State attorneys General (AGs) continue to emerge as major regulators of financial services and show little sign of being cowed by their federal counterparts….or efforts to preempt state authority.
This week, representatives of the consumer protection divisions of the AGs of nearly all 50 states plus officials from the FTC and CFPB met in Phoenix to compare notes and coordinate activity on a range of issues impacting consumers. The meeting was sponsored by the National Association of Attorneys General (NAAG) which serves an educational function for AG offices, and also coordinates legal and policy issues to serve its AG members. Issues discussed at NAAG meetings often signal the onset of increased legal and regulatory activity by AGs.
Among the issues addressed, none was more prominent that those involving consumer financial services. Key panels at the meeting addressed state involvement in FinTech, Payday Lending and Structured Settlements.
“FINTECH – The New Frontier” in particular was keyed up for prominent discussion and included briefings by the FTC, the Utah Department of Financial Institutions and academics. A particular theme that emerged that should be top of mind for FinTech companies is that many AGs believe they already have the tools to regulate and pursue legal matters regarding FinTech under state consumer protection statutes governing unfair or deceptive acts and practices (aka, “UDAP” laws) notwithstanding that new products may not be subject to laws specifically addressing them. Another area of concern, particularly for non-bank FinTech firms hoping for some relief from state-by-state regulatory compliance and enforcement through potential preemptive rules by the OCC, is that efforts to preempt state actions and regulations with respect to FinTech will be widely resisted by the states.
In light of this, as FinTech firms continue to expand and refine their products, they would do well to keep their eye on activities in the states.