On May 19, the Consumer Financial Protection Bureau (CFPB or Bureau) issued an interpretive rule, describing states’ authorities to pursue companies and individuals that allegedly violate any of the federal consumer financial laws enforced by the CFPB.
CFPB Director Rohit Chopra described this action as “promoting state enforcement, not suffocating it.” It openly invites states to exercise their authority under Section 1042, “Preservation of Enforcement Powers of States,” of the Consumer Financial Protection Act of 2010 (CFPA) to not only bring lawsuits in federal court for unfair and deceptive acts and practices (UDAAP) violations under the CFPA, but also bring federal actions for any violations of the “enumerated consumer laws” enforced by the CFPB.
The CFPB alleges that while some states have joined the Bureau in alleging violations of enumerated federal consumer financial laws, few have pursued non-UDAAP claims in their own CFPA actions. Hence the interpretive rule.
This reminder comes almost six months after Chopra’s remarks in December 2021 to the National Association of Attorneys General (NAAG). At the NAAG meeting, Chopra spoke about how federal preemption of strong state consumer protections led to “disastrous consequences” in the lead up to the financial crisis a decade ago. This sentiment is echoed in the recent announcement by 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. [The CFPB’s] action today demonstrates our commitment to promoting state enforcement, not suffocating it.”
This latest announcement from the CFPB reminds states that:
- States can enforce all statutes and regulations under the Consumer Financial Protection Act, even without the CFPB.
- States can pursue claims and actions against a broad range of entities.
- CFPB enforcement actions do not put a halt to state actions.
In short, the continuing uptick in state-level consumer protection enforcement does not appear poised to abate anytime soon. Rather, we anticipate that the current trend of increasing state legislation and regulatory scrutiny will continue and be further bolstered by the CFPB. Companies must be prepared to navigate the increasingly complex overlay of federal and state compliance requirements, particularly as one frequently begets the other.