CFPB Withdraws Proposed Changes to State Official Notification Procedures

The CFPB on July 21, 2025, withdrew a direct final rule that would have "rescinded procedures by which a State official must notify the Bureau when the official takes an action to enforce the Consumer Financial Protection Act."

As previously reported by Holland & Knight, the notification rules established by Section 1042(B) of the Consumer Financial Protection Act (CFPA) require state officials to notify "the prudential regulators" prior to "initiating any action in a court or other administrative or regulatory proceeding" to enforce any CFPA provision. The statute requires the notification to 1) be timely or "immediately upon instituting the action" in cases of emergency, 2) include a copy of the complaint to be filed in addition to a written summary of the action and 3) include written identification of the parties, alleged facts and "whether there may be a need to coordinate the prosecution of the proceeding so as not to interfere with any action, including any rulemaking, undertaken by the Bureau, a prudential regulator, or another Federal agency."

Following the codification of the notification procedures within the CFPA, on June 29, 2012, the CFPB issued regulations, codified at 12 C.F.R. § 1082.1, regarding states' obligations to notify the CFPB and prudential regulators of actions covered by Section 1042. In the direct final rule issued on May 21, 2025, the CFPB emphasized that the regulations at 12 C.F.R. 1082.1 "merely restate the notification requirements codified in [S]ection 1042(b)" with only immaterial and "minor tweaks." The direct final rule, therefore, would not have affected the notification procedures codified under Section 1042 but rather would have removed nearly identical requirements stated within the Code of Federal Regulations.

Though this direct final rule was published on May 21, 2025, the CFPB has now withdrawn the rule after receiving significant adverse comments, leaving the CFPB's notification procedures as they were originally written.

The direct final rule stated that it would be withdrawn if the CFPB received significant adverse comments by June 20, 2025. While the CFPB was concerned about increased regulation and compliance costs without seemingly any notable benefit, consumer and industry groups were concerned about the rule's impact on consistent enforcement of industry regulations, as well as preventing duplicative litigation. "Accordingly, because significant adverse comments were received, the [CFPB] is withdrawing the direct final rule." The CFPB states that it will address comments received in a future rulemaking.

Though the CFPB continues its independent efforts to identify areas where the agency exceeds its rulemaking authority or imposes unduly burdensome compliance regulations, this withdrawal highlights the impact that industry participants can have on ultimate outcomes. As the CFPB seeks comments on several new proposals, it is clear that industry input can be highly impactful on the agency's policy agenda, initiatives and rulemaking process.

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