Federal And State Consumer

Enforcement Actions

New Federal and State Authority

• The Bureau of Consumer Financial Protection

• State Attorneys General

“The Bureau”

Unusual Structure

• Independent executive agency

• No decision-making board – power vested in single Director

• Not dependent on annual Congressional appropriations – funded by annual transfers from Federal Reserve System

• Consumer Advisory Board

• Oversight Council – may stay or set aside rule by 2/3 vote

“The Bureau”

Broad Rule-Making Authority

Exclusive rulemaking authority over Federal consumer financial protection

Existing authority transferred, including:

• Federal Reserve • OCC • OTS • FDIC • NCUA • “Designated Laws”

“The Bureau”Designated Laws include:

• Alternative Mortgage Transactions Parity Act of 1982• Consumer Leasing Act of 1976• ECOA• Electronic Fund Transfer Act (“EFTA”)• Fair Credit Billing Act• Fair Credit Reporting Act (“FCRA”) (subject to certain exclusions)• Fair Debt Collection Practices Act• Gramm-Leach-Bliley Act (certain privacy provisions)• Home Ownership and Equity Protection Act of 1994• Home Owners Protection Act • Real Estate Settlement Procedures Act (“RESPA”)• S.A.F.E. Mortgage Licensing Act of 2008• Truth in Lending Act (now expanded)

“The Bureau”Broad Rule-Making Authority

Exclusive rulemaking authority over Federal consumer financial protection

Existing authority transferred, including:

• Federal Reserve • OCC• OTS • FDIC • NCUA • “Designated Laws”

Plus new authority granted, including:

• Prohibiting unfair, deceptive or abusive practices• Mandating particular disclosures• Prohibiting or restrict pre-dispute arbitration practices

“The Bureau”

Limited Transfer of Authority from Federal Trade Commission

Assumes authority of FTC to issue guidelines, conduct a study, or issue a report mandated under Designated Laws

Does not affect authority of the FTC under the Federal Trade Commission Act or any law that is not a Designated Law

Truth in Lending ActNew Truth in Lending Requirements

(Mortgage Reform and Anti-Predatory Lending Act)

129B – Prohibition on Steering Incentives

129C – Minimum Standards for Residential Mortgage Loans

129D – Escrow Accounts

129E and H – Appraisal Requirements

129F – Proper Crediting of Home Loan Payments

129G – Requests for Payoff Amounts

“The Bureau”

Not just a rule-maker, but also an enforcer.

Power to issue subpoenas for documents and for oral testimony.

Power to issue cease and desist orders.

Power to commence litigation in federal court.

State Attorneys General

Federal Preemption Disfavored

As general rule, State laws are not preempted except to the extent inconsistent with the new federal law and only to the extent of the inconsistency.

A state law providing greater protection to consumers is not treated as inconsistent.

State consumer financial laws are preempted as applicable to national banks only if the law (a) is discriminatory or (b) prevents/interferes with exercise of national banks powers or (c) subject to preemption by federal law outside Title X of Dodd-Frank.

State Attorneys GeneralState Attorneys General May Enforce Federal Law

Laws Enforceable by State in Civil Action

Title X of Dodd-Frank (Bureau of Consumer Financial Protection) Regulations issued by the Bureau Expanded Truth in Lending Act FTC rules re mortgage loan appraisal

State may sue, as parens patriae for state residents, in appropriate state or federal court.

Remedies that may be sought by State InjunctionDamagesRestitutionOther equitable reliefStatutory penaltiesCosts and Attorneys Fees

Advance notice to federal government required, where feasible.

State Attorneys General

How will Attorneys General use their power?

• Two competing “camps”• Possible issue of state law authorization • Investigations, including administrative

subpoenas• Litigation - including use of outside counsel• Multi-state actions • NAAG • Settlements