Rule2022-11356
Authority of States To Enforce the Consumer Financial Protection Act of 2010
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 26, 2022
Effective
May 26, 2022
Issuing agencies
Consumer Financial Protection Bureau
Abstract
Section 1042 of the Consumer Financial Protection Act of 2010 (CFPA) generally authorizes States to enforce the CFPA's provisions. The Consumer Financial Protection Bureau (Bureau) is issuing this interpretive rule to provide further clarity regarding the scope of State enforcement under section 1042 and related provisions of the CFPA. Specifically, the Bureau is issuing the following interpretations: Section 1042 allows States to enforce any provision of the CFPA, including section 1036(a)(1)(A), a provision that makes it unlawful for covered persons or service providers to violate the Federal consumer financial laws; the limitations on the Bureau's authority in sections 1027 and 1029 generally do not constrain States' enforcement authority under section 1042; and section 1042 does not restrict States from bringing concurrent enforcement actions with the Bureau.
Full Text
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<title>Federal Register, Volume 87 Issue 102 (Thursday, May 26, 2022)</title>
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[Federal Register Volume 87, Number 102 (Thursday, May 26, 2022)]
[Rules and Regulations]
[Pages 31940-31943]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-11356]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Chapter X
Authority of States To Enforce the Consumer Financial Protection
Act of 2010
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Interpretive rule.
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SUMMARY: Section 1042 of the Consumer Financial Protection Act of 2010
(CFPA) generally authorizes States to enforce the CFPA's provisions.
The Consumer Financial Protection Bureau (Bureau) is issuing this
interpretive rule to provide further clarity regarding the scope of
State enforcement under section 1042 and related provisions of the
CFPA. Specifically, the Bureau is issuing the following
interpretations: Section 1042 allows States to enforce any provision of
the CFPA, including section 1036(a)(1)(A), a provision that makes it
unlawful for covered persons or service providers to violate the
Federal consumer financial laws; the limitations on the Bureau's
authority in sections 1027 and 1029 generally do not constrain States'
enforcement authority under section 1042; and section 1042 does not
restrict States from bringing concurrent enforcement actions with the
Bureau.
DATES: This interpretive rule is effective on May 26, 2022.
FOR FURTHER INFORMATION CONTACT: Shiva Nagaraj, Senior Counsel, Legal
Division, (202) 435-7700. If you require this document in an
alternative electronic format, please contact
<a href="/cdn-cgi/l/email-protection#6724213725382604040214140e050e0b0e131e270401170549000811"><span class="__cf_email__" data-cfemail="b3f0f5e3f1ecf2d0d0d6c0c0dad1dadfdac7caf3d0d5c3d19dd4dcc5">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
The Consumer Financial Protection Act of 2010 (CFPA) establishes
the Consumer Financial Protection Bureau as the Federal government's
primary regulator of consumer financial products and services.\1\ The
Bureau is charged with administering, interpreting, and enforcing the
``Federal consumer financial laws,'' a category that includes the CFPA
itself, 18 enumerated consumer laws (such as the Fair Credit Reporting
Act and the Truth in Lending Act), and the laws for which authorities
were transferred to the Bureau under subtitles F and H of the CFPA, as
well as rules and orders issued by the Bureau under any of these
laws.\2\
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\1\ Title X of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010, Public Law 111-203, 124 Stat. 1376, 1955-
2113 (2010).
\2\ 12 U.S.C. 5481(14), (12).
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However, the Bureau is not the only enforcer of these laws. The
CFPA recognizes the important role that States play in overseeing the
consumer financial marketplace.\3\ As noted in a 2010 Senate report on
the financial crisis that precipitated the CFPA, ``[w]here [F]ederal
regulators refused to act, the [S]tates stepped into the breach.'' \4\
These efforts were stymied, however, because ``rather than supporting
[States'] anti-predatory lending laws, [F]ederal regulators
[[Page 31941]]
preempted them.'' \5\ Thus, Congress provided States with their own
Bureau enforcement authority.
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\3\ As defined in 12 U.S.C. 5481(27), ``[t]he term `State' means
any State, territory, or possession of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, Guam, American Samoa,
or the United States Virgin Islands or any federally recognized
Indian tribe, as defined by the Secretary of the Interior under
section 5131(a) of title 25.''
\4\ S. Rep. No. 111-176, at 16 (2010), <a href="https://www.congress.gov/congressional-report/111th-congress/senate-report/176/1">https://www.congress.gov/congressional-report/111th-congress/senate-report/176/1</a>.
\5\ Id.
