"" diego="" m.="" width="620" height="372" /> Alan Kaplinsky, with Ballard Spahr, testifies before the Senate Judiciary Committee during a hearing titled "Arbitration in America," April 2, 2019. Photo: Diego M. Radzinschi/ALM

General counsel should keep on their toes in matters affecting consumers because—contrary to popular belief—regulators are aggressively pursuing consumer complaints on both the federal and state level.

That's the advice from Alan Kaplinsky, co-leader of Ballard Spahr's consumer financial services group. He said his law firm has not seen any continued drop in the number of investigations under President Donald Trump's administration.

State attorneys general and state banking regulators are becoming more active and are filling any enforcement void by the U.S. Consumer Financial Protection Bureau, "if there even is a void," he said.

Kaplinsky said early in the administration a number of bureau investigations were dropped. "But little by little, under [new] director Kathy Kraninger the level of activity has really ramped up."

While the bureau did not immediately respond to requests for comment, a look at its annual and quarterly reports supports Kaplinsky's theory.

In fiscal years 2015, 2016 and 2017 the bureau collected penalties from more than 30 defendants each year, mainly companies. In 2018 that number dropped to 14.

"" diego="" m.="" width="150" height="150" /> CFPB Director Kathy Kraninger. Photo: Diego M. Radzinschi/ALM

Kraninger became director in December 2018, and the only quarterly report available so far under her command, for January through March, shows the number of defendants increased to seven in that quarter. If the trend continues, enforcement actions for four quarters could near pre-Trump administration levels.

"There's been a slow and steady increase," Kaplinsky noted. "We can see it in the number of consent orders that has increased, and that's the tip of the iceberg. We know there are also a lot of investigations that are not yet public."

Besides the increased federal activity, Kaplinsky said some states, including Pennsylvania, have created what he called "mini-CFPBs." In addition, New Jersey and New York's Departments of Financial Services have "become an even more formidable financial regulator," he said.

The states seem to be more focused now on consumer protection, especially involving what Kaplinsky called "emerging products." For example, he said several states are investigating 12 companies involved in a new financial technology product offering worker pay advances based on each day's pay. For a fee, it allows workers to collect their pay daily and not have to wait on a weekly or biweekly check.

"It's a very innovative product and it's very consumer-friendly," he said. "But apparently various banking regulators don't like it. They say it violates state usury, licensing and labor laws."

He said more enforcement is occurring under new state licensing laws for companies that service student loans, particularly in Massachusetts.

Both state and federal regulators continue to go after third-party debt collectors who abuse consumers, he said. "Debt collection has always been a hot area," Kaplinsky noted.

There is one area, he said, the federal watchdogs appear to have left to the states: fair lending. "That's one area where there's virtually nothing going on at the federal level right now."

He cited Pennsylvania's mortgage redlining probe as an example of heightened state action, along with New York's investigation of financial institutions for allegedly using collected data to target certain markets and exclude people in protected classes.

Kaplinsky said the increased state enforcement coupled with more investigative demands from the CFPB has his clients asking: "What's going on here? We thought they were out of business."

The bottom line, he said, is "There is this perception [of an enforcement void] and there is reality. The reality right now is quite a bit different from the perception."