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As CFPB focuses on education, regulation falls on state attorneys general

September 7, 2018
The retreat by the Consumer Financial Protection Bureau as a consumer watchdog is causing states to "feel like they have to step in where the government is pulling back," said Patty Covington, an attorney at Hudson Cook, a law firm that focuses on banking, consumer financial services and privacy law.
Since CFPB Acting Director Mick Mulvaney assumed leadership of the Bureau last year, the CFPB has transitioned the Office of Fair Lending and Equal Opportunity to an educational focus compared with the enforcement powers it once held. 
As evidence, the office in late August announced a new educational symposium on the topic of consumer access to credit, to take place this month.
However, with midterm elections coming up in November, it will be interesting to see how the CFPB enforcement pans out, "particularly with the amount of blue attorneys general that come in place," Covington said. More blue attorneys general means the trend of tighter state regulations could take place, especially as more states — even conservative states — have already ramped up regulations. 
Covington said Georgia, South Carolina, and Virginia are the most notable states because those three are not usually aggressive in enforcement. "The fact that conservative states are putting attention on regulation is indicative of where the attorneys general are going," Covington said.
There are 31 candidates for 13 open seats in the upcoming 2018 election, according to the National Association of Attorneys General’s website.
Mulvaney began the pullback of enforcement actions focused on fair lending in February, when he transferred the Office of Fair Lending and Equal Opportunity from the Supervision, Enforcement, and Fair Lending Division to the Director’s Office, where it became part of the Office of Equal Opportunity and Fairness.
According to Chris Willis, a partner for Atlanta-based Ballard Spahr’s litigation and consumer financial services groups, Mulvaney said the Office of Equal Opportunity and Fairness "will continue to focus on advocacy, coordination, and education, while its current supervision and enforcement functions will remain in the Supervision, Enforcement, and Fair Lending Division."
In that same month, Mulvaney called for attorneys general to step up and take the lead in enforcement during a conference National Associate of Attorneys General. Hudson Cook’s Covington referred to his public call as a "rallying cry" for attorneys general. 
"Mulvaney saying so, very publicly, at the NAAG meeting calling for AG’s to step up and take the lead in enforcement," Covington said. "It adds more fuel to the fire."
Although a sigh of relief may have been heard throughout the industry as regulations lightened up, Covington warned that with attorneys general stepping in and ramping up enforcement, that relief is "being dismantled" as stricter state regulations can be more dangerous because "there are more of them," she said. 
Covington predicts dealers to be feeling the impact as they must be "very focused on compliance" especially in terms of F&I products during this time, she said.