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CFPB Empowers States to Bring ‘Complementary’ Enforcement Cases

May 19, 2022, 9:12 PM

State attorneys general and financial regulators can bring enforcement actions against companies and individuals even if the CFPB is engaged in its own action against the same entity, the federal agency said Thursday.

The Consumer Financial Protection Bureau released an interpretive rule outlining state powers to enforce federal consumer financial laws. The rule includes a provision confirming that states can bring “complementary enforcement activities.”

The 2010 Dodd-Frank Act expressly prohibits the CFPB and the Federal Trade Commission from bringing independent enforcement actions against the same entity at the same time. But the law makes no such express limitation on state attorneys general and financial regulators, the CFPB said Thursday.

“In short, when Congress seeks to limit concurrent statutory enforcement activity, it knows how to do so,” the interpretive rule said.

Dodd-Frank gave state attorneys general and financial regulators the power to enforce federal consumer finance laws, including the CFPB’s unfair, deceptive, and abusive acts and practices standard. The move was a response federal banking regulators preempting state actions against abusive mortgage practices prior to the 2008 financial crisis.

States are required to consult with the CFPB before bringing an action under the Consumer Financial Protection Act, the portion of Dodd-Frank covering consumer finance issues.

Some states might view the CFPB’s interpretive rule as a green light to forego that consultation requirement, said Joseph T. Lynyak, a partner at Dorsey & Whitney LLP.

“The bureau will try to argue that the interpretive rule is a waiver of that protection, but covered persons will argue that the bureau cannot waive a jurisdictional precondition that protects covered persons from overreaching by attorneys general,” Lynyak said.

To date, states have brought 33 public enforcement actions using their Dodd-Frank-granted powers, including several in conjunction with the CFPB, the agency said.

The CFPB has a memorandum of understanding on enforcement cooperation with more than 20 state attorneys general, as well as financial regulators in all 50 states and the District of Columbia and Puerto Rico.

To contact the reporter on this story: Evan Weinberger in New York at eweinberger@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com