CFPB Issues Rule Requiring Notice of State Enforcement Actions
On July 28, 2011, the CFPB issued a rule requiring state officials to provide notice to the CFPB before initiating any actions to enforce the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Issued as an interim final rule, it is effective, immediately, although public comments are invited.
Relying on authority conferred upon CFPB by Section 1042(a) of Dodd-Frank, the rule requires that state officials give notice to the Bureau's Division of Enforcement no less than 10 days prior to filing an action to enforce any provision of Dodd-Frank or implementing regulations. An emergency exception allows deferral of the notice until 48 hours after commencement of the proceeding, where immediate action is necessary to protect the public interest or prevent irreparable and imminent harm.
In the notice submitted to the CFPB, the state official must summarize the nature of the action and relevant factual background, the court or other body in which it is to be initiated, the parties against whom the action is to be brought, and the state official's determination as to whether there may be a need to coordinate the prosecution of the action to avoid interference with activities, including rulemakings, being undertaken by the CFPB or other federal agencies. Copies of the complaint or other case-initiating papers must be provided.
Upon initiation of the proceeding, the Bureau may intervene and remove the action to a U.S. district court, and, thereafter, proceed as a party for all purposes. The rule states that its provisions do not create and are not intended to create any private right of action or defense.
This rule will play an important role in the implementation of the joint federal-state enforcement regimen established by the Act. The Bureau's right of intervention, and the circumstances and frequency of its exercise, could have a particularly strong impact on the direction and scope of early enforcement efforts under the new law.
Troutman Sanders’s CFPB Team monitors the development and activities of the CFPB and advises clients on CFPB issues. Ongoing analysis and updates regarding the CFPB are available at our blog, CFPBReport.