Last month, we discussed Consumer Financial Protection Bureau’s (CFPB) May 19, 2022 Interpretive Rule, which sought to clarify the scope of state enforcement authority found in Section 1042 and other sections of the Consumer Financial Protection Act (CFPA). The Interpretive Rule determined that states could enforce the CFPA as well as its 18 enumerated federal consumer financial protection laws (e.g., TILA, RESPA) and certain other laws, as well as CFPB regulations. In a press release accompanying the issuance of the Interpretive Rule, the CFPB announced that its issuance was “part of the CFPB’s expansion of its efforts” to “bolster enforcement actions by states.”
The CFPB has since received significant pushback to the Interpretive Rule from several stakeholders, including the U.S. Chamber of Commerce (which has launched a campaign against CFPB Director Rohit Chopra), Congressional Republicans, and litigants. These groups believe that the Interpretive Rule mis-interprets the relevant sections of the CFPA in several key respects, and impermissibly seeks to expand the States’ existing authority to enforce federal consumer financial protection laws.
Congressional Republicans also allege that the CFPB may be “conspiring” with state attorneys general to intimidate companies, and both the lawmakers and at least one litigant have alleged that the CFPB has engaged in “forum shopping” by recruiting friendly state attorneys general in order to file lawsuits in courts thought to be more friendly to the CFPB.
Despite these criticisms, the CFPB appears intent on continuing to promote state enforcement action of the CFPA as well as the coordination of supervisory and enforcement actions with state authorities. In an August 10th speech at the National Association of Attorneys General Presidential Summit, CFPB Director Rohit Chopra reiterated that the states are “explicitly authorize[d]” to bring enforcement actions under the CFPA.
Clearly, the expansion of state enforcement of federal consumer financial protection laws would be a significant change in the currently regulatory environment for lenders. So it is perhaps no surprise that other stakeholders will seek to push back against any increase in regulatory enforcement action.
However, the Chamber’s campaign against the CFPB signifies a more concerted industry effort to challenge the CFPB’s recent actions under Director Chopra, which may include litigation. Additionally, if Republicans manage to retake the House of Representatives in the 2022 midterm elections, it appears that a House Financial Services Committee chaired by a member of the GOP will once again seek to make oversight of the CFPB a high priority.
These actions—along with other litigation involving whether the manner in which the CFPB is funded is constitutional—may dramatically alter the consumer financial regulatory landscape in the coming months.
The U.S. Chamber of Commerce Ramps Up its Opposition to Director Chopra.
On June 28, 2022, the U.S. Chamber of Commerce launched a campaign that seeks to “rein in” CFPB Director Rohit Chopra. The Chamber believes that Director Chopra’s “ideologically driven agenda to radically change the nature of America’s financial services industry … would harm consumer choice and innovation” if allowed to proceed. As part of this campaign to push back on what the Chamber sees as CFPB overreach, it published a June 28, 2022 letter sent to Director Chopra. The letter addresses several recent CFPB actions which the Chamber considers “imprudent and unlawful”, including issuing the Interpretive Rule.
The Chamber reads the Interpretive Rule as an attempt to impermissibly expand States’ existing authority to enforce federal consumer protection laws—an interpretation of the CFPA the Chamber believes to be “unambiguously wrong.” The Chamber further argues that this interpretation “change[s] the federal-state balance” and would require a clear delegation from Congress to do so.
The Chamber closes its letter by calling on the CFPB to rescind the Interpretive Rule (as well as several other recent actions), and threatening to take legal action if the CFPB does not.
House Republicans Object to CFPB Attempt to “Deputize” State Attorneys General to Enforce the CFPA.
On July 28, 2022 the top minority members on the House Financial Services Committee, Subcommittee on Oversight and Investigations, and the Subcommittee on Consumer Protection and Financial Institutions sent Director Chopra a letter alleging that the CFPB “may be colluding with states contrary to the” CFPA. The letter stated that it is “inappropriate for the CFPB to recruit a state attorney general that is not otherwise investigating a company, to pursue enforcement as a means of intimidation.”
These three Republican congressmen noted that between October 12, 2021 and April 30, 2022, Director Chopra spoke with state attorneys general on 23 occasions, and implied that these interactions were part of a coordinated effort to “deputize” state attorneys general to enforce the CFPA on behalf of the CFPB. The congressmen believe the effect of the Interpretive Rule goes beyond simply enforcing the CFPA, and improperly interprets the CFPA to allow state attorneys general to become a party to an existing CFPB action. The goal, the congressmen allege, is to allow the CFPB to “forum shop across the country” to bring cases in courts that are thought as more friendly to the CFPB.
The congressmen conclude their letter by requesting the CFPB answer questions and produce any and all documents relating to its interactions with state attorneys general by August 12, 2022. To date it is not clear if, and to what extent, the CFPB has responded.
Should the Republicans retake the House in the 2022 mid-term elections, the communication and coordination between the CFPB and attorneys general will likely be an important oversight priority for the GOP.
MoneyGram Alleges Forum Shopping by CFPB in Action Filed Against the Company in New York.
On April 21, 2022, the CFPB and the New York Attorney General (“NYAG”) filed a lawsuit in the Southern District of New York against MoneyGram International, Inc. and MoneyGram Payment System, Inc. (“MoneyGram”), alleging MoneyGram violated the Remittance Rule (Case No. 1:22-cv-03256). The typical practice among regulators, including the CFPB, is to file complaints in the district court where the company is headquartered. In this case, that would be the Northern District of Texas, because MoneyGram is headquartered in Dallas.
In an August 4, 2022 motion seeking to transfer venue from the Southern District of New York to the Northern District of Texas, MoneyGram alleges that the CFPB engaged in “naked forum shopping by recruiting NYAG to join this case on the eve of litigation to attempt to manufacture venue in” the Southern District. MoneyGram further alleges that the NYAG “never sought documents or testimony from [MoneyGram], never issued a subpoena, and never appeared to conduct any investigation whatsoever.”
Such allegations echo those in the House Republicans’ letter, although it remains to be seen how the court will rule on MoneyGram’s motion. If the court grants MoneyGram’s motion and transfers the case to its home district, the CFPB may be forced to adjust its strategy as to when, and how, it involves a state attorney general in any enforcement action.
If you have further questions about the Interpretive Rule and the debate surrounding it, please reach out to Doug Foster, Caroline Jones and Peter Idziak or any of our firm’s attorneys or representatives at: https://www.mortgagelaw.com/people.