The Consumer Financial Protection Bureau ("the 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.