Financial Regulatory Report

Authors: Divonne Smoyer

Consumer Financial Protection Bureau (“CFPB”) Director Mick Mulvaney spoke to the National Association of Attorneys General winter meeting in D.C. on February 28, addressing the agency’s priorities under his leadership. He emphasized the different role that the CFPB will be playing under the Trump Administration, focusing mostly on targeting clearly illegal acts rather than making new law or policy, and said that he will be relying more on the states to take the lead in enforcement. Several Democratic AGs visibly grimaced during his remarks, particularly when he described the differences between his priorities and those of his predecessor, former CFPB director Richard Cordray, who had served as the Democratic AG of Ohio prior to his CFBP tenure and who brought many staffers to the agency who had previously held career consumer protection positions at various state AG offices.

It is clear that the states will be taking on more power in this area, especially since Democratic states have been poised to fill the regulatory gap, including by setting up consumer financial protection sub-units in their states. Pennsylvania and Washington have already done so, with others likely to follow. The most active states in this area going forward are likely to be California, Washington, Oregon, Pennsylvania, Illinois, Iowa, Massachusetts, and North Carolina, but with over 30 AG races taking place in 2018, that number could increase substantially in light of those elections. Already, state enforcement of consumer financial protection issues has rapidly increased in the past two years, from approximately 20 relevant actions in 2016 to nearly three times that in 2017. Director Mulvaney has sent a clear message to the states that the CFPB is likely to defer to this increased state activity. AGs have consumer financial protection authority under their own state laws and the Dodd-Frank Act, and businesses should be aware of and monitoring this growing trend.

According to Director Mulvaney’s remarks, education, accountability, transparency, and collaboration will be the agency’s areas of focus, and the CFPB will seek input from AGs, consumer groups, and industry groups. The agency plans on listening to this input and consulting with stakeholders before making decisions. Of paramount importance, the CFPB will no longer do “regulation by enforcement”; they are not seeking to sue for doing what entities thought was legal. They will seek to let industry know what the rules are first, through education, before accusing people of breaking rules. The agency will spend more time on cost-benefit analyses, particularly doing more quantitative rather than qualitative analyses of prioritization. One way to prioritize will be looking at the number of consumer complaints: for example, a third of the complaints they received last year were about debt collection, while only two percent were about short-term payday lending.

The CFPB will be relying on AGs and other state regulators for local enforcement and leadership more than before. They will not be looking to bring local cases against the relevant AGs’ will. They may look at a local issue, and if that AG is not acting, the CFPB will initiate a discussion about why not, and if it is because the AG thinks it is not prudent, the agency may back off.

In response to a question from Oregon AG Ellen Rosenblum, Director Mulvaney said that his enforcement priorities will be going after illegal activities but not looking to make new laws. When specifically asked about student debt, he said they will only act in that area if there is illegal activity. In response to a question from Iowa AG Tom Miller, Director Mulvaney said that the CFPB intends to do both education and enforcement without replacing one with the other, but plans on doing them better than previously. Responding to a question from Tennessee AG Herbert Slatery, Director Mulvaney said the agency is likely precluded from changing the rules on arbitration clauses because of previous congressional decisions. Finally, in response to a question from Pennsylvania AG Josh Shapiro, Director Mulvaney said the agency is not planning to get in the way of state AG enforcement when it comes to prosecuting activities that are under their joint authority to regulate, but will likely only get involved themselves when there is a strong legal basis to do so.

As a bottom line, Director Mulvaney said that, since elections have consequences, the CFPB will be run differently under the Trump Administration. The agency’s mission will not change—the CFPB will continue to enforce the law—but it will stop short of making new law and will not regulate by enforcement. Instead, state AGs appear to be poised to fill the gaps, and the agency will not stand in their way.


Divonne Smoyer is a partner at the law firm Reed Smith LLP in Washington, DC, where she specializes in legal and policy matters involving state attorneys general and consumer protection, including in the areas of cyber security and data privacy. She has extensive experience counseling major corporations through government investigations and litigation, as well as private litigation and in connection with legal and regulatory issues.

Kimberly Chow is an associate at Reed Smith LLP in Washington, DC. She focuses on data privacy and security, advertising, and other consumer protection issues subject to the oversight of state attorneys general, the Federal Trade Commission, and other agencies.