CFPB Interprets CFPA to Grant States Enforcement Power

On May 19, 2022, the Consumer Financial Protection Bureau (“CFPB”) released an Interpretive Rule that granted states the right to bring enforcement actions for alleged violations of the federal Consumer Financial Protection Act (“CFPA”).

Prior to the Great Recession, “federal banking regulators took numerous steps to undermine state regulators and enforcers” which impacted the protections granted to mortgage borrowers and consumers and leading to the subprime crisis.

The CFPA was passed in 2010 and, according to the CFPB’s release, “it recognized the important role of states in protecting consumers from financial fraud, scams, and other wrongdoing.” Essentially, the CFPA empowered the states in a way that the federal government previously preempted. According to the CFPB, since the passage of the CFPA, states have utilized this authority, either in partnership with the CFPB or in their individual capacity, to initiate 33 public enforcement actions.

Under the CFPB’s new interpretation of the CFPA, these states have the authority to:

• enforce the CFPA, including those provisions prohibiting the violation of 18 enumerated consumer protection laws, as well as any rule or order prescribed by the CFPB under the CFPA;

• pursue claims and enforcement actions against all entities that the CFPB is permitted to pursue under the CFPA; and

• act in collaboration with CFPB enforcement actions or bring actions to stop or remediate harm that is not currently being addressed by the CFPB.

According to the release, the CFPB’s new interpretation of the CFPA was intended to demonstrate the CFPB’s “commitment to promoting state enforcement, not suffocating it.”