CFPB Interpretive Rule Empowers State Enforcement

Jun 1, 2022Federal Regulation, News

In May, the Consumer Financial Protection Bureau (CFPB) issued a new interpretive rule that empowers states’ consumer protection enforcement bodies to enforce the Consumer Financial Protection Act. The Bureau also said it plans to consider other steps to promote state enforcement of federal consumer financial protection law.

“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 in a press release. “Our action today demonstrates our commitment to promoting state enforcement, not suffocating it.”

As outlined in the Bureau’s press release announcing the interpretive rule, Congress recognized the role that states play in protecting consumers from financial fraud, scams, and other wrongdoing when it passed the Consumer Financial Protection Act more than a decade ago.

“In the run-up to the Great Recession, federal banking regulators took numerous steps to undermine state regulators and enforcers, deteriorating protections for mortgage borrowers and setting the stage for the subprime crisis,” the press release reads. “Through the Consumer Financial Protection Act, Congress significantly restricted the ability of federal banking regulators to broadly preempt state consumer financial protections.”

“In addition, Congress sought to enhance states’ enforcement abilities, so states were empowered to enforce the Consumer Financial Protection Act’s consumer protection provisions,” the release continues. “This authority was provided for both state attorneys general and state regulators.”

The interpretive rule clarifies that states can enforce the Consumer Financial Protection Act, states can pursue claims and actions against a broad range of entities, and that enforcement actions by the CFPB do not put a halt to state actions. Under this third provision, nothing in the Consumer Financial Protection Act precludes complementary enforcement activities by state entities from moving forward, whether those enforcement activities are in coordination with the CFPB or being undertaken to stop or remediate a harm that the CFPB’s action is not addressing.

 The full interpretive rule is available here.

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