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CFPB Takes Steps to Limit State Attorney General and Regulator Authority
On May 15, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule attempting to limit the authority of state attorneys general and financial institution regulators when it comes to enforcing federal consumer financial protection law.
Section 1042 of the Dodd-Frank Wall Street Reform and Consumer Protection Act allows a state attorney general or financial institution regulator to “bring a civil action to enforce provisions of this title or regulations issued under this title.” In a now withdrawn interpretive rule from 2022, the previous CFPB administration had interpreted this statutory provision to allow a state attorney general or financial institution regulator enforcement authority over any federal consumer financial protection law.
Under its new interpretive rule, the CFPB indicates that state enforcement activity is limited to those rules specifically promulgated under the Dodd-Frank Act. This would limit state attorney general and regulator authority to things such as the prohibition against unfair, deceptive, and abusive acts and practices. It would not permit enforcement at a state level under any other federal consumer financial protection law. For example, a state attorney general or regulator could not bring an action to enforce a provision of the Truth in Lending Act, the Fair Credit Reporting Act, or the Equal Credit Opportunity Act (to name a few).
In recent months, as the new CFPB has sought to unwind most of the work done under the previous administration, many in the industry envisioned state attorneys general and regulators stepping up to fill the void in consumer financial protection. This new interpretive rule appears to be the agency’s attempt to proactively cut that notion off at the pass. While it remains to be seen what consumer financial protection will look like in the future, it’s safe to say we can expect a lot more litigation on this subject in the years to come.
Section 1033 Personal Financial Data Rights Rule Likely to be Struck Down by Month’s End
In late 2024, the Consumer Financial Protection Bureau finalized its personal financial data rights rule as required by Section 1033 of the Dodd-Frank Act. The rule requires financial institutions and other data providers to make covered data regarding financial products and services available to consumers and authorized third parties in electronic form.
Almost immediately, the CFPB was sued in federal district court in Kentucky, alleging several deficiencies with the rulemaking. On May 23, the CFPB’s general counsel indicated that the agency plans to file a motion for summary judgment by May 30 asking the court to cancel the rule. In a status report filed with the court, the CFPB stated, “after reviewing the rule and considering the issues that this case presents, Bureau leadership has determined that the rule is unlawful and should be set aside.”
Notwithstanding this development, financial institutions must keep in mind that Section 1033 of the Dodd-Frank Act statutorily mandates that the CFPB prescribe rules requiring covered persons to make certain information about financial products and services available to consumers in electronic form. Absent an act of Congress striking this requirement from the Dodd-Frank Act, the CFPB will need to start anew with its open banking initiative. Stay tuned for more information!
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