As the incoming administration of President-elect Donald J. Trump prepares to roll back federal regulations impacting a wide variety of industries, the battleground will not just be in Washington, DC—it may emerge in the states.
During the Obama administration, state attorneys general—mostly Republican—have used their litigation authority to challenge federal regulations and executive orders that were designed to implement what could not be enacted in the US Congress. With the goal of stopping what they describe as federal government overreach, these attorneys general challenged the Affordable Care Act (Obamacare), Environmental Protection Agency (EPA) clean power rules, Obama’s executive order on immigration, and climate change regulations, among many other federal regulatory activities. In fact, just this week, 18 states filed a lawsuit challenging federal environmental regulations, specifically “overreaching new federal rules that broadly expand the definition of ‘critical’ habitat for endangered and threatened species.”
This role of challenging federal authority is likely to change, with the new administration expected to ease federal regulations and other requirements in many areas—especially with respect to financial services. Financial services requirements that are targeted for change include many aspects of the Dodd-Frank Act and its implementing regulations, including the Volker Rule, as well as major regulations promulgated by the Consumer Financial Protection Bureau (CFPB). Other regulations slated for possible dismantling or change may include mortgage servicing, foreclosure relief services, and debt collection, among others.
Some state attorneys general, however, particularly Democrats, have had a close working relationship with the CFPB (the current director of which is a former Ohio state attorney general). Just as the Republican attorneys general took the Obama administration to court to stop what they called “federal overreach,” the Democratic attorneys general are already planning to litigate to stop changes to existing federal regulatory regimes.
Earlier this week, taking a page out of the Republican attorney general playbook, Massachusetts Attorney General Maura Healey (D) said that “[w]hen the federal government overreaches, state attorneys general have an enormously important role to play.” She pledged to take President-elect Trump to court if he tries to roll back the progress made, including with respect to “Wall Street reforms.” As such, the new president’s deregulatory initiatives may be stalled or even stopped in court by these legal challenges.
Hence, the pace of deregulatory change may not be what the new administration expects if even one state attorney general is successful in an attempt to stop a rollback. In federal regulation, as in politics and other areas of human endeavor, turnaround is fair play—as the incoming Trump administration may soon find out.