Mulvaney Looks to AGs for Greater Role in Consumer Protection; Comments on 1071

Consumers and companies can expect to see states taking a greater role in enforcing consumer protection laws, Mick Mulvaney, Acting Director of the Consumer Financial Protection Bureau (CFPB), said yesterday in Washington, DC.

Speaking at the National Association of Attorneys General, Mulvaney said the CFPB would not be “looking to create law where there isn’t” through enforcement actions...“We are going to be looking to the state regulators and state attorneys general for a lot more leadership when it comes to enforcement,” Mulvaney said in a story reported by American Banker. “Why we (CFPB) think we know better or how to protect consumers in your state surprises me. I don’t think we’ll be doing much of that anymore.”

CFPB’s enforcement actions in recent years based on allegations against certain reputable companies in the consumer credit industry, including members of the American Financial Services Association (AFSA), served as the de facto legal blueprints for other companies to follow in the absence of clear-cut rules and regulations for the entire industry to be compliant.

At AFSA’s recent Law & Compliance Symposium, Arizona AG Mark Brnovich said his state’s consumer protection laws are among the most stringent in the country, adding that each incident against a company could result in a $10,000 fine. He also said Arizona is looking for ways to reduce regulations without stifling technology. He said the Arizona AG’s civil division has a department overseeing financial institutions.

Echoing the enforcement by states was recurring theme at the AFSA conference. J.B. Kelly, a member of the state attorneys practice at Cozen O’Connor and a former General Counsel in the North Carolina AG’s office, who said some state AG offices are staffed with former CFPB and FTC attorneys who were either on staff at the federal agencies or served as outside counsel. He said more state AG offices have bulked up their financial services sections, including Illinois, Iowa, Massachusetts, New York and Pennsylvania.

Mulvaney said the CFPB going forward would take a more quantitative approach to setting its priorities. He said most consumer complaints are for debt collection. “That should instruct us on where we should be spending our priorities,” he said.

In a Washington, DC conference today attended by AFSA, Mulvaney said the bureau is doing a thorough analysis of all enforcement actions. However, he cautioned that just because there is a new administration, it does not mean that enforcement actions will be dropped. Mulvaney emphasized, “We are going after the real bad actors who are breaking the law.” He added that the CFPB will not be making up new rules in enforcement actions. In other words, he reiterated that there will not be regulation by enforcement.

Additionally, Mulvaney commented on Section 1071 of the Dodd-Frank Act. Section 1071 amends the Equal Credit Opportunity Act to require financial institutions to compile, maintain, and report information concerning credit applications made by women-owned, minority-owned, and small businesses. Regulations implementing this section could substantially impact AFSA members. The acting director stated that because it is a statutory requirement, the CFPB continues to gauge this rule. He stressed that the rulemaking is hard to do because small business lending is different for different types of businesses, and there is no template to making the loans. Mulvaney said that the CFPB does not have a timeline on the rulemaking.