Consumer Law

NCLC Publishes Report on the Role of the States Under the Dodd-Frank Act

By Brian Wolfman

The National Consumer Law Center has published this helpful nine-page report on the role of the states (and those seeking to enforce state law) under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Report covers two basic topics: (1) the extent to which Dodd-Frank expressly authorizes state Attorneys General and other state regulators to enforce federal consumer protection law; and (2) Dodd-Frank's position on preemption (or not) of state consumer protection and other law.

    Here's an excerpt of the Report's executive summary (with minor edits and links added): 

Under the Dodd-Frank Act, state attorneys general and, to a lesser extent, state regulators
can directly enforce several aspects of federal law:

The generic ban on unfair, deceptive or abusive conduct against covered persons except national banks, federal thrifts and certain merchants who offer credit; .
Rules of the Consumer Financial Protection Bureau (CFPB) against covered persons, including banks and thrifts, except certain merchants who offer credit;
New mortgage provisions regarding ability to repay, steering, prepayment penalties, escrows, appraisals, prompt crediting of payments, and payoff amount requests (including against banks and thrifts); and
Federal statutes like the Truth in Lending Act and the Fair Credit Reporting Act, against banks, thrifts and others, to the extent authorized by the statute.

Dodd-Frank also limits the ability of banks and others to ignore state consumer protection laws through the doctrine of preemption:

Subsidiaries of national banks and federal thrifts are no longer entitled to preemption (reversing the Watters v. Wachovia case);
Mortgage laws and other specific consumer protection laws are preempted only if they prevent or significantly interfere with national bank or federal thrift powers under the standard of the 1996 Barnett case. Federal preemption regulations should have to be revised and will be subject to closer judicial review;
General state laws, like those against unfair or deceptive practices, should be less subject to preemption;
The Alternative Mortgages Parity Transactions Act, which currently preempt state laws regulating certain mortgage terms as to anyone (including nonbanks), has largely been repealed;
The new rules of the CFPB will not generally preempt more protective state laws;
Bank interest rate preemption remains and has been codified; and
Nonpreempted state laws can be enforced against banks and thrifts (codifying the Cuomo case).

Full post as published by CL&P Blog on December 30, 2010 (boomark / email).