WASHINGTON (Legal Newsline) – Some states will be even more active in financial consumer protection enforcement now that the Consumer Financial Protection Bureau's new director has made it clear the bureau will stay out of the way, an expert on state attorneys general said during a recent interview.
The states most expected to be active - California, Washington, Oregon, Pennsylvania, Illinois, Iowa, Massachusetts and North Carolina - have Democrat attorneys general, Divonne Smoyer, a partner in Reed Smith's Washington, D.C. office, said during a Legal Newsline telephone interview.
With some caveats, Smoyer said she would add New York to her list of states she expects to become especially active in financial consumer protection enforcement going forward.
"I don't know the extent to which New York would actually be involved with enforcing Dodd–Frank [Wall Street Reform and Consumer Protection Act], because the state has so many of its own laws, so I can't really speak to that," Smoyer said.
"But in terms of enforcing financial and consumer protection-type claims, those are the states that have historically been the most active, either doing things on their own or with CFPB. They have a solid set staff, they work well together. Pennsylvania in particular, but also Washington state, have sub-units."
The importance of those states and their CFPB-type units became very clear in CFPB Acting Director Mick Mulvaney comments during National Association of Attorneys General (NAAG) winter meeting in Washington on Feb. 28, when Mulvaney addressed the agency's expected priorities under his leadership.
Mulvaney is widely reported to have emphasized during his NAAG winter meeting address that the CFPB will operate differently under the Trump administration than during the Obama administration, when it was created. Mulvaney specifically said the CFPB will rely more on the states to take on financial consumer protection enforcement.
Mulvaney's comments came a few weeks before release of the CFPB’s five-year strategic plan, which in part announced a greater movement toward fostering "operational excellence through efficient and effective processes, governances and security of resources and information."
During his February remarks, Mulvaney specifically mentioned Pennsylvania Attorney General Josh Shapiro's recent creation of a CFPB-type sub-unit in the state headed by former CFPB enforcement attorney Nick Smyth. Shapiro was present during Mulvaney's remarks at the NAAG winter meeting.
Mulvaney's comments about the Pennsylvania unit under Smyth were significant, Smoyer said.
"He (Smyth) is going to be one of the leaders of the charge in terms of financial consumer protection matters," she said.
"At that meeting, Josh Shapiro specifically asked Mulvaney, 'Gee, are you going to try to get involved and in some way have input in what the states do in terms of dismissing a case or dissuading us from bringing cases?' and so on and so forth. And Mulvaney said that 'Things go on a case-by-case basis, but I'm not looking to get in the way of enforcement activities by the states.'"
Smoyer said she can't speak for the attorneys general, but that Mulvaney's response to Shapiro's question must have been a relief to state attorneys general.
"Because I know they're watching what is happening in a lot of federal regulatory agencies, in the CFPB in particular," she said.
"They're concerned about what those agencies may be doing and will there be an attempt to clip the wings of the state attorneys general. So I think that's why Pennsylvania state attorney general posed that question."
That relief also provides extends to concerns state attorneys general have already been voicing to the Trump administration, Smoyer said.
"Those states have been involved in sending letters to the Trump administration expressing concern about Mulvaney," she said.
"There was a letter in December led by New York, signed on by California, D.C., Connecticut, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, New Mexico, Minnesota, North Carolina, Oregon, Virginia, Vermont and Washington state. Some of those states, just because they sign onto a letter doesn't mean that a state like Maine is going to go out and all of a sudden start doing a lot of enforcement action because it has a smaller office and things like that."
However, more unfettered enforcement can be expected from other signatories on that letter, Smoyer said.
"They have a good team and a track record of doing these kinds of things, as well as an expressed interest in continuing to do what they've done and to not have the CFPB get in their way," she said.