With 2019 in full swing, many are taking stock on what changes could be looming in consumer finance and the regulatory landscape. Although some say the role of the Consumer Financial Protection Bureau (CFPB) has seemed to be less aggressive, financial regulations are gearing up as State AGs take a more aggressive stance on consumer protection.
Consumer Complaints Attract Headlines and Voter Attention
In Minnesota, AG Lori Swanson reached a settlement with Comcast Corp for allegedly using deceptive advertisements and practices in violation of the state Prevention of Consumer Fraud Act and the state Uniform Deceptive Trade Practices Act according to The State AG Report. The complaint accuses Comcast of deceptively decreasing cable television packages through additional and often undisclosed fees.
In late 2018, all 50 State AGs including the District of Columbia reached a settlement with a national bank totaling $575 million for encouraging its employees to use deceptive practices to enroll consumers into programs and accounts without their knowledge through sales goals and incentives without the necessary oversight according to JD Supra.
In the midterm elections, many candidates ran on more aggressive enforcement of consumer laws. In Colorado, Michigan, Nevada and Wisconsin, Democrats won attorney general offices. However consumer protection concerns are a bipartisan issue with Republican AGs toughening their stance on consumer protection issues.
As a result, many states are bolstering their efforts to protect their citizens by creating “mini-CFPBs.” For example, Maryland, Massachusetts, Pennsylvania, New Jersey and Delaware have all created state consumer protection units within their offices. Further, the appointment of Paul R. Rodriquez as Director of the New Jersey Division of Consumer Affairs fulfilled NJ Governor Murphy’s promise to create a “state-level CFPB.” According to New Jersey AG Gurbir Grewal, “as the federal government abandons its responsibility to protect consumers from financial fraudsters, it is more important than ever that New Jersey picks up the mantle to protect its own residents. ...from fraud and professional misconduct in the marketplace.”
Consumer finance remains one of the most significant agendas on State AGs’ list as increased scrutiny falls on areas such as credit scoring, online lending and payment processing.
How Can Consumer Financial Service Companies Manage This Disruption
Financial services companies must keep a close eye on state regulators, bolster their compliance efforts through regulatory technologies (RegTech) to monitor customer complaints and all consumer protection laws, all while documenting their course of remediation to be prepared to respond to scrutiny from the state attorneys general or federal regulators.
Financial service companies must look to alternatives to meet the increased need for compliance within the financial industry. Using sophisticated data analytics and machine learning, RegTech offers the prospect of improving regulatory compliance while simultaneously cutting costs and providing businesses with a competitive edge.
The rise of a more aggressive stance from state attorneys general presents unique challenges to financial services companies and they now must plan accordingly as State AGs are poised to become tenacious regulators.
According to Duane Pozza, former FTC Assistant Director and past COMPLY speaker, “This upward trend in State AG enforcement actions should put every consumer-related industry on notice, whether it’s tech, health care, energy, financial services, sports and entertainment—take your pick."
If you would like to learn more about how the states and their attorneys general are working to protect their citizens and enforce consumer protection laws, catch up on the COMPLY session “State AGs Leading the Push on Consumer Protection” free and on demand.