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Generally, State attorneys general may ``bring a civil action in
the name of such State in any district court of the United States in
that State or in State court that is located in that State and that has
jurisdiction over the defendant, to enforce provisions of this title
[i.e., the CFPA] or regulations issued under this title, and to secure
remedies under provisions of this titleor remedies otherwise provided
under other law.'' \6\ Likewise, a ``state regulator may bring a civil
action or other appropriate proceeding to enforce the provisions of
this title or regulations issued under this title 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 provisions of this title or remedies otherwise provided under
other provisions of law with respect to such an entity.'' \7\ State
attorneys general and regulators are required to consult the Bureau
before initiating an action or proceeding under section 1042, in
accordance with section 1042(b) and 12 CFR part 1082.
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\6\ 12 U.S.C. 5552(a)(1). With respect to national banks or
Federal savings associations, State attorneys general may only
``bring a civil action in the name of such State'' in order ``to
enforce a regulation prescribed by the Bureau under a provision of
this titleand to secure remedies under provisions of this titleor
remedies otherwise provided under other law.'' 12 U.S.C. 5552(a)(2).
\7\ Id.
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Section 1042, as one court has explained, allows States to
vindicate their ``fundamental right to protect their citizens and
prevent harmful conduct from occurring in their jurisdictions'' and
gives them tools ``to pick up slack when the [F]ederal Government fails
to enforce and regulate.'' \8\
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\8\ Pennsylvania v. Navient Corp., 967 F.3d 273, 286 (3d Cir.
2020).
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Since the CFPA was enacted, many 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 or services.\9\ Some States have also joined the Bureau in
alleging violations of the CFPA's prohibition on covered persons and
service providers violating other enumerated Federal consumer financial
laws, but few have pursued such claims in their own CFPA actions. The
Bureau is issuing this interpretive rule regarding several important
aspects of section 1042.\10\
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\9\ 12 U.S.C. 5536(a)(1)(B); see also id. 5531.
\10\ This interpretive rule is not intended as an exhaustive
interpretation of section 1042.
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III. Analysis
A. States' Authority Under Section 1042 To Address Violations of
Federal Consumer Financial Laws
CFPA section 1042 authorizes State attorneys general and State
regulators to bring an enforcement action to pursue violations of
section 1036(a)(1)(A), which makes it unlawful for a covered person or
service provider to violate any Federal consumer financial law.\11\
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\11\ As noted above, however, section 1042 does not allow State
attorneys general to bring an enforcement action against national
banks or Federal savings associations, except for violations of ``a
regulation prescribed by the Bureau under a provision of this
title.'' 12 U.S.C. 5552(a)(2).
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As noted above, section 1042(a) generally authorizes States to
bring civil actions ``to enforce provisions of [the CFPA].'' One such
provision of the CFPA, section 1036(a)(1)(B), states that it is
unlawful for any ``covered person'' or ``service provider'' to ``engage
in any unfair, deceptive, or abusive act or practice.'' \12\ States can
thus rely on section 1042(a) to pursue an enforcement action against a
covered person or service provider that commits an unfair, deceptive,
or abusive act or practice, and many States have filed such enforcement
actions.
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\12\ 12 U.S.C. 5536(a)(1)(B).
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Additionally, another provision of the CFPA, section 1036(a)(1)(A),
declares it unlawful for any ``covered person'' or ``service provider''
to ``offer or provide to a consumer any financial product or service
not in conformity with Federal consumer financial law, or otherwise
commit any act or omission in violation of a Federal consumer financial
law.'' \13\ Because section 1036(a)(1)(A) is a ``provision of [the
CFPA],'' States may use their section 1042 authority to enforce section
1036(a)(1)(A) against covered persons or service providers. Thus, when
a covered person or service provider violates any of the Federal
consumer financial laws, section 1042 gives States authority to address
that violation by bringing a claim under section 1036(a)(1)(A) of the
CFPA.
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\13\ 12 U.S.C. 5536(a)(1)(A); see also id. 5481(6) (defining
``covered person''), 5481(26) (defining ``service provider'').
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As explained above, the ``Federal consumer financial laws'' are the
CFPA, the enumerated consumer laws, the laws for which authorities are
transferred under subtitles F and H of the CFPA, and any rule or order
prescribed by the Bureau under the CFPA, an enumerated consumer law, or
pursuant to the authorities transferred under subtitles F and H. The
enumerated consumer laws are the 18 laws referred to in section
1002(12) of the CFPA. Rules prescribed by the Bureau include, for
example, the rules implementing the Real Estate Settlement Procedures
Act (Regulation X),\14\ the Truth in Lending Act (Regulation Z),\15\
and the Fair Debt Collection Practices Act (Regulation F).\16\ Orders
prescribed by the Bureau include, for example, consent orders and other
final orders issued by the Bureau under sections 1053 and 1055 of the
CFPA.\17\
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\14\ 12 CFR part 1024.
