The passage last year of a new federal law covering lending and credit transactions for consumers will provide stronger protection, but questions about how it will be enforced and what it will actually mean are just beginning to be answered.

That was the overall theme of the 2011 Public Service Conference held at Eckstein Hall. The conference, New Directions in Consumer and Community Financial Protection, brought together prominent federal and state authorities on the subject and provided an up-to-the-minute look at the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“Dodd-Frank created a floor, not a ceiling, for consumer protection” noted Kathleen Keest, an expert on consumer protection law from the Center for Responsible Lending.  The new law reverses some of the federal preemption rules that were in effect prior to its passage, providing state attorney generals with increased enforcement authority with respect to many consumer protection laws.   

One of the focal points for discussion was where the balance will be struck between federal and state regulators as the new law is implemented. Gregory Zoeller, attorney general of Indiana and co-chair of the National Association of Attorneys General Consumer Protection Committee, told the audience that he was working with federal regulators to make sure that states have an important role in making decisions about prosecutions and other actions.

“When you consolidate authority in Washington, it often has trouble written all over it,” said Zoeller, a Republican.  “Even things that started off well sometimes come back to haunt you.”

He said while he was skeptical of some parts of the Dodd-Frank law, he agrees it is an improvement. But he fears what the impact of  lobbyists may be in shaping rules for carrying out the law that are just beginning to be shaped. 

Zoeller said attorneys general are supposed to have a relationship with federal enforcers that involves cooperation and consultation, but sometimes they end up feeling like the federal officials want to own and operate them. It will be better for carrying out Dodd-Frank if the relationship is a healthy one, he said. He said attorneys general are collaborating well in working on the course they want to take in response to the law.

Charles Harwood, deputy director of consumer protection for the Federal Trade Commission, struck an optimistic note in describing the role FTC has played, and will play, in protecting consumers in cases involving lending  practices and in describing relations between federal and state enforcement efforts.

“In my experience, the states and the federal government have no problem co-existing in the consumer protection area,” he said. He said even when attorneys general decide they prefer to prosecute a matter using state laws, they benefit from having federal regulations or enforcement tools as practical help to them.

The FTC will move some of its power over regulating consumer financial instruments to the new Consumer Financial Protection Bureau, being created within the Treasury Department, Harwood said. Recounting all the FTC went through to create rules for disclosing information on energy consumption to consumers who buy appliances, Harwood cautioned that it can become very complicated to determine ways to give consumers information. 

The Dodd-Frank law is intended to prevent the kind of abuses and excesses in lending and credit practices that were major contributing factors in the mortgage and foreclosure crisis of recent years. Nine months after its passage, the practical aspects of Dodd-Frank are still in formation. The Public Service conference allowed about 150 lawyers and others to get top quality information on where that enforcement process is headed – and to consider major questions that remain to be answered in determining  the law’s effectiveness.