The Attorneys General for the states of Connecticut, Indiana, Kansas, and Vermont recently took the unusual step of filing a joint motion to intervene to modify the settlement terms of a CFPB enforcement action.

The motion was filed in the CFPB’s action filed in a New York federal district court in December 2014 against Sprint Corporation that alleged Sprint had violated the Consumer Financial Protection Act by allowing unauthorized third-party charges on its customers’ telephone bills.  To settle the action, Sprint and the CFPB entered into a Stipulated Final Judgment and Order (Stipulated Judgment) that required Sprint to pay $50 million in consumer refunds pursuant to a redress plan.

According to the memorandum in support of the joint motion to intervene, the redress plan provides that once the deadline for customers to file passes and Sprint refunds all charges for approved claims, Sprint must pay the balance of the $50 million to the CFPB.  The CFPB, in consultation with the states (which were parties to separate agreements with Sprint relating to similar billing practices claims) and the FCC, must then determine if additional consumer redress is “wholly or partially impracticable or otherwise inappropriate.”  If additional redress is determined to be “wholly or partially impracticable or otherwise inappropriate,” the CFPB, again in consultation with the states and the FCC, can apply the remaining funds “for such other equitable relief, including consumer information remedies, as determined to be reasonably related to the allegations set forth in the Complaint.”  Any funds not used for such equitable relief are to be deposited in the U.S. Treasury as disgorgement.

The AGs claim in their motion that, after payment of claims, approximately $14 million of Sprint’s redress funds remain unused and that the CFPB, in consultation with the Vermont AG acting as liaison for the states and the FCC, has concluded that additional redress is wholly or partially impracticable or otherwise inappropriate and did not identify any other equitable relief towards which the CFPB could apply the remaining funds.

The AGs seek to modify the Stipulated Judgment to require the CFPB to deposit the remaining funds with the National Association of Attorneys General to continue and complete the development of the National Attorneys General Training and Research Institute (NAGTRI) Center for Consumer Protection.  NAGTRI proposes to use the funds “to train, support and improve the coordination of the state consumer protection attorneys charged with enforcement of the laws prohibiting the type of unfair and deceptive practices alleged by the CFPB [in its action against Sprint].”  The AGs state that neither the CFPB nor Sprint oppose their motion.

State AGs and financial regulators are widely expected to ramp up their enforcement of federal and state consumer financial protection laws in response to anticipated changes to the CFPB and other federal regulatory agencies in a Trump administration.  In a recent webinar, “Beyond the CFPB-Preparing for State Enforcement Post-Election,” Ballard Spahr attorneys reviewed the enforcement authority of state AGs and regulators, surveyed enforcement and rulemaking activity in the financial services industry, and discussed what can be done by companies to prepare to defend against state enforcement activity.