States to fill gaps created by expected federal deregulation

Federal regulations are expected to loosen under president-elect Donald Trump and state regulators are likely to fill the gaps. The Consumer Financial Protection Bureau (CFPB) will likely have a new director . Rohit Chopra is expected to step down as his predecessor , Kathleen Kraninger , did when President Joe Biden was elected, Eric Johnson , a partner at Hudson Cook law firm, whose practice includes financial services regulation, told Auto Finance News . While the person chosen to lead the CFPB will offer the clearest clues on how federal regulation will change, state regulators will become more aggressive if federal regulation is scaled back, Johnson said. “We're going to see the states, particularly the blue states, picking up the slack and the perceived reduction and/or actual reduction in federal activity,” Johnson said. “Where they see the CFPB not acting and protecting consumers, state attorney generals will say ‘not on my watch, we're going to protect our consumers here in our state.’” How aggressive states might become depends on who is in charge at the federal level, Kenneth Rojc , managing partner of law firm Nisen & Elliot ’s automotive finance group, told AFN . “In the first three months of next year, we'll get a good indication on how aggressive the states will be either in submitting legislation and passing regulations, or coming out with other types of regulatory pronouncements,” he said. “Some of that may be a reaction to what's going on in the federal front. Others might have their own independent agenda for consumer protection.” State-level activity Auto lenders can expect increased state-level activity; those operating in multiple states are already required to comply with each state's laws, Johnson said. While federal regulators were active under the Biden administration, state-level actions are not unusual. For example, Connecticut teamed up with the FTC in January to take action against auto dealer Manchester City Nissan for “deceiving” consumers about car prices and charging “junk fees." During Biden’s term, several states passed t heir own versions of the Telephone Consumer Protection Act (TCPA). The act prohibits telemarketers, banks, debt collectors and other companies from using autodialers or robocalls to contact consumers at their home or cell phone without consent. States with “mini-TCPA” regulations include a mix of red and blue states, such as California, Florida, New York and Oklahoma. New York State’s Department of Financial Services fined subprime financier OneMain Financi al $4.25 million in May for violating the state’s cybersecurity regulations. Status of current actions As for rules under consideration, the CFPB has until Trump’s inauguration on Jan. 20 to finalize any changes, Hudson Cook’s Johnson said. That deadline would apply to a proposal released by the CFPB on Dec. 3 that would amend the Fair Credit Reporting Act and apply it against data brokers. While it doesn’t affect auto creditors directly, it would have an impact if creditors receive leads from data brokers, he said. As of September, 20 states, including California, Florida, Tennessee, Texas , and Virginia, had enacted related consumer data privacy laws , according to research platform Bloomberg Law . “Don't get complacent and lull to sleep thinking that compliance is not important,” Johnson said. “We're going to see a lot of activity at the state level, and they're still going to have to be keep on their toes. Instead of one entity to worry about at the federal level, now you're going to have all these different state entities to worry about." New department raises questions Elon Musk , chief executive of Tesla , has been appointed by Trump to lead the new Department of Government Efficiency , tasked with reducing federal bureaucracy and cutting government spending. While Musk suggested eliminating the CFPB , compliance experts remain skeptical, noting the agency's bipartisan support makes such a move unlikely. A more likely scenario is an attempt to shift the CFPB from a single-director structure to a commission, like the FTC , Johnson said. That would be in line with proposals such as the CFPB Transparency and Accountability Reform Act, introduced in April 2023. The bill is awaiting action in the House of Representatives . “It’s a big pendulum that swings one way or the other every four years,” he said.

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