Many predicted that newly-elected President Donald Trump would remove Richard Cordray, Director of the Consumer Financial Protection Bureau, upon taking office. Cordray remains the head of the CFPB, but uncertainty still looms at the agency. President Trump has characterized the Dodd-Frank Wall Street Reform and Consumer Protection Act, the legislation which created the CFPB, as “a disaster” and directed the Treasury Secretary to review the law. Further, the Department of Justice recently submitted a brief to the D.C. Circuit in CFPB v. PHH Corporation, asserting that the Bureau’s single-director structure is unconstitutional. Even if the CFPB survives PHH, it still faces attack from pending legislation that would replace the current structure of the Bureau with a five-member Board of Directors.
However, a reorganized CFPB does not mean that regulatory action in the consumer protection space will lessen. State attorneys general have begun taking a more active role in recent years, instituting regulatory investigations by issuing subpoenas and civil investigative demands (“CIDs”), and many AGs have indicated that if the CFPB’s consumer protection activities decrease, they will increase efforts to fill the gap.
One of the areas that state attorneys general have targeted in recent months is consumer lending. AG actions in this area include the following:
- Payday loans and payday lending. In November 2016, Virginia Attorney General Mark Herring submitted a letter to the CFPB providing comments regarding payday loans, vehicle title loans, installment loans, and open-end lines of credit. Herring suggested that additional rulemaking is necessary to address the specific risks and harms these products impose on consumers.
- Tribal lending. Minnesota Attorney General Lori Swanson announced a settlement with CashCall, Inc. in August 2016. The state sued CashCall in 2013, alleging that it engaged in a “rent-a-tribe” scheme in which it used a front company affiliated with a Native American tribe to originate unlawful loans.
- Redlining. In September 2015, New York Attorney General Eric Schneiderman settled claims with Evans Bank over discriminatory mortgage practices. Schneiderman alleged that Evans Bank denied mortgage access to borrowers in predominately African-American neighborhoods in the city of Buffalo because of the racial composition of the communities.
As these examples from just one industry demonstrate, regulatory investigations persist in the new political landscape, with activity increasing at the state level rather than the federal level.