In our second installment of “Keeping the Pulse – What’s Happening in Washington?”, our panel revisited our predictions from the beginning of the year. One of our big predictions was about the states filling the gap left with the administration’s downsizing of the federal government (and the almost shuttering of the CFPB). One example of states stepping in involves the New York Attorney General’s Office, which has recently demonstrated a renewed commitment to financial oversight—particularly in the wake of federal withdrawal.
From Federal to State: The Capital One Case
A prime illustration of this transition is the case initially brought by the Consumer Financial Protection Bureau (CFPB) against Capital One. The case involved allegations regarding how the bank handled interest rates on certain savings loans—a matter closely tied to fair lending and transparency in consumer finance. Click here to see the AG’s statement on the matter.
However, for reasons not publicly disclosed, the CFPB eventually dropped its pursuit. This could have left the matter unresolved and potentially unaddressed. But instead, the New York Attorney General stepped in and picked up the mantle.
This wasn’t just lip service. The NY AG’s office took concrete action, not only by re-opening the case but also by building its internal enforcement capability. As highlighted in the webinar, the office hired a former head of enforcement from the CFPB—a move that signals strategic alignment with federal priorities and a desire to carry forward critical investigations when federal agencies pivot or face political constraints.
A Trend in State Enforcement Power
What makes the NY AG’s actions especially noteworthy is how representative they are of a broader trend: state agencies increasingly asserting themselves as frontline enforcers in the consumer finance space. Historically, states like New York and California have led on regulatory matters, but we’re now seeing even more pronounced efforts to institutionalize this power.
Hiring experienced federal regulators, investing in compliance infrastructure, and publicly committing to uphold consumer protections are all signs that these states are not waiting for the federal government to act—they’re stepping in to fill the void.
Implications for Financial Institutions
For banks, fintechs, and non-bank lenders, this shift carries several key implications:
- Dual Oversight: Dropping a federal investigation doesn’t mean the issue is closed. State AGs can and increasingly will take independent action.
- Enforcement Muscle: With former CFPB personnel now working at the state level, expect continuity in investigative rigor and regulatory expectations.
- Proactive Compliance: Firms should monitor not just federal guidance, but also AG offices in jurisdictions where they operate—especially in enforcement-forward states like New York.
Conclusion
The case against Capital One and the NY AG’s decision to pursue it despite the CFPB’s withdrawal is a signal to the industry. Enforcement is not going away—it’s simply being redistributed. For those in compliance roles, this means adjusting your radar and being prepared for scrutiny from multiple directions. CompliSun can be your regulatory tracker – CLICK HERE to schedule a free consultation.