulatory advocacy related to consumer protection, e-commerce, privacy, and data security. He previously served two stints in senior positions for the Illinois attorney general's office and served in senior positions for committees in the U.S. Senate and House of Representatives.

Alexandra Megaris, a partner in the New York and Washington offices of Venable LLP, focuses on complex regulatory investigations and government enforcement matters involving state attorneys general, the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), state regulatory agencies, and the U.S. Congress. Alex also works closely with Venable's government affairs team in advocating for clients before these agencies. She has extensive experience with consumer protection laws, such as state unfair, deceptive and abusive practices (UDAAP) laws, the FTC Act, the Consumer Financial Protection Act, the FTC's Telemarketing Sales Rule, and product-specific regulations, including those regulating credit reporting, loan servicing, and debt collection.

For more information about this and related industry topics, see www.venable.com/cfs/publications.

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