The impending storm: post-preemption state consumer protection enforcement


"In the past three years, litigation between states and national lenders has increased dramatically, resulting in high dollar settlements and unprecedented involvement by state officials in lenders' business operations. Responding to the public sentiment that lenders were to blame for subprime meltdown and the resulting foreclosure crisis, state attorneys general have used state consumer protection laws, commonly referred to as UDAP statutes..., to challenge national banking practices with little regard to a lender's federal regulatory status...Although the CFPA's [Consumer Financial Protection Act] end to federal preemption of state enforcement is new legislation, state AGs have increasingly used UDAP laws to target national lenders with allegations of predatory lending, unfair servicing and discrimination. The resulting cases demonstrate a progressive increase in the scope of enforcement activity by state AGs and provide a window into what national banks and federal savings associations can expect post-CFPA."

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