CFPB Deferment of Enforcement Authority to States Will Lead to Increased Scrutiny

This article was co-authored by Joann Needleman and Timothy Lee, of Clark Hill. It originally appeared as an Alert on, and is republished here with permission.

At a recent gathering of states attorneys general, Mick Mulvaney, Acting Director of the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) indicated his preference that they take the lead on the enforcement of consumer protection laws along with state regulators. According to Acting Director Mulvaney, “States know best how to protect their own consumers”. This approach marks a stark contrast from the previous regime at the CFPB. Historically, under the CFPB’s previous director, Richard Cordray, states often took a back seat to the CFPB on enforcement actions. This aggressive enforcement policy was often criticized as many believed this authority was used solely to set new industry standards independent of the rulemaking process. Mulvaney is determined to change the narrative. However, such a shift in the CFPB’s enforcement philosophy should not be interpreted as a loosening of the proverbial “oversight belt”. Rather, the “oversight belt” is still tight and will continue to get tighter; as now, it is being worn by a new, more politically charged and unpredictable source: states and cities.

States—and cities thanks to a recent Supreme Court decision—are already taking Acting Director Mulvaney’s deferment to task, suggesting enforcement of consumer protection laws will soon become a priority among their state attorneys general and regulators as well as city and municipal officials. Several states and the District of Columbia have either filed suit alleging or begun investigating potential discriminatory lending practices by some of the nation’s largest financial institutions. In Pennsylvania, the Pennsylvania Treasurer and Bureau of Consumer Protection of the Pennsylvania Attorney General’s Office have announced separate investigations of major financial institutions for alleged discriminatory practices in mortgage lending that were unveiled by a recent report released by the Center for Investigative Reporting. A copy of the report can be found here. Other states, including Iowa and Washington, have taken similar action based on the same report. The states are not alone in this growing fight.

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