This article was republished on insideARM on January 23, 2025 and in their newsletter on January 27, 2025.
As the Consumer Financial Protection Bureau (CFPB or Bureau) anticipates a shift in its leadership with the incoming administration of President Trump, the Bureau has released a report titled “Strengthening State-Level Consumer Protections.” This report appears to be a strategic move by the CFPB to influence state-level consumer protection laws before the anticipated shift in federal regulatory policy, and the Bureau’s recommendations appear to be items that would need to be the subject of legislation, if they are to occur. As detailed below, the changes advocated by the CFPB would strengthen the position of both state regulators and private plaintiffs in actions against industry participants.
The report provides a detailed historical context, highlighting the long-standing partnership between federal and state authorities in consumer protection. The report also highlights instances where the CFPB actively supported state-level consumer protection through joint investigations, information sharing, and removing obstacles to state enforcement. For instance, the CFPB points to its creation of a Nonbank Registry to help track repeat offenders and identify trends in the consumer financial marketplace, fostering deeper partnerships with state and local agencies.
Key Recommendations from the CFPB
The CFPB’s report outlines several recommendations for how states should update their laws and regulations to meet evolving risks, including:
- Ban on Abusive Practices: Incorporating a ban on “abusive” practices similar to the CFPA. The Bureau’s recommendation is aimed addressing practices that purportedly obscure product features or exploit power imbalances.
- Enhanced Investigatory Authority: Strengthening the investigatory powers of state Attorneys General, including the ability to issue subpoenas and civil investigative demands without prior court approval.
- Consumer Remedies: Ensuring consumers have access to comprehensive remedies, including equitable relief and punitive damages.
- Private Rights of Action: Removing evidentiary hurdles for private rights of action, such as the requirement for plaintiffs to prove individual monetary harm and reliance on deceptive statements.
- Protection for Businesses: Extending consumer protection laws to business-to-business transactions on the basis that unfair practices in these transactions can affect consumers.
- Prohibition of “Junk Fees”: Enacting bright-line prohibitions against “junk fees” to ensure transparent pricing.
- Consumer Data and Privacy Rights: Strengthening consumer data and privacy rights, including the right to delete data and limiting data collection to what is necessary.
The Compendium of Guidance Documents
Concurrently with its report, the CFPB issued a compendium of guidance documents. In recent years, the CFPB has published numerous guidance documents opining on the applicability of federal consumer financial laws in the evolving consumer financial marketplace. These documents contained in the compendium include Consumer Financial Protection Circulars, Bulletins, Advisory Opinions, and Interpretive Rules, providing the CFPB’s interpretation of federal consumer financial laws for those tasked with enforcing them, as well as the courts. These documents have generally all been published in the Federal Register.
Our Take
The CFPB’s report and compendium can be seen as a last-minute effort to preserve its legacy and influence state-level consumer protection laws before the anticipated shift under President Trump’s incoming administration. The recommendations outlined in the report aim to empower states to take a more aggressive stance on consumer protection, potentially leading to increased regulatory burdens on businesses, as well as continuing the trend of an ever-increasingly complex state legal and regulatory landscape. Following the trend that has become evident over the past few years, we believe there will be continued state legislation in the area of consumer financial protection, privacy, and AI regulation. However, we would be surprised to see the full suite of recommendations from this CFPB report adopted on a widespread basis.