At a recent meeting of state attorneys general, Consumer Financial Protection Bureau (CFPB) Acting Director Mick Mulvaney reiterated his message, previously reported here that his bureau will no longer “push the envelope” on enforcement matters.
At the conclusion of his remarks, Pennsylvania Attorney General Josh Shapiro (D) asked Mulvaney whether this change in enforcement philosophy means that the CFPB will interfere in or otherwise impede the use of state attorney general authority to enforce certain Dodd-Frank provisions, specifically those penalizing conduct which is “unfair, deceptive, or abusive” (UDAAP) in federal court. Mulvaney responded unequivocally that it would not.
While that was a significant development, how this is implemented is of even greater significance. On May 23, following a meeting of senior state attorney general consumer protection prosecutors, there will be a closed-door meeting covering, among other topics, how states can best enforce federal consumer protection laws. Attorneys general have traditionally eschewed the use of federal authority in consumer protection matters, although they have used other federal authorities in antitrust and environmental matters for many years. That forbearance at the state level may be coming to an end.
These developments also signal that while there may be a reduction in enforcement actions by the CFPB, at least some of that slack may be taken up by the states, leading to the possibility that differing interpretations of the same law may emerge in different parts of the country.
We advise financial institutions that may be subject to state attorney general UDAP or UDAAP prosecution to consider their current state attorney general strategy to determine whether it adequately addresses this new risk.