First came the “joint statement of principles” between the CFPB and the state attorneys general, then there was the controversy over then-CFPB head Elizabeth Warren’s involvement in the 50-state mortgage servicer settlement negotiations lead by Iowa Attorney General Tom Miller.
In July, President Obama nominated former state AG Rich Cordray to lead the CFPB, around the same time that the Bureau released interim final rules giving the CFPB authority to share information with the state AGs that was not allowed prior to Dodd-Frank.
The result could be a whole new kind of “new partnership” between a federal regulator and the states.
“I anticipate that our cooperation will have a profound effect on the consumer financial markets,” Warren said at the National Association of Attorneys General (NAAG) Presidential Initiative Summit in April, where both parties signed the Joint Statement of Principles.
The Principles advance three joint goals of the CFPB and state AGs:
- To protect consumers of financial products or services from unlawful acts or practices;
- To provide clear rules that improve the marketplace for consumers and remove unfair competition for the benefit of law-abiding businesses; and
- To find ways to promote understanding and address concerns raised by consumers about financial products or services as efficiently and effectively as possible.
Enter Cordray. Six months ago, he stood before the NAAG as a former member of their ranks and head of the CFPB’s enforcement division.
“You understand better than anyone the kinds of problems that consumers – your constituents – face from the ground up. We will be depending on your expertise and your experience as we work to achieve our mutual objectives,” Cordray told the state attorneys general.
Now, as the CFPB director nominee, he may have an even better vantage point from which to take on his three top priorities: the credit card industry, mortgages and student loans. He told the Wall Street Journal that his role with the CFPB is, “in many ways doing on a 50-state basis the things I cared most about as a state attorney general, with a more robust and a more comprehensive authority.”
The Rules allow the CFPB to share information between divisions, with other federal banking agencies, the Federal Trade Commission, state banking regulators and state attorneys general.
This means that data the CFPB gathers through supervision and examinations will be accessible to state AGs, information that had not been available to them before Dodd-Frank.
“After years of tension between state officials and federal bank regulators, Democratic lawmakers sought to restore the balance of power in the Dodd-Frank Act, particularly when it comes to federal preemption,” according to American Banker.
However, the Office of the Comptroller of the Currency must consult on questions of federal preemption with the CFPB – and is likely to “take a more sympathetic view of states’ rights,” American Banker notes.