[Federal Register Volume 87, Number 102 (Thursday, May 26, 2022)]
[Rules and Regulations]
[Pages 31940-31943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-11356]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Chapter X


Authority of States To Enforce the Consumer Financial Protection 
Act of 2010

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Interpretive rule.

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SUMMARY: Section 1042 of the Consumer Financial Protection Act of 2010 
(CFPA) generally authorizes States to enforce the CFPA's provisions. 
The Consumer Financial Protection Bureau (Bureau) is issuing this 
interpretive rule to provide further clarity regarding the scope of 
State enforcement under section 1042 and related provisions of the 
CFPA. Specifically, the Bureau is issuing the following 
interpretations: Section 1042 allows States to enforce any provision of 
the CFPA, including section 1036(a)(1)(A), a provision that makes it 
unlawful for covered persons or service providers to violate the 
Federal consumer financial laws; the limitations on the Bureau's 
authority in sections 1027 and 1029 generally do not constrain States' 
enforcement authority under section 1042; and section 1042 does not 
restrict States from bringing concurrent enforcement actions with the 
Bureau.

DATES: This interpretive rule is effective on May 26, 2022.

FOR FURTHER INFORMATION CONTACT: Shiva Nagaraj, Senior Counsel, Legal 
Division, (202) 435-7700. If you require this document in an 
alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    The Consumer Financial Protection Act of 2010 (CFPA) establishes 
the Consumer Financial Protection Bureau as the Federal government's 
primary regulator of consumer financial products and services.\1\ The 
Bureau is charged with administering, interpreting, and enforcing the 
``Federal consumer financial laws,'' a category that includes the CFPA 
itself, 18 enumerated consumer laws (such as the Fair Credit Reporting 
Act and the Truth in Lending Act), and the laws for which authorities 
were transferred to the Bureau under subtitles F and H of the CFPA, as 
well as rules and orders issued by the Bureau under any of these 
laws.\2\
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    \1\ Title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act of 2010, Public Law 111-203, 124 Stat. 1376, 1955-
2113 (2010).
    \2\ 12 U.S.C. 5481(14), (12).
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    However, the Bureau is not the only enforcer of these laws. The 
CFPA recognizes the important role that States play in overseeing the 
consumer financial marketplace.\3\ As noted in a 2010 Senate report on 
the financial crisis that precipitated the CFPA, ``[w]here [F]ederal 
regulators refused to act, the [S]tates stepped into the breach.'' \4\ 
These efforts were stymied, however, because ``rather than supporting 
[States'] anti-predatory lending laws, [F]ederal regulators

[[Page 31941]]

preempted them.'' \5\ Thus, Congress provided States with their own 
Bureau enforcement authority.
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    \3\ As defined in 12 U.S.C. 5481(27), ``[t]he term `State' means 
any State, territory, or possession of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, the 
Commonwealth of the Northern Mariana Islands, Guam, American Samoa, 
or the United States Virgin Islands or any federally recognized 
Indian tribe, as defined by the Secretary of the Interior under 
section 5131(a) of title 25.''
    \4\ S. Rep. No. 111-176, at 16 (2010), https://www.congress.gov/congressional-report/111th-congress/senate-report/176/1.
    \5\ Id.
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    Generally, State attorneys general may ``bring a civil action in 
the name of such State in any district court of the United States in 
that State or in State court that is located in that State and that has 
jurisdiction over the defendant, to enforce provisions of this title 
[i.e., the CFPA] or regulations issued under this title, and to secure 
remedies under provisions of this titleor remedies otherwise provided 
under other law.'' \6\ Likewise, a ``state regulator may bring a civil 
action or other appropriate proceeding to enforce the provisions of 
this title or regulations issued under this title with respect to any 
entity that is State-chartered, incorporated, licensed, or otherwise 
authorized to do business under State law . . . and to secure remedies 
under provisions of this title or remedies otherwise provided under 
other provisions of law with respect to such an entity.'' \7\ State 
attorneys general and regulators are required to consult the Bureau 
before initiating an action or proceeding under section 1042, in 
accordance with section 1042(b) and 12 CFR part 1082.
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    \6\ 12 U.S.C. 5552(a)(1). With respect to national banks or 
Federal savings associations, State attorneys general may only 
``bring a civil action in the name of such State'' in order ``to 
enforce a regulation prescribed by the Bureau under a provision of 
this titleand to secure remedies under provisions of this titleor 
remedies otherwise provided under other law.'' 12 U.S.C. 5552(a)(2).
    \7\ Id.
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    Section 1042, as one court has explained, allows States to 
vindicate their ``fundamental right to protect their citizens and 
prevent harmful conduct from occurring in their jurisdictions'' and 
gives them tools ``to pick up slack when the [F]ederal Government fails 
to enforce and regulate.'' \8\
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    \8\ Pennsylvania v. Navient Corp., 967 F.3d 273, 286 (3d Cir. 
2020).
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    Since the CFPA was enacted, many States have relied on section 1042 
to bring civil enforcement actions, on their own or in joint or 
coordinated filings with the Bureau, to enforce a provision of the CFPA 
that prohibits unfair, deceptive, and abusive acts and practices in 
connection with the offering or provision of consumer financial 
products or services.\9\ Some States have also joined the Bureau in 
alleging violations of the CFPA's prohibition on covered persons and 
service providers violating other enumerated Federal consumer financial 
laws, but few have pursued such claims in their own CFPA actions. The 
Bureau is issuing this interpretive rule regarding several important 
aspects of section 1042.\10\
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    \9\ 12 U.S.C. 5536(a)(1)(B); see also id. 5531.
    \10\ This interpretive rule is not intended as an exhaustive 
interpretation of section 1042.
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III. Analysis

