CFPB Summary: Interpretive Rule re: Authority of States to Enforce the Consumer Financial Protection Act of 2010
12 CFR Chapter X
Section 1042 of the Consumer Financial Protection Act (CFPA) generally authorizes States to enforce the CFPA’s provisions. The Consumer Financial Protection Bureau (CFPB) is issuing this interpretive rule to provide further clarity regarding the scope of State enforcement under Section 1042 and related provisions of the CFPA.
The Interpretative Rule became effective on May 26, 2022 and can be found here.
- The Consumer Financial Protection Act of 2010 (CFPA) establishes the Consumer Financial Protection Bureau as the as the Federal government’s primary regulator of consumer financial products/services. The Bureau is charged with administering, interpreting, and enforcing “Federal consumer financial laws, “ a category that includes the CFPA. The CFPA also recognized the important role that States play in overseeing the consumer financial marketplace and provided States with their own consumer protection enforcement authority.
- Generally, State attorneys general may bring a civil action to enforce provisions of the Act or implementing regulations and to secure remedies provided under this Act or under some other law. Likewise, a state regulator may bring a civil action or other appropriate proceeding to enforce the provisions of the Act or implementing regulations with respect to any entity that is state-chartered, incorporated, licensed, or otherwise authorized to do business under State law and to secure remedies under this Act or other provisions of law. However, state attorneys general and regulators are required to consult the Bureau before initiating an action or proceeding under Section 1042 of the CFPA.
- Section 1042 allows States to exercise their “fundamental rights to protect their citizens and prevent harmful conduct from occurring in their jurisdictions” and gives them tools “to pick up slack when the Federal government fails to enforce and regulate.” States have relied on Section 1042 to bring civil enforcement actions, on their own or in joint or coordinated filings with the Bureau, to enforce a provision of the CFPA that prohibits unfair, deceptive, and abusive acts and practices in connection with the offering or provision of consumer financial products/services. Additionally, state attorneys general and state regulators may bring (or continue to pursue) actions under Section 1042 even if the Bureau is pursuing a concurrent actions against the same entity.
- The enforcement authority of the States under Section 1042 is generally not subject to certain limits applicable to the Bureau’s enforcement authority. Specifically, Section 1027 and 1029 of the CFPA set limits on the Bureau’s enforcement authority. The Bureau noted that these limitations do not extend to the States. The rule notes one exclusion to the States’ authority, which is the limitation on sellers of nonfinancial goods that is specifically discussed in the Act.