\15\ 12 CFR part 1026.
\16\ 12 CFR part 1006.
\17\ These orders can generally be found at <a href="https://www.consumerfinance.gov/administrative-adjudication-proceedings/administrative-adjudication-docket/">https://www.consumerfinance.gov/administrative-adjudication-proceedings/administrative-adjudication-docket/</a>.
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States' authority to pursue violations of the CFPA is, of course,
supplemental to the authority States may already have to enforce the
Federal consumer financial laws. Several enumerated consumer laws
authorize States to bring actions to enforce the substantive provisions
of those laws. Section 1042(a)(3) of the CFPA clarifies that it does
not ``modify[ ], limit[ ], or supersed[e] the operation of any [such]
provision of an enumerated consumer law.'' \18\ As a result, States can
enforce those laws to the full extent authorized under those laws--
including against entities that are not covered persons or service
providers (and thus not subject to liability under section
1036(a)(1)(A)) and including against national banks and Federal savings
associations. For example, the Fair Credit Reporting Act allows States
to bring enforcement actions against any person violating that statute,
including users of consumer reports that are not themselves covered
persons or service providers.\19\ The Real Estate Settlement Procedures
Act authorizes States to enforce the anti-kickback rule against those
who profit from kickbacks but are not actually providing settlement
services, and thus may not be covered persons.\20\ And the Truth in
Lending Act authorizes States to enforce provisions of that statute
against national banks and Federal savings associations.\21\ Thus,
States may bring such claims even if they could not bring similar
claims against such a defendant under section 1036(a)(1)(A).
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\18\ 12 U.S.C. 5552(a)(3).
\19\ 15 U.S.C. 1681s(c)(1).
\20\ 12 U.S.C. 2607(d)(4).
\21\ 15 U.S.C. 1640(e).
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[[Page 31942]]
B. Limitations on States' Enforcement Authority Under Section 1042
The enforcement authority of States under section 1042 is generally
not subject to certain limits applicable to the Bureau's enforcement
authority.
Sections 1027 and 1029 of the CFPA set limits on the Bureau's
enforcement authority. Under section 1027, the Bureau is subject to
limits on its authority with respect to merchants, retailers, and other
sellers of nonfinancial goods; real estate brokerage activities;
retailers of manufactured or modular homes; accountants and tax
preparers; attorneys engaged in the practice of law; persons regulated
by a State insurance regulator; products or services that relate to
specified employee benefit and compensation plans; persons regulated by
a State securities commission; persons regulated by the Securities and
Exchange Commission; persons regulated by the Commodity Futures Trading
Commission; persons regulated by the Farm Credit Administration; and
activities related to charitable contributions.\22\ Similarly, under
section 1029, the Bureau is limited in exercising authority with
respect to a motor vehicle dealer that is predominantly engaged in the
sale and servicing of motor vehicles, the leasing and servicing of
motor vehicles, or both.\23\
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\22\ 12 U.S.C. 5517. Each of these exclusions is subject to
various exceptions as detailed in section 1027(a) through (l) and
(n).
\23\ 12 U.S.C. 5519. As with the section 1027 limitations, this
limitation is also subject to various exceptions as detailed in
section 1029.
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With one exception discussed below, each of these limitations
expressly applies to only the ``Bureau'' or the Bureau's ``Director.''
For example, under section 1027(e), ``the Bureau may not exercise any
supervisory or enforcement authority with respect to an activity
engaged in by an attorney as part of the practice of law under the laws
of a State in which the attorney is licensed to practice law,'' except
as specified.\24\ Likewise, under section 1029(a), ``the Bureau may not
exercise any rulemaking, supervisory, enforcement or any other
authority, including any authority to order assessments, over a motor
vehicle dealer that is predominantly engaged in the sale and servicing
of motor vehicles, the leasing and servicing of motor vehicles, or
both,'' except as specified.\25\
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\24\ 12 U.S.C. 5517(e).
\25\ 12 U.S.C. 5519(a).