A. States' Authority Under Section 1042 To Address Violations of 
Federal Consumer Financial Laws

    CFPA section 1042 authorizes State attorneys general and State 
regulators to bring an enforcement action to pursue violations of 
section 1036(a)(1)(A), which makes it unlawful for a covered person or 
service provider to violate any Federal consumer financial law.\11\
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    \11\ As noted above, however, section 1042 does not allow State 
attorneys general to bring an enforcement action against national 
banks or Federal savings associations, except for violations of ``a 
regulation prescribed by the Bureau under a provision of this 
title.'' 12 U.S.C. 5552(a)(2).
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    As noted above, section 1042(a) generally authorizes States to 
bring civil actions ``to enforce provisions of [the CFPA].'' One such 
provision of the CFPA, section 1036(a)(1)(B), states that it is 
unlawful for any ``covered person'' or ``service provider'' to ``engage 
in any unfair, deceptive, or abusive act or practice.'' \12\ States can 
thus rely on section 1042(a) to pursue an enforcement action against a 
covered person or service provider that commits an unfair, deceptive, 
or abusive act or practice, and many States have filed such enforcement 
actions.
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    \12\ 12 U.S.C. 5536(a)(1)(B).
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    Additionally, another provision of the CFPA, section 1036(a)(1)(A), 
declares it unlawful for any ``covered person'' or ``service provider'' 
to ``offer or provide to a consumer any financial product or service 
not in conformity with Federal consumer financial law, or otherwise 
commit any act or omission in violation of a Federal consumer financial 
law.'' \13\ Because section 1036(a)(1)(A) is a ``provision of [the 
CFPA],'' States may use their section 1042 authority to enforce section 
1036(a)(1)(A) against covered persons or service providers. Thus, when 
a covered person or service provider violates any of the Federal 
consumer financial laws, section 1042 gives States authority to address 
that violation by bringing a claim under section 1036(a)(1)(A) of the 
CFPA.
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    \13\ 12 U.S.C. 5536(a)(1)(A); see also id. 5481(6) (defining 
``covered person''), 5481(26) (defining ``service provider'').
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    As explained above, the ``Federal consumer financial laws'' are the 
CFPA, the enumerated consumer laws, the laws for which authorities are 
transferred under subtitles F and H of the CFPA, and any rule or order 
prescribed by the Bureau under the CFPA, an enumerated consumer law, or 
pursuant to the authorities transferred under subtitles F and H. The 
enumerated consumer laws are the 18 laws referred to in section 
1002(12) of the CFPA. Rules prescribed by the Bureau include, for 
example, the rules implementing the Real Estate Settlement Procedures 
Act (Regulation X),\14\ the Truth in Lending Act (Regulation Z),\15\ 
and the Fair Debt Collection Practices Act (Regulation F).\16\ Orders 
prescribed by the Bureau include, for example, consent orders and other 
final orders issued by the Bureau under sections 1053 and 1055 of the 
CFPA.\17\
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    \14\ 12 CFR part 1024.
    \15\ 12 CFR part 1026.
    \16\ 12 CFR part 1006.
    \17\ These orders can generally be found at https://www.consumerfinance.gov/administrative-adjudication-proceedings/administrative-adjudication-docket/.
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    States' authority to pursue violations of the CFPA is, of course, 
supplemental to the authority States may already have to enforce the 
Federal consumer financial laws. Several enumerated consumer laws 
authorize States to bring actions to enforce the substantive provisions 
of those laws. Section 1042(a)(3) of the CFPA clarifies that it does 
not ``modify[ ], limit[ ], or supersed[e] the operation of any [such] 
provision of an enumerated consumer law.'' \18\ As a result, States can 
enforce those laws to the full extent authorized under those laws--
including against entities that are not covered persons or service 
providers (and thus not subject to liability under section 
1036(a)(1)(A)) and including against national banks and Federal savings 
associations. For example, the Fair Credit Reporting Act allows States 
to bring enforcement actions against any person violating that statute, 
including users of consumer reports that are not themselves covered 
persons or service providers.\19\ The Real Estate Settlement Procedures 
Act authorizes States to enforce the anti-kickback rule against those 
who profit from kickbacks but are not actually providing settlement 
services, and thus may not be covered persons.\20\ And the Truth in 
Lending Act authorizes States to enforce provisions of that statute 
against national banks and Federal savings associations.\21\ Thus, 
States may bring such claims even if they could not bring similar 
claims against such a defendant under section 1036(a)(1)(A).
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    \18\ 12 U.S.C. 5552(a)(3).
    \19\ 15 U.S.C. 1681s(c)(1).
    \20\ 12 U.S.C. 2607(d)(4).
    \21\ 15 U.S.C. 1640(e).

