WASHINGTON (Legal Newsline) - Republicans on an influential House committee have called on the director of the Consumer Financial Protection Bureau to explain a recent interpretation of federal law they say encourages state attorneys general to pile on federal enforcement actions and intimidate companies into settling.
Patrick McHenry of North Carolina, Blaine Luetkemeyer of Missouri and Minnesota’s Tom Emmer, minority leaders on the House Committee on Financial Services, accused CFPB Director Rohit Chopra of “colluding” with mostly Democratic AGs to use the broad provisions of the Consumer Financial Protection Act to pursue companies with “redundant and duplicative state actions.”
They accused Chopra of “deputizing state attorneys general to enforce the CFPA on behalf of the CFPB – something Congress did not authorize,” they said in a July 28 letter. The agency’s new reading of the law would allow it to “forum shop across the country to find friendly attorneys general willing to bring cases on behalf of the bureau” instead of referring cases to the CFPB when appropriate, they said.
The CFPB was created in the wake of the mortgage crisis in 2010 to enforce a wide range of consumer protection laws, including loosely worded prohibitions on “abusive” conduct in financial transactions. The agency released an interpretive ruling in May telling state AGs they not only can enforce specific provisions of the federal law but have authority that exceeds the CFPB itself, including going after car dealers and other nonfinancial businesses. The CFPB said its interpretation “bolsters enforcement efforts by the states” to “pursue lawbreakers.” Some of the federal laws include penalties up to $1 million a day.
Because it was an interpretation designed to provide “further clarity” about the law and not a new rule, the CFPB said it could issue the instructions without complying with the formal notice-and-comment process. In their letter to Director Chopra, the Republicans said they are concerned the interpretation suggests AGs can join existing CFPB actions or file duplicative enforcement actions. Already, they said, the CFPB has partnered with the New York AG to sue MoneyGram Payment Systems in an action that includes “information sharing with MoneyGram’s state authorities to facilitate parallel actions.”
The representatives demanded information on Chopra’s communications with state AGs, an explanation of any safeguards against duplicative enforcement actions, and information about complaints by businesses against the CFPB.
The CFPB’s interpretive ruling drew the attention of financial industry lawyers when it came out. In a blog post after the release, Greenburg Traurig warned that under the agency’s new interpretation, state AGs could sue to enforce federal consent agreements even if they weren’t parties to the original action and enforce provisions of federal law against nonfinancial businesses even though the CFPB was prohibited from doing so.