CFPB releases guidance documents as blueprint for states

Bloomberg News

The Consumer Financial Protection Bureau continued its near-daily onslaught of actions in the waning days of the Biden administration by issuing recommendations to the states on how to beef up enforcement after the Trump administration takes over next week. 

CFPB General Counsel and Senior Advisor Seth Frotman and Assistant Director of Policy Planning and Strategy Brian Shearer wrote in a blog post late Tuesday that the CFPB had released a report and a compendium of recent guidance documents on best practices for enforcing consumer protection law.

With just days before President-elect Trump's inauguration, the 11th hour move is meant to bolster state actions over the next four years, presumably to counteract the deregulatory bent of the incoming administration. 

"It is critically important for policymakers to make sure that all state consumer protections are up to the task of dealing with new challenges," Frotman and Shearer wrote in the blog.

The report includes samples of legislative text that states can use to address what the CFPB called "common schemes in the modern economy, such as junk fees and abuse of sensitive personal data." The blog post stated that the information can be used by states to authorize representative private claims to ensure viability of private enforcement and to ban "abusive" practices in state law to prevent companies from obscuring product features or exploiting their market power.

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Lawyers suggested the compendium of guidance documents was a response by the CFPB to the Supreme Court's decision in Loper Bright Enterprises v. Raimondo, in which the court overturned the long-standing Chevron deference doctrine. The decision means that judges are no longer required to defer to a government agency's interpretation when reviewing regulations and instead must conduct their own analysis of a statute's meaning. That gives courts more power to scrutinize agency rules and could potentially lead to increased legal challenges against banking regulators by banks. 

The CFPB stated that the documents could help states that are trying to address the collection and sale of sensitive data by large technology companies, and ensure that banks are meeting the credit and investment needs of low- and moderate-income communities under the Community Reinvestment Act, among other issues.  

The CFPB under Director Rohit Chopra has issued guidance warning companies about legal requirements of technology to track workers' performance, a practice that has become more widespread with the emergence of the so-called gig economy. The bureau also has warned lenders of the requirement to provide specific and accurate reasons when denying credit to a consumer when using artificial intelligence and advanced algorithms in underwriting decisions. 

Still, guidance and interpretive rules are considered nonbinding. Banks have criticized the CFPB and Chopra specifically for targeting what the bureau has called "unfair" bank fees, and expanding the federal prohibition on "unfair, deceptive and abusive acts and practices," known as UDAAP. 

The compendium of guidance documents "reflect the considered judgment, reasoning, knowledge, and expertise of the CFPB," Frotman and Shearer wrote. "In many instances, courts have agreed with interpretations articulated in CFPB guidance documents. We believe that the interpretations set forth in these documents, which reflect the best reading of the federal consumer financial laws, will prove durable."