The Blue State AG Blues: Are You Catching Them Too?
The Consumer Financial Protection Bureau is in the news again this week, following a vote by the House of Representatives to eliminate the CFPB’s 2013 guidance on dealer markups. Consumer lending analysts call the repeal an “unprecedented” move by Republicans in Congress, and a victory that “carries large symbolic weight” in the automotive lending world.
So, why aren’t the CFPB’s opponents celebrating?
It’s because they’ve got the blues—the blue state attorney general blues.
As federal lawmakers systematically eviscerate the CFPB from both outside and within the Bureau, attorneys general in numerous states are seizing the reins of consumer protection and, in some cases, taking regulatory action even further. AG offices in in Democratic-controlled states such as New York, California, Massachusetts, and Maryland are beginning to resemble miniature CFPBs, aggressively passing new consumer protection laws and going after lenders for alleged fair lending violations.
In an American Banker article published on Monday, California-based consumer finance reporter Kevin Wack examines how lenders are reacting to a recent pattern of state-led investigations. Wack writes:
“[L]enders would be well advised to keep up their guard, since states—particularly blue ones—are taking steps of their own to crack down on what they see as abusive lending practices.
On Thursday, Credit Acceptance Corp., a subprime auto lender based in Southfield, Mich., disclosed in its quarterly earnings report that New York officials are looking into whether it discriminated against certain borrowers. Also under review is the question of whether the firm provided inaccurate information in the course of a supervisory examination.
The investigation of Credit Acceptance by the New York State Department of Financial Services comes on the heels of demands for information from the company by authorities in Massachusetts, Maryland and Mississippi.”
The article goes on to explore how cases such as Credit Acceptance’s indicate Democratic pushback to Republican deregulatory efforts at the federal level, leading attorneys who represent financial institutions to issue “general warnings in recent months about the threat of closer scrutiny by state officials.”
Take a look at what some of these lawyers are saying:
“‘It may not be the case that every state is going to make consumer financial law enforcement a top priority. But at least the majority of the states with Democrats as attorneys general have shown a willingness to push on this issue,’” Stephanie Robinson, an attorney at Mayer Brown, said during a conference call last month.
“The lobbying push to repeal the Obama-era auto lending guidance was led by the National Automobile Dealers Association. Last week the trade group warned its members that they still face the risk of litigation over alleged fair-lending violations.
‘That’s why it’s so important to have an internal culture of compliance,’ David Regan, executive vice president of public affairs at the National Automobile Dealers Association, said during a call with reporters.”
Read “Auto lending scrutiny: Will states pick up where CFPB left off?.”
These perspectives echo much of what we’ve heard from our customers over the past few months: the same compliance approach adopted to meet the demands of the old CFPB is the right approach to take in response to state AGs, too. Learn how lenders across the US use Compligo to develop cultures of compliance and stay on the right side of the law—no matter who’s enforcing it.