On July 20, Pennsylvania Attorney General Josh Shapiro announced the creation of a Consumer Financial Protection Unit to protect Pennsylvanians from “financial scams.”
According to Shapiro’s announcement, the new unit will focus on lenders and mortgage and student loan servicers that “prey on seniors, families with students, and military service members.” This new consumer unit will focus on protecting financially vulnerable Pennsylvanians.
Shapiro has taken steps to protect the Commonwealth’s residents from financial scams prior to creating the Consumer Financial Protection Unit. In 2016, Pennsylvania’s Consumer Protection Bureau handled 19,727 consumer complaints, returning $8 million in restitution to consumers. Most recently, Shapiro joined other state attorneys general in filing suit against Education Secretary Betsy DeVos after she rolled back regulations holding for-profit colleges accountable for misleading advertising. Shapiro said in an interview with NPR’s NewsWorks Tonight host Dave Heller that the rolled back regulations “make it harder for students to recover once they have been scammed” by a for-profit school. Based on Shapiro’s announcement regarding creation of the unit, expect his office to focus on for-profit colleges engaged in misleading advertising.
Shapiro also announced that Nicholas Smyth, who worked on the United States Treasury team that created the federal Consumer Financial Protection Bureau, would be the Assistant Director of Pennsylvania’s Attorney General’s Bureau of Consumer Protection. Although Shapiro has recruited one of the creators of the CFPB, his decision to create a consumer protection unit is not new. In fact, Pennsylvania joins more than fifteen states, including Georgia and Virginia, that have created dedicated consumer protection divisions within the offices of their attorneys general.
Although certain advocates for the business community may question the continuing increase in individual state consumer financial protection agencies, state attorneys general have argued that these units benefit consumers. For example, before Virginia Attorney General Mark Herring launched a Consumer Predatory Unit, Virginia was known as the “East Coast capital of predatory lending.” According to Virginia’s State Corporation Commission, Virginia-based payday lenders made more than $170 million in loans to Virginia consumers at an average interest rate of 289%. Since its implementation, the Consumer Protection Unit has entered into multiple large enforcement actions and settlements, including a settlement agreement with CashCall for over $15 million in restitution and debt relief.
Other states, like Georgia, have entered similar settlement agreements with offending collection companies, resulting in restitution and debt forgiveness for the states’ residents.
The trend by state attorneys general to create consumer finance protection units has emerged amidst Congressional pressure to restructure the CFPB and limit its investigative and rulemaking ability. With increasing uncertainty about the future of the CFPB, we expect state attorneys general will strengthen, create, or augment their states’ laws to ensure consumers are protected from unscrupulous businesses.