As the Consumer Financial Protection Bureau (CFPB) continues to emphasize coordination with state attorneys general, lawmakers and regulators, senior congressional officials from the US House Financial Services Committee (HFSC) are questioning the legality of such coordination. In a letter to CFPB Director Rohit Chopra, HFSC Ranking Member Patrick McHenry (R-NC), Oversight and Investigation Subcommittee Member Tom Emmer (R-MN) and Sub – committee on consumer protection and financial institutions. , Blaine Luetkemeyer (R-MO), discuss specific coordination in certain states and wonder if Congress has authorized this activity.
In the letter, members of Congress seek a variety of documents and other information regarding interactions between the CFPB and state attorneys general’s offices to pursue duplicate enforcement actions, which they say is in violation of the Consumer Financial Protection Act. The letter asks several key questions, including: “Under what authority can the CFPB recruit state attorneys general to join existing CFPB actions?” and “What safeguards has the CFPB put in place to avoid redundant and duplicative state actions?”
The members’ investigation follows several CFPB enforcement actions the federal agency has brought in cooperation with a state attorney general, such as the CFPB’s lawsuit in April 2022 with co-plaintiff New York’s attorney general. York Letitia James v. MoneyGram Payment Systems, Inc. There, MoneyGram’s motion to dismiss details how the CFPB recruited its co-plaintiff from the state attorney general.
FCRA Interpretation Rule
In recent months, the CFPB has taken several steps to encourage states to strengthen enforcement of consumer protection laws and regulations. In late June, the CFPB released an interpretative rule urging states to enact state-level laws stricter than the federal Fair Credit Reporting Act (FCRA).
“Given the intrusive surveillance Americans face every day, it’s critical that states can protect their citizens from data abuse and misuse,” CFPB Director Rohit Chopra said. “The legal interpretation released today makes it clear that federal law does not automatically remove state data protections.”
In its actions, the CFPB says “Congress has made it clear that the FCRA only prevails over narrow categories of state law.” Yet the CFPB’s simple assertion is not binding law. The text of the FCRA controls and the statute include many detailed express preemptive provisions prohibiting conflicting state laws. Indeed, courts frequently dismiss state law credit information claims against consumer information providers by finding that state law is preempted in whole or in part by the FCRA. . Thus, the CFPB’s position that states are essentially free to enact stricter credit reporting limits without concern for preemption is belied by the FCRA itself and extensive case law. States that follow the CFPB’s suggestion and enact tougher credit reporting laws will therefore undoubtedly see those laws challenged in court if consumers or regulators file lawsuits to enforce them.
Interpretative rule describing state authorities
In May, the CFPB also released an interpretative rule that outlines its view for state authorities to prosecute actions that violate provisions of the federal consumer financial protection law. The interpretative rule states:
- States may enforce the Consumer Financial Protection Act, including the provision prohibiting Covered Persons or Service Providers from violating any provision of the federal Consumer Financial Protection Act. This provision covers the Consumer Financial Protection Act itself as well as its 18 listed consumer laws and certain other laws, as well as any rules or orders prescribed by the CFPB under the Consumer Financial Protection Act, a listed consumer law or under certain other authorities.
- States can bring lawsuits and actions against a wide range of entities. The Consumer Financial Protection Act outlines the entities over which the CFPB may exercise enforcement authority under the Act. States can bring actions against a broader cross-section of companies and individuals.
- The CFPB’s enforcement actions do not put an end to state actions. Sometimes states take enforcement action in coordination with the CFPB. A State may also initiate enforcement action to stop or repair harm that is not addressed by 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 the national and state levels.
It is clear that the CFPB is focused on working with state attorneys general. Our work with state GAs across the country informs us that consumer protection offices and the CFPB are in close communication about investigative priorities and opportunities for collaboration. Indeed, Commissioner Chopra spoke with the National Association of Attorneys General (NAAG) and said, “The CFPB will take steps to promote enforcement of the Federal Consumer Financial Protection Act by Attorneys General. States. The only requirement for states to pursue these actions is to give notice to the Bureau before filing a complaint. Additionally, at least 20 state attorneys general have signed memorandums of understanding with the CFPB to promote collaboration. The CFPB has also demonstrated that it plans to use rules of interpretation, advisory opinions, enforcement and monitoring activity as means to create new precedents and requirements, which in particular avoid giving the public the opportunity to participate in the process through opinions and comments.
As the CFPB and states continue to take an aggressive approach – often simultaneously submitting monitoring and enforcement requests to the same company – financial service providers find themselves responding to overlapping requests multiple times and to juggle competing demands. This can increase both the expense and effort required to respond, but also overwhelm employees and risk errors due to dwindling resources. Therefore, it is essential that financial services market participants understand their rights, as well as any limitations on the authority of the CFPB or the States. Companies in this position must coordinate their state and federal investigations to reduce the risks inherent in duplicate investigations.
To read the full Congress press release, click here.