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Last year, the Consumer Financial Protection Bureau (CFPB) withdrew an interpretive rule which, historically, has been largely construed to grant states enforcement authority over CFPB rules. Put more broadly, this means that, prior to the withdrawal, states had the right to enforce consumer protection laws that were under the purview of the CFPB.
The interpretive was a bit controversial throughout the financial services industry. Some commentators have suggested that the ability of states to enforce CFPB rules leads to more regulatory ambiguity. Further, the interpretative rule was a result of the Biden Administration policies, resulting in a more “robust” CFPB presence that was furthered by the interpretive rule.
Other commentators have suggested that the less “robust” approach, will leave a bit of a gap that state authorities are not in the best position to fill. More specifically, these commentators suggested that state authorities have limitations when it comes to issues of preemption (legal theory used to determine which jurisdiction’s laws apply), and extensions of state consumer protection laws.
So, upon withdrawal, the financial services industry breathed a bit of a sigh of relief. Perhaps, however, the sigh was a bit premature. As the CFPB has become smaller, particularly with regard to its enforcement efforts, state authorities have begun to fill the gap the CFPB created. From a regulatory perspective, this could be a difficult landscape, specifically for state-chartered credit unions. As state authorities begin to fill the gap by passing their own versions of consumer protection laws, state-chartered credit unions are left navigating the new landscape.
Additionally, as state entities begin to determine the appropriate way to address issues that may have been previously addressed by the CFPB, state attorneys general are beginning to “shape the regulatory enforcement landscape,” taking on issues like artificial intelligence, elder abuse, and fraud. Specifically state attorneys general from California, New York, Pennsylvania, Illinois, Massachusetts, Colorado, Texas, and Connecticut are seen to more frequently lead these types of efforts.
So, what should state-chartered credit unions do with the changing regulatory landscape? The best thing that a credit union can do is make sure that it has the appropriate resources in place to stay informed of the changes. These resources can look like newsletters, third-party sources, or other ways to ensure that regulatory changes are not flying under the radar.
Additionally, if a significant change has occurred, work with the compliance department or compliance provider to help implement those changes. When laws that affect day-to-day compliance are enacted, every credit union’s compliance professionals or third-party professional service should be involved.
Have questions or want to know more? Contact ViClarity’s compliance services team at compliancesupport@viclarityus.com.
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For more information, email Heather Line.
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