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[[Page 31942]]

B. Limitations on States' Enforcement Authority Under Section 1042

    The enforcement authority of States under section 1042 is generally 
not subject to certain limits applicable to the Bureau's enforcement 
authority.
    Sections 1027 and 1029 of the CFPA set limits on the Bureau's 
enforcement authority. Under section 1027, the Bureau is subject to 
limits on its authority with respect to merchants, retailers, and other 
sellers of nonfinancial goods; real estate brokerage activities; 
retailers of manufactured or modular homes; accountants and tax 
preparers; attorneys engaged in the practice of law; persons regulated 
by a State insurance regulator; products or services that relate to 
specified employee benefit and compensation plans; persons regulated by 
a State securities commission; persons regulated by the Securities and 
Exchange Commission; persons regulated by the Commodity Futures Trading 
Commission; persons regulated by the Farm Credit Administration; and 
activities related to charitable contributions.\22\ Similarly, under 
section 1029, the Bureau is limited in exercising authority with 
respect to a motor vehicle dealer that is predominantly engaged in the 
sale and servicing of motor vehicles, the leasing and servicing of 
motor vehicles, or both.\23\
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    \22\ 12 U.S.C. 5517. Each of these exclusions is subject to 
various exceptions as detailed in section 1027(a) through (l) and 
(n).
    \23\ 12 U.S.C. 5519. As with the section 1027 limitations, this 
limitation is also subject to various exceptions as detailed in 
section 1029.
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    With one exception discussed below, each of these limitations 
expressly applies to only the ``Bureau'' or the Bureau's ``Director.'' 
For example, under section 1027(e), ``the Bureau may not exercise any 
supervisory or enforcement authority with respect to an activity 
engaged in by an attorney as part of the practice of law under the laws 
of a State in which the attorney is licensed to practice law,'' except 
as specified.\24\ Likewise, under section 1029(a), ``the Bureau may not 
exercise any rulemaking, supervisory, enforcement or any other 
authority, including any authority to order assessments, over a motor 
vehicle dealer that is predominantly engaged in the sale and servicing 
of motor vehicles, the leasing and servicing of motor vehicles, or 
both,'' except as specified.\25\
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    \24\ 12 U.S.C. 5517(e).
    \25\ 12 U.S.C. 5519(a).
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    Because Congress applied these limitations in sections 1027 and 
1029 only to the Bureau, they do not extend to States exercising their 
enforcement authority under section 1042. Indeed, Congress used 
different language in the one exclusion that it intended to apply to 
States, the limitation on sellers of nonfinancial goods: ``To the 
extent that the Bureau may not exercise authority under this subsection 
with respect to a merchant, retailer, or seller of nonfinancial goods 
or services, no action by a State attorney general or State regulator 
with respect to a claim made under this titlemay be brought under 
[section 1042], with respect to an activity described in any of clauses 
(i) through (iii) of subparagraph (A) by such merchant, retailer, or 
seller of nonfinancial goods or services.'' \26\ Because Congress did 
not similarly extend the exclusions to States in other provisions of 
1027 and 1029, and instead applied them only to the Bureau, those 
exclusions do not extend to States.\27\
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    \26\ 12 U.S.C. 5517(a)(2)(E).
    \27\ See, e.g., Russello v. United States, 464 U.S. 16, 23 
(1983) (``[W]here Congress includes particular language in one 
section of a statute but omits it in another section of the same 
Act, it is generally presumed that Congress acts intentionally and 
purposely in the disparate inclusion or exclusion.'').
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C. States May Pursue Actions Under Section 1042 Even While the Bureau 
Is Pursuing a Concurrent Action

