Last week (12/5/12), the CFPB announced an extraordinary partnership with the City of Chicago to share information regarding fraudulent and predatory practices by financial institutions.
This arrangement is troubling on a number of levels, but hardly surprising. The action is certain to broaden the scope of the CFPB’s gaze, as the agreement includes a commitment by the City to directly report alleged violations of consumer financial protection laws and regulations to the CFPB, thereby granting extraordinary leverage to the City. In fact, the agreement effectively turns the City’s enforcement infrastructure into an investigative arm of the CFPB, and vice versa.
Ignoring the limited role cities are entitled to play on Illinois legislative and regulatory matters Chicago Mayor Emanuel announced that Chicago’s City Council is poised to pass new ordinances aimed at regulating and licensing debt collectors and enforcing compliance with existing debt collection laws. Ignoring (and in fact overreaching beyond) the role of the state's banking division, the Illinois Department of Financial and Professional Regulations, Emanuel says that he anticipates that new ordinances will give the City’s Department of Business Affairs & Consumer Protection enhanced supervision authority and “the teeth it needs” to step up its own enforcement activities for violations of state and federal consumer protection laws.
This agreement is yet another example of the CFPB’s effort to expand the reach of its authority through collaborative partnerships. This expansion of CFPB’s enforcement capabilities likely won’t end with Chicago either. CFPB Director Cordray indicated that similar agreements with other municipalities are in the works and are “at the heart of our efforts.” This level enhanced supervision and direct reporting to CFPB by the City of Chicago will undoubtedly increase the CFPB’s supervision and enforcement activities, as well as embolden other municipalities to expand their own enforcement and supervision activities and capabilities. Stay tuned to the CFPB-Lawblog for updates and analysis as this story evolves.