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70 National Association of Attorneys General Also in 2011, the CFPB and National Association of Attorneys General agreed to a Joint Statement of Principles, establishing a framework for regulation of financial products and services. In the Joint Statement, the parties agreed to several areas where they would cooperate, including: i) engaging in regular consultation to identify mutual enforcement priorities; ii) supporting each other through joint or coordinated investigations of wrongdoing and coordinated enforcement actions; and iii) sharing of consumer complaint information. e last item—sharing and analysis of customer complaint information— has been a hallmark of the CFPB as it has engaged in the unprecedented collection of consumer complaint data as a knowledge- gathering method to support its enforcement agenda. National Mortgage Settlement In February 2012, in one of the first major examples of this increased cooperation, federal regulators and 49 state attorneys general (excluding Oklahoma) announced a settlement with the country's five largest mortgage servicers. is settlement was meant to resolve mortgage servicing irregularities stemming from the foreclosure crisis. As part of the settlement, the five companies agreed to a set of comprehensive Servicing Standards, which would reform various servicing processes and procedures. e companies also agreed to provide $25 billion in financial relief to consumers. Joseph A. Smith, Jr., a former state banking commissioner, serves as the independent monitor, enforcing compliance with the settlement. Non-Bank Servicer Consent Order e cooperation continued in December 2013 when the CFPB and state Attorneys General brought an enforcement action against a large non-bank servicer. Under the consent order, the servicer agreed to provide $2 billion in relief to homeowners. e order stemmed from examinations, in early 2012, by the Multistate Mortgage Committee, which is comprised of state financial regulators. e Bureau coordinated with the state regulators to investigate the issues and bring the enforcement action. is is an example of coordination which we expect will continue, not only for mortgage servicers, but also in other areas of the financial services industry. INCREASED [TENSE] COOPERATION While we are certainly in a time of increased cooperation, tension remains between federal agencies and state regulators. For example, in June 2014, Massachusetts Attorney General Martha Coakley sued the Federal Housing Finance Agency, conservator/regulator of Fannie Mae and Freddie Mac, alleging that the GSEs were violating a 2012 state law by having policies that forbid the sale of homes in foreclosure to non-profit organizations if the property will be resold or leased by the non-profit to the former homeowner. In October 2014, a federal judge dismissed the lawsuit, stating that federal law expressly prohibits courts from taking any action to restrain the functions of the FHFA as conservator for the GSEs. is case, however, illustrates that state and federal agencies often have conflicting policy goals which, in turn, can lead to regulatory tension. LOCAL PREEMPTION CONTINUES It's also worth pointing out that this new era of cooperation has been confined to the states and federal government, with local regulators largely left out of the mix. For example, over the past several years, four cities in Massachusetts - Lawrence, Lynn, Springfield, and Worcester - enacted virtually identical foreclosure mediation ordinances, which required lenders to send to the respective cities copies of the Notice of Right to Cure (35A Notices) that are sent to borrowers. e cities were sued by various banks who argued that the ordinances were preempted by state law. In the lead case, Easthampton Savings Bank v. City of Springfield, the Federal Court of Appeals hearing the case determined that it involved novel questions of state law. As a result, the Federal Court of Appeals certified the question of whether the ordinances were constitutional under state law to the Massachusetts Supreme Judicial Court. On December 19, 2014, the Massachusetts Supreme Judicial Court announced its decision in the Easthampton case. e Court determined that the foreclosure mediation ordinances enacted by the four cities are preempted by state law. According to the Court, "mortgage foreclosure regulation traditionally has been a matter of State, and not local, concern." is case highlights the ongoing conflict among regulators in balancing the desire for a single coordinated approach while allowing for the flexibility of passing regulations in response to local policy concerns. STATE REGULATORS USING DODD-FRANK Of course, even in the absence of uniform cooperation, state regulators will use the powers they have been given. Specifically, under Section 1042 of Dodd-Frank, a "State regulator may bring a civil action or other appropriate proceeding to enforce the provisions of this title or regulations issued under this title with respect to any entity that is State-chartered, incorporated, licensed, or otherwise authorized to do business under State law…." We have seen increasing examples of state regulators using these new powers which are derived from federal law. In March 2014, Illinois Attorney General Lisa Madigan sued a Chicago lender alleging that the lender was marketing and selling a new short-term predatory loan product. Specifically, the lawsuit alleges that the loan product evades the state's 36 percent interest- rate cap by offering a short-term loan product that acts like a revolving line of credit, but offers none of the protections of a credit card. is was the attorney general's first action under the powers granted to her by Dodd- Frank. In addition, in April 2014, Benjamin Lawsky, the superintendent of New York's Department of Financial Services, sued a subprime auto lender for unfair, deceptive, or abusive acts or practices, specifically alleging that the lender essentially stole money from consumers by not disclosing to them the existence of refundable credit balances. Under New York General Business Law § 349, the attorney general is the only state official empowered to bring an action for an unfair or deceptive act or practice. Section 1042 of Dodd-Frank, however, extends this power such that other state regulators can bring these types of actions. ere have been other examples of state regulators using their authority under Dodd- Frank, including in Connecticut and Florida (joint lawsuit against a mortgage rescue company), and Mississippi (lawsuit against a credit reporting agency). We expect other state regulators will also begin to utilize this new authority in their supervision of the financial services industry. Dodd-Frank has ushered in a new era of cooperation among state and federal regulators, especially the CFPB. e regulators are sharing information and coordinating investigation and enforcement actions. is coordination means there are more resources available in the investigation of financial services companies. We expect additional coordination among the regulators in the future. is will lead to even more regulatory scrutiny, increased examinations and enforcement actions throughout the financial services industry. Companies should take steps now to bolster their compliance functions in response to this new age of regulatory cooperation.

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