Since last Tuesday’s election, there has been much discussion of how expected changes under a Trump Administration are likely to reduce the CFPB’s impact, particularly in the enforcement arena. Little attention, however, has been paid to the election’s implications for the role of state attorneys general and state financial services regulators in enforcing federal and state consumer financial protection laws.
Faced with a less aggressive CFPB, state attorneys general and financial regulators may be emboldened to ramp up their enforcement activity, with Democratic-controlled states such as New York, California and Illinois already known for an activist approach likely to take the lead. Section 1042 of the Consumer Financial Protection Act authorizes state AGs and regulators to bring civil actions to enforce the provisions of the CFPA, most notably its prohibition of unfair, deceptive or abusive acts or practices. Indeed, the New York AG, the New York Department of Financial Services, and the Illinois AG have already filed lawsuits using their Section 1042 authority.
Several federal consumer financial protection laws such as the TILA, FCRA, and RESPA directly give enforcement authority to state AGs. In addition to relying on that authority, state AGs can be expected to take a more aggressive approach to enforcement of state law, including provisions in many states under which a federal law violation is deemed to be violation of state law. When enforcing state law, state AGs can bring civil actions against national banks or federal savings associations to enforce state laws that are not preempted. (Such authority is expressly provided by the CFPA, which codified the U.S. Supreme Court’s 2009 decision in Cuomo v. Clearing House Association, LLC.) The issue of which state laws are preempted could take on heightened significance in the face of increased state AG enforcement activity.
Providers of consumer financial services will need to be prepared to defend against this likely surge in state investigations and enforcement activity. To help clients prepare, we will hold a webinar, “Beyond the CFPB: Preparing for State Enforcement Post-Election,” on December 15, 2016 from 12 p.m. to 1 p.m. A link to register is available here.