State AGs seek to fill CFPB vacuum

In a series of announcements last week, one of the country's largest law enforcement agencies underscored its aim to fill a perceived vacuum created by the Trump administration.

Since 2017, state attorneys general have positioned themselves as a legal and policy counterweight to the federal government -- a stance that has resulted in legal actions in areas ranging from immigration to the environment.

Last week's announcements from California Attorney General Xavier Becerra, as well as other recent attorney general actions, reveal a roadmap that state attorneys general are using to leverage their opposition to various Trump administration policies and priorities into affirmative state enforcement.

On April 25, Becerra, along with 16 other Democratic attorneys general, sent a public letter to Mick Mulvaney, acting director of the Consumer Financial Protection Bureau, in support of the agency's use of its "civil investigative demand" authority. In voicing their opposition to "any effort to curtail" this authority, the attorneys general made the case that the CFPB's civil investigative demand power is a commonplace exercise of investigative authority and necessary for the agency to continue aggressive enforcement.

The multistate letter comes on the heels of a speech that Mulvaney delivered in February to the nation's attorneys general in Washington. Mulvaney, who was appointed following the resignation of Richard Cordray and currently serves in a dual capacity as the head of the Office of Management and Budget, has long been a critic of the bureau's authority.

During his speech at the National Association of Attorneys General's winter meeting, Mulvaney announced that the CFPB would no longer be "creating law where there isn't" any or otherwise "look for reasons to sue people." Instead, Mulvaney said the CFPB will look to states to take the lead in consumer protection enforcement. He said that the CFPB would instead spend more time on cost-benefit analysis and take a more "quantitative" perspective as to where it places priorities.

For example, Mulvaney said that a third of consumer complaints the bureau receives are for debt collection, but only 2 percent of the complaints relate to payday-type loans -- an area on which the CFPB has placed an enforcement focus.

Mulvaney's comments echo the strategic plan that he unveiled in February for the agency over the next four years. Emphasizing that the agency would fulfill its responsibilities and "go no further," Mulvaney's CFPB has set the stage for state attorneys general to pick up the enforcement slack.

On its face, the Becerra-led letter is an appeal for the CFPB to continue the forward-leaning enforcement approach that characterizes Cordray's tenure. But the letter is also a flag-in-the-ground statement that state attorneys general -- the Democratic ones, at least -- will take up the mantle of enforcement if the CFPB declines to do so. Several state attorneys general have already begun ramping up enforcement efforts, particularly against consumer financial services companies like debt collectors, credit card providers and retail sales financing companies.

In March, for instance, Washington state Attorney General Bob Ferguson filed a consumer protection lawsuit against an alleged "trust mill" that his office said has mislead hundreds of seniors about estate planning and high-commission insurance products. And just last month, outgoing Illinois Attorney General Lisa Madigan filed suit against a consumer loan company that allegedly exploited Illinois consumers by targeting their retirement benefits. Other states, such as New Jersey and Pennsylvania, have even created "little CFPBs" -- state-level units designed to bring the type of matters ordinarily brought by the CFPB.

Although the CFPB has been one of the more visible targets for their attention, state attorneys general have also focused critiques on other federal entities that share enforcement duties with the states, including the Environmental Protection Agency and the U.S. Justice Department. For instance, on May 1, California filed a lawsuit, joined by a coalition of 17 states and the District of Columbia, against the EPA over its plan to roll back emission standard targets.

Companies and industries subject to regulation and enforcement by government authorities should understand that federal regulators are not the only enforcers they must satisfy. Indeed, for state attorneys general, enforcement will continue to ramp up, a sentiment that District of Columbia Attorney General Karl Racine expressed in a recent opinion piece. This effort extends to attorneys general's enforcement of their own state laws, as well as federal law in many statutory circumstances. Moreover, some of the most assertive attorneys general represent states with significant populations -- and, in the case of states like California and New York, robust laws ranging from consumer protection to the environment.

As state attorneys general continue their efforts to serve as a rebuttal to the Trump administration, the most immediate question will be how they continue to manifest this opposition in their affirmative enforcement. Their recent actions, coupled with the pullback that traditional federal partners have now made, illustrate that state attorneys general appear poised to turn their opposition to the Trump administration into their own affirmative enforcement agenda.