CFPB interpretive ruling underscores broad authorities for states to enforce federal consumer financial protections

States’ broad authorities to enforce federal consumer financial protections are affirmed in an interpretive rule issued Thursday by the federal Consumer Financial Protection Bureau (CFPB) and set to take effect upon publication in the Federal Register.

The CFPB noted that the 2010 Consumer Financial Protection Act (CFPA) grants states’ consumer protection enforcers the authority to enforce the CFPA following years in which federal regulators, in lead-up to the financial crisis, blocked states seeking to enforce certain consumer protections from abuses in the mortgage market.

“In the years leading up to the financial crisis, federal regulators undermined states seeking to protect families and businesses from abuses in the mortgage market,” said CFPB Director Rohit Chopra. “Our action today demonstrates our commitment to promoting state enforcement, not suffocating it.”

The bureau, in a release, said Thursday’s interpretive rule affirms the following:

  • States can enforce the Consumer Financial Protection Act, including the provision making it unlawful for covered persons or service providers to violate any provision of federal consumer financial protection law. This provision covers the Consumer Financial Protection Act 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 Consumer Financial Protection Act, an enumerated consumer law, or pursuant to certain other authorities.
  • States can pursue claims and actions against a broad range of entities. The Consumer Financial Protection Act outlines entities over which the CFPB may exercise its enforcement authority under the statute. States are able to bring actions against a broader cross-section of companies and individuals.
  • CFPB enforcement actions do not put a halt to state actions. Sometimes states bring enforcement actions 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 Consumer Financial Protection Act precludes these complementary enforcement activities that serve to protect consumers at both the national and state levels.

The CFPB noted that Congress, through the CFPA, “significantly restricted” federal banking regulators’ ability to broadly preempt state consumer financial protections. At the same time, it authorized state attorneys general (AGs) and state regulators to enforce the CFPA’s consumer protection provisions. The bureau said states have since used this authority in 33 public enforcement actions to protect consumers, with some actions brought in partnership with the CFPB and others brought by individual states or multistate groups that “have included almost every state and territory in the country.”

The bureau noted that it also has memoranda of understanding to promote such efforts with more than 20 state AG offices and regulators in all 50 states, the District of Columbia, and Puerto Rico.

Interpretive Rule Seeks to Clarify Scope of States’ Ability to Enforce Federal Consumer Financial Protection Laws

Interpretive rule