As the Consumer Financial Protection Bureau (CFPB) continues to highlight coordination with state attorneys general, lawmakers and regulators, top congressional officials from the U.S. 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), ranking member of the Oversight and Investigations Subcommittee, Tom Emmer (R-MN), and the ranking member of the Subcommittee on Consumer Protection and Financial Institutions, Blaine Luetkemeyer (R-MO), discuss specific coordination in certain states and question whether Congress has authorized this activity.
In the letter, the members of Congress seek a variety of documents and other information regarding interactions between the CFPB and state attorneys general offices to pursue duplicative enforcement actions, which they argue 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 does the CFPB have in place to avoid redundant and duplicative state actions?"
The members' inquiry is in the wake of several CFPB enforcement actions that the federal agency brought in cooperation with a state attorney general, such as the CFPB's April 2022 lawsuit with co-plaintiff New York Attorney General Letitia James against MoneyGram Payment Systems, Inc. There, MoneyGram's motion to dismiss details how the CFPB recruited its state attorney general co-plaintiff.
FCRA Interpretive Rule
The CFPB over the past several months has taken several steps to encourage states to increase policing of consumer protection laws and regulations. In late June, the CFPB issued an interpretive rule urging states to enact state-level laws that are stricter than the federal Fair Credit Reporting Act (FCRA).
"Given the intrusive surveillance that Americans face every day, it is critical that states can protect their citizens from abuse and misuse of data," said CFPB Director Rohit Chopra. "The legal interpretation issued today makes clear that federal law does not automatically hit delete on state data protections."
In its actions, the CFPB asserts that "Congress made clear that the FCRA preempts only narrow categories of state laws." Yet, the CFPB's bare assertion is not binding law. The text of the FCRA controls and the act includes many detailed express preemption provisions barring conflicting state laws. Indeed, courts frequently dismiss state law credit reporting claims against furnishers of consumer information by finding the state law is preempted in whole or in part by the FCRA. Thus, the CFPB's position that states are essentially free to enact more robust credit reporting limitations without worry of preemption is belied by the FCRA itself and abundant case law. States that follow the CFPB's suggestion and enact stricter credit reporting laws, therefore will undoubtedly see those laws challenged in courts should consumers or regulators bring suits to enforce them.
Interpretive Rule Describing States' Authorities
In May, the CFPB also issued an interpretive rule that describes its view of states' authorities to pursue actions that violate the provisions of federal consumer financial protection law. The interpretive rule argues:
- 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.
It is clear that the CFPB is focused on collaboration with state attorneys general. Our work with state AGs across the country informs us that consumer protection offices and the CFPB are in close communication about investigatory priorities and collaboration opportunities. Indeed, Commissioner Chopra spoke to the National Association of Attorneys General (NAAG) and said, "the CFPB will be taking steps to promote enforcement of federal consumer financial protection law by state attorneys general. The only requirement for states to pursue these actions is to give notice to the Bureau prior to filing a complaint." Additionally, at least 20 state attorneys general have signed memoranda of understanding with the CFPB to promote collaboration. The CFPB has also demonstrated that it plans to use interpretive rules, advisory opinions, enforcement and supervisory activity as the means to create new precedent and requirements, which notably all avoid allowing the public the opportunity for participation in the process through notice and comment.
As the CFPB and the states continue to take an aggressive approach—often lodging supervisory and enforcement demands simultaneously to the same company—financial services providers find themselves responding multiple times to overlapping requests and juggling competing demands. This can increase both the expense and effort involved in responding, but also overwhelm employees and risk mistakes born from diminished resources. As a result, it is critical for financial services market participants to understand their rights, as well as any limitations in the authority of the CFPB or states. Companies in this position should coordinate their state and federal investigations to reduce the risks inherent in duplicative investigations.
To read the full release from Congress, click here.
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