The Consumer Financial Protection Bureau (Bureau or CFPB) released an Interpretive Rule—which is exempt from notice-and-comment requirements of the Administrative Procedure Act—that sets out its view on the power of states to bring enforcement actions pursuant to the federal Consumer Financial Protection Act (CFPA). Of note, under the Bureau's interpretation of the CFPA, states can enforce consent orders issued by the Bureau, and the limits applicable to the Bureau's enforcement authority do not apply to states. The Interpretive Rule also may signal the Bureau's apparent comfort with state regulators and state attorneys general bringing specific enforcement actions under CFPA without first consulting with the CFPB.
The CFPB also announced it would propose additional means to promote state attorney general enforcement of federal consumer financial law and ways to facilitate victim redress. The announcements are part of efforts by CFPB Director Rohit Chopra to support state enforcement activity.
The Interpretive Rule provides the following:
- States can enforce the CFPA, including (1) the generic prohibition on unfair, deceptive, or abusive (UDAAP) conduct, (2) the provision making it unlawful for covered persons or service providers to violate any of the 18 federal consumer financial statutes listed in the CFPA, such as the Truth in Lending Act and Fair Debt Collection Practices Act, (3) any regulations it enacts under the CFPA, subject to some exceptions, and (4) consent orders and other final orders issued by the Bureau under sections 1053 and 1055 of the CFPA.
- Unlike the limits imposed by the CFPA on the Bureau, states are not bound by the limits and thus can bring actions against real estate brokerages; retailers of manufactured or modular homes; accountants and tax preparers; attorneys engaged in the practice of law; persons regulated by a state insurance regulator; products or services that relate to specified employee benefit and compensation plans; persons regulated by a state securities commission; persons regulated by the Securities and Exchange Commission; persons regulated by the Commodity Futures Trading Commission; persons regulated by the Farm Credit Administration; and activities related to charitable contributions.
- CFPB enforcement actions do not stop state actions. Nothing in the CFPA precludes complementary enforcement of federal consumer financial law by state regulators or state attorneys general.
Not mentioned in the Interpretive Rule are the CFPA's notice requirements on when state officials can act under the CFPA, the CFPB's ability to intervene, and whether CFPA remedies are available to states. By taking this action, the CFPB appears to be laying the groundwork for states to step in as first responders to alleged legal violations to fill in gaps in federal enforcement. Although not decisive, any future challenge to state authority may require a court to consider the Bureau's interpretation of its organic statute with deference.
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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, 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 in the Illinois attorney general's office and served in senior positions with 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.