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Because Congress applied these limitations in sections 1027 and
1029 only to the Bureau, they do not extend to States exercising their
enforcement authority under section 1042. Indeed, Congress used
different language in the one exclusion that it intended to apply to
States, the limitation on sellers of nonfinancial goods: ``To the
extent that the Bureau may not exercise authority under this subsection
with respect to a merchant, retailer, or seller of nonfinancial goods
or services, no action by a State attorney general or State regulator
with respect to a claim made under this titlemay be brought under
[section 1042], with respect to an activity described in any of clauses
(i) through (iii) of subparagraph (A) by such merchant, retailer, or
seller of nonfinancial goods or services.'' \26\ Because Congress did
not similarly extend the exclusions to States in other provisions of
1027 and 1029, and instead applied them only to the Bureau, those
exclusions do not extend to States.\27\
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\26\ 12 U.S.C. 5517(a)(2)(E).
\27\ See, e.g., Russello v. United States, 464 U.S. 16, 23
(1983) (``[W]here Congress includes particular language in one
section of a statute but omits it in another section of the same
Act, it is generally presumed that Congress acts intentionally and
purposely in the disparate inclusion or exclusion.'').
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C. States May Pursue Actions Under Section 1042 Even While the Bureau
Is Pursuing a Concurrent Action
State attorneys general and regulators may bring (or continue to
pursue) actions under section 1042 even if the Bureau is pursuing a
concurrent action against the same entity. As explained by the Third
Circuit, ``the clear statutory language of the Consumer [Financial]
Protection Act permits concurrent [S]tate claims, for nothing in the
statutory framework suggests otherwise.'' \28\
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\28\ Navient Corp., 967 F.3d at 287.
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When Congress intended to preclude concurrent CFPA actions, it
expressly did so. There are multiple places within the CFPA where
Congress made clear that concurrent actions should not occur or that
one agency should take primary enforcement role over other agencies.
For example, with respect to nondepository covered persons, if the
Bureau or the Federal Trade Commission (FTC) has filed an action
asserting certain violations of the CFPA, the other agency is
prohibited during the pendency of the action from instituting ``a civil
action under such provision of law against any defendant named in the
complaint in such pending action for any violation alleged in the
complaint.'' \29\ Likewise, Congress limited States' ability to enforce
rules relating to mortgage loan modification and foreclosure rescue
services during the pendency of enforcement activity by either the
Bureau or the FTC.\30\ Finally, Congress can--and did--designate the
Bureau as holding primary CFPA enforcement authority among Federal
regulators, limiting other agencies to the position of backup
enforcement or precluding their authority to enforce entirely. Congress
made that decision regarding supervised nondepository covered persons
and very large banks, savings associations, and credit unions in
sections 1024(c) and 1025(c), limiting the possibility of concurrent
enforcement activity by the Bureau and certain Federal agencies. In
short, when Congress seeks to limit concurrent statutory enforcement
activity, it knows how to do so.\31\ It did not exercise that option
with respect to section 1042.
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\29\ 12 U.S.C. 5514(c)(3).
\30\ 12 U.S.C. 5538(b)(6).
\31\ See, e.g., Russello, 464 U.S. at 23 (``[W]here Congress
includes particular language in one section of a statute but omits
it in another section of the same Act, it is generally presumed that
Congress acts intentionally and purposely in the disparate inclusion
or exclusion.'').
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V. Regulatory Matters
This is an interpretive rule issued under the Bureau's authority to
interpret the CFPA, including under section 1022(b)(1) of the CFPA,
which authorizes guidance as may be necessary or appropriate to enable
the Bureau to administer and carry out the purposes and objectives of
Federal consumer financial laws, such as the CFPA.\32\
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\32\ 12 U.S.C. 5512(b)(1).
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As an interpretive rule, this rule is exempt from the notice-and-
comment rulemaking requirements of the Administrative Procedure
Act.\33\ Because no notice of proposed rulemaking is required, the
Regulatory Flexibility Act does not require an initial or final
regulatory flexibility analysis.\34\ The Bureau has also determined
that this interpretive rule does not impose any new or revise any
existing recordkeeping, reporting, or disclosure requirements on
covered entities or members of the public that would be collections of
information requiring approval by the Office of Management and Budget
under the Paperwork Reduction Act.\35\
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\33\ 5 U.S.C. 553(b).
\34\ 5 U.S.C. 603(a), 604(a).
\35\ 44 U.S.C. 3501-3521.
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Pursuant to the Congressional Review Act,\36\ the Bureau will
submit a report containing this interpretive rule and other required
information to the United States Senate, the United States House
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of Representatives, and the Comptroller General of the United States
prior to the rule's published effective date. The Office of Information
and Regulatory Affairs has designated this interpretive rule as not a
``major rule'' as defined by 5 U.S.C. 804(2).
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\36\ 5 U.S.C. 801 et seq.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-11356 Filed 5-25-22; 8:45 am]
BILLING CODE 4810-AM-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.