In the first joint enforcement action between the Bureau of Consumer Financial Protection (CFPB) and state regulators, a Florida payday lender has agreed to enter into a consent order requiring $105,000 in restitution and other payments. The consent order (Order), entered in the U.S. District Court for the Southern District of Florida, is directed against Payday Loan Debt Solution, Inc. (PLDS) for alleged violations of numerous state consumer protection laws, the federal Telemarketing Sales Rule (16 C.F.R. § 310), and various provisions of the Dodd-Frank Act (12 U.S.C. §§ 5481, 5531, 5536, 5564 and 5581).

The Order requires PLDS to refund $100,000 to certain customers and pay a $5,000 civil penalty to the CFPB. Given the CFPB’s recent rash of enforcement actions against credit card providers resulting in customer restitution and civil fines totaling over $471 million, a $105,000 fine appears unremarkable. The CFPB, however, accurately describes this action as “landmark” because it represents the first (of undoubtedly many) joint enforcement action with state attorneys generals.  The CFPB's overall effort to “police the debt-relief industry” also confirms the CFPB’s commitment to joint enforcement activities, which activities will be a source of continuing concern to financial institutions.

According to the Order, PLDS violated state consumer protection laws and the federal Telemarketing Sales Rule by collecting fees in advance for debt relief services that were often never provided to its customers. The Order also subjects PLDS to two (2) years of compliance monitoring and reporting, and requires its cooperation with the Bureau in any future investigations. The CFPB claims that PLDS’s civil penalty was limited due to PLDS’s immediate cessation of the alleged unlawful conduct and cooperation with the investigation.

CFPB Director Richard Cordray remarked that his agency was “pleased to be working with our state partners on this important effort to protect consumers.” Joining the CFPB in this action are the attorneys general of New Mexico, North Carolina, North Dakota and Wisconsin, and the Hawaii Office of Consumer Protection. The level of cooperation among state and federal enforcement agencies is not unprecedented, but the CFPB's information sharing and collaborative agreements certainly are. Viewed in the context of the recent joint enforcement actions against Capital One, Discover and American Express, our expectation is that this approach will become the norm. That is, the CFPB will not only share information with other agencies, but rather will joint venture with its state colleagues to share information and resources with a variety of state, local and federal regulators and law enforcement agencies. The result so far does not appear to bode well for financial institutions. Through these joint enforcement actions, the CFPB not only receives greater assistance in identifying potential areas of non-compliance, but the penalties appear higher, including greater supervisory oversight of financial institutions by the Bureau