    State attorneys general and regulators may bring (or continue to 
pursue) actions under section 1042 even if the Bureau is pursuing a 
concurrent action against the same entity. As explained by the Third 
Circuit, ``the clear statutory language of the Consumer [Financial] 
Protection Act permits concurrent [S]tate claims, for nothing in the 
statutory framework suggests otherwise.'' \28\
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    \28\ Navient Corp., 967 F.3d at 287.
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    When Congress intended to preclude concurrent CFPA actions, it 
expressly did so. There are multiple places within the CFPA where 
Congress made clear that concurrent actions should not occur or that 
one agency should take primary enforcement role over other agencies. 
For example, with respect to nondepository covered persons, if the 
Bureau or the Federal Trade Commission (FTC) has filed an action 
asserting certain violations of the CFPA, the other agency is 
prohibited during the pendency of the action from instituting ``a civil 
action under such provision of law against any defendant named in the 
complaint in such pending action for any violation alleged in the 
complaint.'' \29\ Likewise, Congress limited States' ability to enforce 
rules relating to mortgage loan modification and foreclosure rescue 
services during the pendency of enforcement activity by either the 
Bureau or the FTC.\30\ Finally, Congress can--and did--designate the 
Bureau as holding primary CFPA enforcement authority among Federal 
regulators, limiting other agencies to the position of backup 
enforcement or precluding their authority to enforce entirely. Congress 
made that decision regarding supervised nondepository covered persons 
and very large banks, savings associations, and credit unions in 
sections 1024(c) and 1025(c), limiting the possibility of concurrent 
enforcement activity by the Bureau and certain Federal agencies. In 
short, when Congress seeks to limit concurrent statutory enforcement 
activity, it knows how to do so.\31\ It did not exercise that option 
with respect to section 1042.
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    \29\ 12 U.S.C. 5514(c)(3).
    \30\ 12 U.S.C. 5538(b)(6).
    \31\ See, e.g., Russello, 464 U.S. at 23 (``[W]here Congress 
includes particular language in one section of a statute but omits 
it in another section of the same Act, it is generally presumed that 
Congress acts intentionally and purposely in the disparate inclusion 
or exclusion.'').
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V. Regulatory Matters

    This is an interpretive rule issued under the Bureau's authority to 
interpret the CFPA, including under section 1022(b)(1) of the CFPA, 
which authorizes guidance as may be necessary or appropriate to enable 
the Bureau to administer and carry out the purposes and objectives of 
Federal consumer financial laws, such as the CFPA.\32\
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    \32\ 12 U.S.C. 5512(b)(1).
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    As an interpretive rule, this rule is exempt from the notice-and-
comment rulemaking requirements of the Administrative Procedure 
Act.\33\ Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis.\34\ The Bureau has also determined 
that this interpretive rule does not impose any new or revise any 
existing recordkeeping, reporting, or disclosure requirements on 
covered entities or members of the public that would be collections of 
information requiring approval by the Office of Management and Budget 
under the Paperwork Reduction Act.\35\
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    \33\ 5 U.S.C. 553(b).
    \34\ 5 U.S.C. 603(a), 604(a).
    \35\ 44 U.S.C. 3501-3521.
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    Pursuant to the Congressional Review Act,\36\ the Bureau will 
submit a report containing this interpretive rule and other required 
information to the United States Senate, the United States House

[[Page 31943]]

of Representatives, and the Comptroller General of the United States 
prior to the rule's published effective date. The Office of Information 
and Regulatory Affairs has designated this interpretive rule as not a 
``major rule'' as defined by 5 U.S.C. 804(2).
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    \36\ 5 U.S.C. 801 et seq.

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-11356 Filed 5-25-22; 8:45 am]
BILLING CODE 4810-AM-P