In yet another example of state attorneys general stepping up their activities in response to a perceived regulatory rollback in Washington, 16 attorneys general[1], all Democrats, have written to the Bureau of Consumer Financial Protection (Bureau), formerly the Consumer Financial Protection Bureau (CFPB), proposing in quite strident terms that the Bureau not reduce its authority for or use of key enforcement tools such as the Civil Investigative Demand (CID). Read the letter here.
The letter makes the case that full CID authority permits agencies to fulfill their investigative mandate. While nominally responding to the Bureau’s request for information about its CID process, the letter serves the unmistakable purpose of making a joint public statement of the enforcement philosophy of these attorneys general. The letter thus bears a careful review as it likely presages investigative and enforcement litigation that they might undertake themselves. Each of these attorneys general has not only powerful consumer protection authorities under state law but also the express authorization under the Dodd-Frank Act to enforce that law’s prohibition on “unfair, deceptive, and abusive” acts and practices in federal court. In turn, as we have previously reported, the Bureau’s acting director, Mick Mulvaney, has made clear that he does not intend to interfere in the states’ regulatory and enforcement prerogatives. Read our prior blog here.
At the same time, the attorneys general of California, New York, and Oregon, also all Democrats, have filed a petition to intervene and seek rehearing en banc of a panel opinion by the US Court of Appeals for the Fifth Circuit invalidating to the US Department of Labor’s, Obama-era Fiduciary Rule. The petition to intervene, which also states that “DOL appears ready to abandon its effort to protect retirement investors by acquiescing to a split decision of this Court,” emphasizes the need to protect retirement investors, as well as the direct negative impact on state tax revenues that could result from the rule’s invalidation. Read the petition here.
These two coordinated actions point to increased activism by empowered and invigorated attorneys general who want to push back against the perceived federal regulatory agenda, on this occasion at the Bureau, and indirectly at the Labor Department for its alleged acquiescence to the Fifth Circuit decision. In turn, affected financial institutions must continue to be aware of and manage the regulatory, enforcement, and reputational risks posed by the actions of these public officials who wear two hats—both as their respective state’s chief legal and law enforcement officer, and as a statewide political official.
[1] The 16 are from California, Delaware, Hawai’i, Illinois, Iowa, Maryland, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington.