CFPB Pushes States to Enforce Federal Consumer Protection Laws

In a move potentially impacting credit unions and banks, the CFPB issued an rule encouraging state officials to apply bureau regulations. Learn why.

David Baumann


May 24



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David Baumann

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David Baumann

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Issuance of interpretive rule encouraging state officials to apply bureau regulations could impact both credit unions and banks.

The Consumer Financial Protection Bureau (CFPB) last week issued an interpretive rule aimed at fortifying the powers states have to enforce federal consumer protection laws.

In issuing the rule, agency officials reminded states that even though the CFPB was created by Dodd-Frank, state officials still have the power to enforce the laws on their own or in tandem with the bureau.

Since it is an interpretive regulation, no public comment period is required.

How States Have Worked with the CFPB

The agency noted officials in several states have worked with the CFPB on enforcement actions. Most recently, bureau officials announced Monday that the agency, working with the New York attorney general’s office, has filed a proposed stipulated judgement in federal court to settle a case against a debt collection company and its owners and managers.

However, in an accompanying statement, CFPB Director Rohit Chopra claimed that the federal government and state financial regulators have not always cooperated with each other.

Rohit Chopra official photo

CFPB Director Rohit Chopra

“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,” he said. “Our action today demonstrates our commitment to promoting state enforcement, not suffocating it.”

What Exactly Does the Rule Entail?

The new rule states that, “Through the Consumer Financial Protection Act, Congress significantly restricted the ability of federal banking regulators to broadly preempt state consumer financial protections.”

Further, it notes the federal Consumer Financial Protection Act specifically authorizes state regulators to enforce the federal law. That includes allowing states to file a complaint alleging unfair, deceptive, or abusive acts or practices.

The agency said that state officials may file those complaints even if federal officials are pursuing a concurrent action against the same entity. Many states have taken advantage of their ability to do so, with the CFPB citing 33 specific cases in which state officials have used the power to enforce consumer protection laws.

“Nothing in the Consumer Financial Protection Act precludes these complementary enforcement activities that serve to protect consumers at both the national and state levels,” the rule states.

Agency officials said they have memoranda of understanding with more than 20 state attorney general offices, as well as regulators in all fifty states, the District of Columbia and Puerto Rico.

They added the interpretive rule is part of the bureau’s expanded effort to support state enforcement actions and the CFPB plans to consider other steps to promote those efforts, including ways to facilitate victim redress.

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