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The Connecticut state attorney general (AG) is seeking new investigative authority to enforce federal consumer financial protection rules after several consumers were left without access to online banking and debit accounts during a bank merger process. If granted, it could have wide implications for US payment firms.
Connecticut state AG William Tong has asked state lawmakers to pass a bill that would give his office the power to enforce key provisions of the federal Dodd-Frank Wall Street Reform Act 2010, as well as related regulations by the Consumer Financial Protection Bureau (CFPB).
The plea came after consumers filed more than400 complaints with the AG’s office as a result of the merger between People’s United and M&T banks, alleging money disappeared from their accounts or they lost access to online banking.
Others complained they encountered long wait times and delays in payment processing, did not receive adequate customer support, or the payment dates of their automatic payments were shifted to the end of the month without notice, causing them to pay their bills or mortgages late.
Tong additionally stated that when his office brought this systemic issue to M&T’s attention, it refused to address the problem broadly, opting instead to wait for customers to complain and resolve the complaints on a case-by-case basis.
Although M&T stated that the issues concerned around 0.6 percent of the customer base that was integrated into its system, that is around 6,000 customers, the issue reached Capitol Hill where top senators, including Bernie Sanders (I-VT), Elizabeth Warren (D-MA) and Richard Blumenthal (D-CT) pressed M&T to compensate all consumers affected by the “mishandling” of the merger.
Tong now claims that the bill would empower his office to conduct investigations of alleged deceptive and anti-consumer practices under the federal act, filling a significant regulatory gap.
Currently, the state AG has the general authority to bring civil actions to enforce federal consumer protection rules but he cannot seek records or subpoena witnesses before going to court. This makes it difficult to determine whether the facts alleged do in fact constitute violations of federal law and to seek recourse on behalf of consumers.
This bill would fix this gap and would additionally enable the AG to bring cases against companies that are chartered or licensed in other states, such as M&T.
This means that if passed, the AG would get the power to enforce federal consumer protection laws against firms, including money transmitters, across the United States if they offer services to Connecticut residents.
A wider effort to increase state AG powers
Strengthening the powers of state law enforcement agencies is in line with the current administration’s efforts to protect consumers as well as being within the spirit of the Dodd-Frank Act. For example, the act intended to reverse the pre-financial crisis trend of weakening state agencies’ role in overseeing and enforcing rules for consumer financial products.
To promote enforcement by state AGs, last May, the CFPB issued an interpretive rule which clarified that state enforcers can sue for violation of federal consumer protection rules, even when there is a CFPB action ongoing against the same entity.
CFPB director Rohit Chopra has emphasised several times the importance of state AGs in federal consumer protection, calling them “a valued, critical Bureau partner” who at times lead as “the last, if not only, line of defense” in consumer protection.
“Rather than discouraging, obstructing, or preempting state enforcement or stronger state laws, the CFPB will be taking steps to promote enforcement of federal consumer financial protection law by state attorneys general,” Chopra said in a speech more than a year ago.
