The CFPB is the primary regulator of consumer financial products and services in the US, but other state and federal regulators also have authority to enforce some federal consumer financial protection laws. The CFPB is now focused on bringing enforcement efforts by these agencies into line with the CFPB’s approach and encouraging states to become more active. In short, the CFPB wants states and other federal financial regulators to put their muscle behind the CFPB’s enforcement objectives.
To that end, the CFPB has announced plans to issue periodic guidance to state and federal consumer financial regulators on how it plans to enforce the laws and regulations it administers. In the announcement, the CFPB indicated that the move is intended to address “inconsistent enforcement strategies and approaches” and level the playing field between banks and non-banks, which have different regulators but often compete with each other with certain similar financial services offerings.
The CFPB guidance documents, styled as Consumer Financial Protection Circulars, will be published on the agency’s website and in the Federal Register. The CFPB has not announced the topics for circulars, saying only that it is “beginning to identify issues that would benefit from clear and consistent enforcement.” However, we would expect early topics to include those the CFPB has recently addressed, such as “junk fees”, student loan servicing, and credit reporting.
In a related move, the CFPB issued two interpretive rules on May 19 and June 28 intended to clarify the scope of states’ authority to enforce state and federal consumer financial protection laws and encourage them to exercise that authority. The May 19 rule covers general enforcement authority under Section 1042 of the Dodd-Frank Act, which empowers states (after consulting with the CFPB) to enforce the Dodd-Frank Act and any of the other 18 federal consumer protection laws that the CFPB administers (the Enumerated Consumer Protection Laws), as well as any related rule the CFPB issues. The June 28 rule notes that states have “substantial flexibility” to combat problematic practices in credit reporting by enforcing their own fair credit reporting statutes, which, the CFPB notes, may be more protective of consumers than the federal Fair Credit Reporting Act (FCRA). The FCRA only preempts state statutes that are inconsistent with its provisions or fall into one of a few narrow categories of state laws that are expressly preempted.
In the commentary to the May 19 interpretive rule, the CFPB notes that, though several states have pursued enforcement actions under the Enumerated Consumer Protection Laws jointly with the CFPB, few have done so on their own. The interpretive rule seeks to clarify for states their ability to bring actions both independently of the CFPB and concurrently with the CFPB, including for violations the CFPB is not pursuing.
Of particular note is the May 19 interpretive rule’s emphasis on the states’ authority to enforce Section 1036 of the Dodd-Frank Act, which prohibits covered persons from engaging in unfair, deceptive, or abusive acts or practices. Using this broad authority, states can pursue conduct that may not violate an express statutory provision but is nonetheless harmful to consumers.
Additionally, both interpretive rules encourage state regulatory agencies to pursue specific conduct that the CFPB cannot due to restrictions or omissions in the federal statutes it administers. The May 19 interpretive rule asserts that express limitations on the CFPB’s enforcement authority over participants in certain industries, such as motor vehicle dealers, real estate brokers, accountants, attorneys, and manufactured and modular home retailers, do not apply to states. The June 28 rule emphasizes the states’ ability to restrict the inclusion of unpaid medical debts in consumer credit reports. These comments may be aimed at encouraging states to focus on issues the CFPB has recently identified in the retail sale and financing of vehicles and mobile homes and medical debt reporting.
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