On May 19th, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule clarifying the scope of state enforcement authority found in Section 1042 and other sections of the Consumer Financial Protection Act (CFPA). The rule was published in the May 26, 2022 edition of the Federal Register. As an interpretive rule, this rule is exempt from the notice-and-comment rulemaking requirements of the Administrative Procedure Act.
The interpretive rule affirms the following:
States Can Enforce the CFPA
Section 1042 allows states to enforce the CFPA. This includes Section 1036(a)(1)(A) which makes it unlawful for covered persons or service providers to violate Federal consumer protections laws. This provision covers the CFPA itself as well as its 18 enumerated consumer laws and certain other laws, along with any rule or order prescribed by the CFPB under the CFPA, an enumerated consumer law, or pursuant to certain other authorities.
CFPA Limitations on the CFPB’s Enforcement Authority Generally Do Not Apply to States
Sections 1027 and 1029 of the CFPA set forth certain limits on the CFPB’s enforcement authority over certain persons, such as licensed real estate agents and brokers engaged in brokerage activities, manufactured home retailers, accountants, and attorneys. The interpretive rule affirms that these restrictions generally do not apply to states, which are able to bring actions against a broader cross-section of companies and individuals.
CFPB Enforcement Actions Do Not Prevent State Actions.
States can bring enforcement actions concurrently with the CFPB’s action or in coordination with the CFPB. A state may also bring an enforcement action to stop or remediate harm that is not addressed by a CFPB enforcement action against the same entity. Nothing in the CFPA precludes these complementary enforcement activities that serve to protect consumers at both the national and state levels.
The interpretive rule builds on a history of longstanding coordination between the CFPB and state financial regulators. Almost nine years earlier to the day, on May 20, 2013, the CFPB and the Conference of State Bank Supervisors (CSBS), acting on behalf of state regulators, signed the CFPB-State Supervisory Coordination Framework. The Framework expanded the scope of the 2011 Memorandum of Understanding (the Information-Sharing MOU) to include working together to achieve examination efficiencies and to avoid duplication of time and resources expended. These documents established a process for coordinated federal/state consumer protection supervision and enforcement of entities providing consumer products or services that are subject to concurrent jurisdiction of the CFPB and one or more state regulators.
The Department of Savings and Mortgage Lending (SML), an agency of the State of Texas, stated “their legal division is reviewing the interpret[ive rule]. However, at this point SML does not envision any changes to its enforcement or supervisory oversight.”
It is still unclear how other state financial regulators will respond. This clarification of existing authority may have been more targeted to state attorneys general, as both the interpretive rule and its accompanying press release highlight that the CFPA provides for state enforcement by both state regulators and state attorneys general. This will certainly be an area to watch. We anticipate the interpretative rule may embolden certain state regulators and attorneys general to more aggressively pursue enforcement actions under the CFPA.
The press release accompanying the interpretive rule indicates that the CFPB plans to consider other steps in the future to promote state enforcement of federal consumer financial protection law.
If you have further questions about the interpretive rule and its potential impact, please reach out to Doug Foster and Caroline Jones or any of our firm’s attorneys or representatives at: http://www.mortgagelaw.com/people.