The director of the Consumer Financial Protection Bureau, Rohit Chopra, urged attorneys general to partner with the office on enforcement actions or to produce their own under federal law.
Speaking to the National Association of Attorneys General on Monday, Chopra said he was considering changes that would allow states to access the CFPB's multi-million dollar civil penalty fund to provide more relief for consumers with government interventions.
Attorneys-General are often the first line of defense in protecting consumers and should apply the federal prohibition on "unfair, misleading, or abusive acts or practices" known as UDAAP when filing enforcement actions against malicious actors, he said.
"Rather than discouraging or hindering or anticipating state enforcement or stricter state laws, the CFPB will take steps to encourage you to enforce our laws," said Chopra. "We encourage each of you to take legal action under our law, the Consumer Financial Protection Act, especially when federal protection is stronger than your own state laws."
Rohit Chopra, director of the Consumer Financial Protection Bureau, not only encourages states to bring cases under federal law, but is also considering changes that would allow states to access the CFPB's multi-million dollar civil penalty fund to provide more help to victims.
The only requirement for states to pursue action under federal law is that they notify the CFPB before filing a complaint. Chopra said he directed CFPB staff to seek ways for states to get more of the legal remedies available under the law.
"We want to make it clear that government agencies and regulators can enforce a number of federal bans," he said. "One way to improve your enforcement tools is to clarify the multitude of claims that states can make under the CFPB Statute."
The agency's civil penalty fund currently has a balance of $ 476 million, according to the CFPB's mid-November financial report. While victim compensation from the fund is currently only available for enforcement actions by the CFPB, Chopra said his goal is to find ways to strengthen states' ability to exonerate their own residents from the fund. This could happen if the CFPB is notified in advance and then engages in some government action.
"To allow for this expanded access, I am considering changing our rules so that states don't need the CFPB to formally join the lawsuits so that victims have access to these relief funds," he said. "We aim to swiftly review notices from states so that we can participate in action, if necessary, and this will allow all of you to access funds on behalf of injured consumers."
The CFPB also plans to work with attorneys general to tackle repeat offenders. Chopra said he was concerned that business recidivism has normalized and that many companies are charging fines simply as the cost of doing business.
"When it comes to large institutions and well-connected companies that keep breaking the law, they pay a fine and then send out their press release," he said. "That doesn't work and we have to work together to stop repeat offenders, especially those who violate government and court orders at the federal and state levels."
Consumers end up subsidizing bad business behavior, he said. As a result, the CFPB is exploring new ways to address the underlying issues that drive repeat offenders, including action against top management and executives, and structural reforms to redesign business incentives.
"Executives and managers should know that if they are well informed that they are ordered to do anything illegal they will face consequences," said Chopra. "Relapse not only robs consumers of protection in the marketplace, it also burdens them with the direct and downstream costs of non-compliance."
Some of Chopra's hottest words in the years leading up to the 2007-2008 subprime mortgage crisis were reserved for the Auditor's Office leaders, which drove down house prices and foreclosed millions of homeowners. Chopra described a meeting in Washington in 2001 where a longtime OCC official warned attorneys general that "If you continued to try to protect consumers in your states, the OCC would suppress you." ; "
He cited multiple agencies spanning multiple administrations, including the OCC and the now defunct Office of Thrift Supervision, which were actively trying to undermine states that wanted to protect their own consumers.
The federal government's prevention of state consumer protection had catastrophic consequences in the run-up to the mortgage crisis, he said. Some banks dropped their state banking charter to national charter because it allowed them to evade state oversight. Chopra swore that such actions would not happen under his supervision.
“Many in Washington will always be tempted to remove tough state laws protecting the public, be it consumer financial products or privacy. We keep hearing it, and I think that's fundamentally wrong, ”said Chopra.