Aiming to fill the void resulting from the Consumer Financial Protection Bureau’s retreat from regulation, states are stepping up and going after big financial companies.
According to a report in the Financial Times, more than a dozen attorneys general in states around the country in December expressed alarm about the appointment of Mick Mulvaney as the acting director of the CFPB, pointing out he once called the government watchdog a “joke…in a sick, sad kind of way.” Under his charge, the CFPB has halted all new actions and started to walk back some of the stricter rules and enforcement against the financial services industry.
As a result, states around the country have stepped in — including the AGs in New Jersey and Pennsylvania who have announced plans to enhance the resources focused on protecting consumers from financial scams and deceptions. Maryland’s General Assembly has created a new commission that’s focused in the same area. Other states are stepping up enforcement, with West Virginia joining Massachusetts to sue Equifax, the credit scoring agency that was hacked, revealing the information of 145 million consumers.
Those efforts have more than offset the decline in oversight by the federal government, Alan Kaplinsky, a partner at Ballard Spahr, a law firm which specializes in defending financial institutions in lawsuits, told the Financial Times. “We haven’t got involved in any new investigations by the CFPB but on the state side we’ve seen an enormous increase,” he said. The states that have been active include the usual suspects — New York, Illinois, California and Massachusetts. There’s also been a big increase from Connecticut and other states, noted the report.
Still, even with the stepped-up enforcement, there are concerns that the state AGs can’t go after the really big financial companies such as Wells Fargo or Bank of America. States tend to go after smaller, state-chartered banks or non-banks like payday lenders and mortgage brokers. They also have less of a budget than the CFPB and thus may not be as effective as the federal government in holding the big firms accountable. “There really is no substitute for the CFPB, as we saw in the run-up to the last recession,” said Lisa Stifler, deputy director of state policy for the Center for Responsible Lending. “We need states to look out for the best interests of state residents, but we also need the CFPB to vigorously enforce consumer protection laws.”