‘Wilder West’ of Oversight Coming for Consumer Financial Services: Panel

NEW YORK — There is clearly going to be a vacuum with respect to rulemaking, supervision, and enforcement of consumer financial services companies for at least the next three-plus years, and the expectation is that states will fill that void, but there are genuine questions about how states are going to accomplish that with limited staffs and budgets and the bigger problem for companies in this industry may be at the lower levels of government, a panel of compliance experts discussed yesterday at the New York City Bar’s Consumer Financial Law Institute. The program was chaired by Don Maurice of Maurice Wutscher.

The panel featured industry veteran Tim Collins and a trio of lawyers from Paul Hastings — Jonice Gray, Kari Hall, and Brian Stief. The objective was for the panel to discuss the next four years and what companies engaged in consumer financial services, including those in credit and collections, can expect.

With the future of the Consumer Financial Protection Bureau in limbo, all eyes are turning to state regulators and attorneys general with the expectation that they will pick up where the CFPB left off when Rohit Chopra was fired, and there are some signs already that this is happening. But conflicting priorities and agendas make it appear that there is “no clear solution” at the state level right now, Gray said. “It’s about to be the wild west and the wilder west,” she added.

Collins pointed out his concerns about counties and states — such as New York City — becoming more active and the problems that an even patchier quilt of laws and regulations could cause companies. “Clearly there is a vacuum, which happens anytime there is a big bang,” Collins said. “People are rushing to fill that void. States will keep focusing on medical debt and counties and cities will step in and fill any other gaps.”

Gray pointed out that states may band together and conduct multi-state examinations and investigations, and may even contract with private law firms to augment and supplement their workforces. Former CFPB staffers are also finding work at state regulatory agencies, which will also bolster activity, the panelists agreed.

The panel also discussed the impact of the memo published

by the CFPB last month outlining its new prerogatives and shifting priorities. When asked whether Jonathan McKernan, who was nominated to be the new director of the CFPB and is awaiting confirmation by the Senate, could be expected to follow the memo, Gray answered that it was unlikely that the Bureau would be able to manage those priorities with the amount of staff that are expected to remain if Acting Director Russell Vought is successful at firing up to 1,500 employees. “I think what McKernan does is dependent on what is left when he takes over, she said.”