There’s yet another state CFPB, and this one could be significant. Joining Pennsylvania’s earlier effort, the New York Department of Financial Services (DFS) has just created a new office, the Consumer Protection and Financial Enforcement Division. In the wake of decreased enforcement on the federal level, several states have considered creating a state-level Consumer Financial Protection Bureau (CFPB), but New York is just the second to formalize the new office.
Richard Cordray’s resignation allowed the Trump administration to take earlier control of the CFPB, leading to dramatic changes in the Bureau, and afar more pragmatic turn. But the changes also forced progressive states to consider establishing their own state versions of the Bureau. Pennsylvania was first, establishing a Consumer Financial Protection Unit under the auspices of the state’s Attorney General, in July 2017. But there have been few major headlines out of Pennsylvania since the creation of the unit, which largely operates as a division within an otherwise active AG’s office.
The news out of New York could be quite different. The state’s newly created Consumer Protection and Financial Enforcement Division more formally combines the Enforcement and Financial Frauds division with the Consumer Protection division. The office also encompasses the Investigation and Intelligence Division, the Civil Investigations Unit, the Producers Unit, the Consumer Examinations Unit, the Student Protection Unit and the Holocaust Claims Processing Office.
Responsible for ensuring compliance, fighting consumer fraud and assisting the DFS with the enforcement of the state’s Banking, Insurance and Financial Services laws, the new office indicates it will pay particular attention to the review and response to cybersecurity events and the development of supervisory, regulatory and enforcement policy and direction in the area of financial crimes.
Although it is too early to tell whether the new office will be “a powerhouse,” as acting DFS Superintendent Linda A. Lacewell describes it, the New York version of the CFPB will be led by Katherine Lemire, a former career prosecutor who served both as an Assistant U.S. Attorney in the Southern District of New York and a prosecutor in the Manhattan District Attorney’s Office, Lemire joins after a brief tenure with StoneTurn, a global consulting firm. The creation of the new office makes New York the second state to launch its own mini-CFPB, after Pennsylvania, which opened a Consumer Financial Protection Unit in 2017. Aimed at “better protect[ing] Pennsylvania consumers from financial scams,” the unit focuses on “lenders that prey on seniors, families with students and military service members, including for-profit colleges and mortgage and student loan services.”
Why it matters
Regulators at the state level have taken an aggressive approach as enforcement has trended downward at the CFPB in recent years. Given the reach of the DFS’s authority, New York’s new office will likely have a significant influence on the financial services industry.