It’s a step in the right direction at the 11th hour, CFPB Offers Regulatory Relief for Small Loan Providers but the exposure to the rule still exists. Under Section 5552 of Title 12 of the United States Code, concerning the Preservation of Enforcement Powers of States under the Consumer Financial Protection Act (CFPA). Basically, states can actively enforce CFPB rules and federal consumer financial laws, even if the CFPB chooses not to prioritize enforcement.
So what now? The CFPB can modify or rescind the rule by so long as it follows the proper administrative process and stays within its statutory authority. Specifically: Authority to rescind: The CFPB has the power under the Dodd-Frank Act to rescind (fully remove) a rule it previously issued, provided the rescission is justified legally and procedurally.
Required procedure: To eliminate a rule, the CFPB must undertake the full rulemaking process, including:
- Issuing a Notice of Proposed Rulemaking (NPRM)
- Providing a public comment period
- Considering and addressing public feedback
- Publishing a final rule rescinding the regulation, clearly stating the justification for its removal
Legal considerations: Any removal must be supported by sufficient legal rationale. Courts can review these actions, and rescinding rules without proper justification can be challenged and potentially overturned in court.
Congressional oversight: Congress can still intervene legislatively, either to reverse a CFPB decision or to mandate certain rules.
For a deeper understanding of state enforcement capabilities, you can explore the CFPB’s detailed announcement: CFPB Bolsters Enforcement Efforts by States.
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