On May 15, the CFPB rescinded its May 2022 interpretive rule that had expanded state enforcement authority under Section 1042 of the Consumer Financial Protection Act (CFPA). The Bureau now maintains that the previous guidance misread the statute and improperly extended state authority beyond what Congress intended.
According to the rescission, the CFPB identified three core issues with the 2022 interpretation that gave states unintended additional regulatory powers. Specifically, the CFPB stated that the rule:
- Expanded the reach of Section 1042. The rule concluded that states could enforce any provision of the CFPA, including Section 1036’s UDAAP prohibition. The Bureau now asserts that Section 1042 only permits enforcement actions as specifically authorized within the CFPA and not any conduct touching on consumer protection.
- Disregarded statutory limitations on enforcement. The rescinded rule stated that limitations on the CFPB’s authority—such as those in Sections 1027 and 1029 restricting jurisdiction over certain entities—did not constrain state action. The Bureau now maintains that those limits apply to states as well when they enforce the CFPA under Section 1042, in line with how the statute should be read as a whole.
- Encouraged duplicative enforcement. The 2022 rule allowed states to bring actions independently even where the CFPB had already initiated proceedings. The Bureau now views Section 1042 as contemplating joint enforcement, requiring states to notify the Bureau and enabling the Bureau to intervene.
Putting It Into Practice: The CFPB remains focused on rolling back interpretations from prior leadership that expanded its regulatory and enforcement reach (previously discussed here and here). Although not binding on state attorneys general, the guidance reflects the Bureau’s shift toward a less aggressive approach in enforcement matters. We are also likely to see a decrease in joint federal-state enforcement actions.