State attorneys general have fought against evictions during the pandemic, filed suit to extend utilities disconnection suspension, and promised retribution against those who would take advantage during these times of emergency.
As citizens face the financial hardships that ripple across the country as a result of the Covid-19 wave, states and municipalities will face increased pressure to ensure that all entities, and especially those in the financial services and consumer credit industries are strictly abiding by the law. As some have done in the past, state attorneys general can be expected to turn to outside counsel for help.
Consumer Protection Laws
Enforcement actions can take many forms. Sometimes enforcement actions will be brought in conjunction with other state attorneys general, others will continue separately from the traditional multistate (or, in the case of localities, joint state and local or state-based) regulatory enforcement model.
In this vein, over the past decade, state attorneys general and an increasing number of municipal bodies authorized to file actions on behalf of their citizens have made purposeful decisions to effectuate the policy goals of their constituents through enforcing consumer protection laws.
As a recent example, after 48 state attorneys general, D.C., and Puerto Rico announced a multistate settlement with Equifax for its September 2017 data breach, the city of Chicago announced a $1.5 million settlement with Equifax in addition to the payment to Illinois under the multistate settlement.
Chicago sued Equifax for violating the city’s ordinance, where a violation of the Illinois Consumer Fraud and Deceptive Business Practice Act violates Chicago’s municipal code. Chicago’s press release declared that the settlement “complemented settlements reached with Equifax by the federal government, state governments and private plaintiffs.”
We anticipate more localities will pursue actions that traditionally have been the exclusive domain of state attorneys general.
Hiring Private Attorneys to Represent States and Localities
As background, states are often authorized to seek private law firms to represent the states’ interest in limited engagements and have traditionally solicited assistance in highly complex or time-consuming engagements. In turn, states pay outside counsel on a contingency fee basis.
In light of the pandemic, outside counsel will be eager to increase their workloads by cutting their contingency rates and state attorneys general will be cognizant that engaging outside counsel on contingency is a means to increase their enforcement capabilities while minimizing government overhead.
For example, Oklahoma Attorney General Mike Hunter recently acknowledged that his office would likely need to utilize more outside counsel in light of understaffing caused by across-the-board statewide budget cuts. Hunter indicated that if his office is forced to make 3% budget cuts as part of Oklahoma’s plan to deal with a shortfall projected for the next fiscal year, it will not have the staffing to adequately defend the state in court and would be quick to look to outside counsel.
Keep Compliance Goals Strong
Given the coming regulatory enforcement wave, it may be tempting for businesses facing difficult economic circumstances to consider cutting compliance personnel and taking shortcuts in the name of efficiency, but these instincts should be avoided.
The current pandemic presents unparalleled regulatory risks and businesses must ensure their continued compliance with the rapidly changing legal landscape.
Moreover, regulators are quick to contact businesses when their constituents file complaints regarding their activities. As a result, businesses must be proactive in making timely compliance adjustments where necessary and be prepared to communicate openly with regulators.
Through taking proactive action to maintain compliance and promptly communicating with regulators, a business can demonstrate its commitment to protecting its own customer base—and the regulators’ constituents.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Stephen Piepgrass is a partner at Troutman Sanders in Richmond, Va., where he focuses on government enforcement actions and investigations and litigation. He represents clients interacting with and being investigated by state attorneys general and other enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, particularly in heavily regulated industries.
Ashley Taylor is a partner at Troutman Sanders where he focuses on federal and state government regulatory and enforcement matters involving state attorneys general, the CFPB, and the FTC. He was previously a deputy attorney general, and he has an extensive consumer practice, advising debt buyers, debt collectors, payment processors, credit reporting agencies, and auto finance companies on regulatory and compliance issues.
Stephen Cobb, counsel at Troutman Sanders, assists clients through the myriad legal challenges inherent in high-profile litigation and investigations. A former deputy attorney general and presidential appointee at the U.S. Commerce Department, Cobb helps clients deal with legal problems as they exist in both the courtroom and the public sphere.
Chris Carlson represents clients in regulatory, civil and criminal investigations and litigation. He employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.