Entropy is the tendency toward disorder.  A corporate disruptor can refer to someone who challenges the status quo within an organization, upending current practices and priorities. It’s obvious that President Donald Trump is such a disruptor in a governmental sense, embracing a form of entropy, as federal agencies are no longer the leaders in consumer advocacy and regulation. Previous administrations respected order and structure, using the Consumer Financial Protection Bureau and the Federal Trade Commission to set the tone on both federal and state levels. Today that leadership has been banished and the tone of stability silenced.

FTC and CFPB Disruption

The activist FTC, under Democrat Lina Khan’s leadership, is no more. She resigned, and her fellow Democratic commissioners, Rebecca Kelly Slaughter and Carlos Bedoya, were fired. The current commission, comprised of three Republicans and two vacancies, operates under a mandate of reduced regulatory aggression. 

CFPB Director Rohit Chopra, an extremely aggressive consumer advocate who regulated by enforcement, was also fired along with more than 1,500 other CFPB employees. Chopra was succeeded by Jonathan McKernan, who is considered an ally of the financial services industry. McKernan stated that the CFPB has acted beyond its statutory authority, and he opposes regulation by enforcement. He also stated that regulators “…should avoid the temptation to pile on yet more prescriptive regulation …” 

Adding to these personnel changes, the Vehicle Shopping Rule/CARS Rule was vacated in January, which denied additional agency prosecutorial powers. 

Nature Abhors a Vacuum – So Does DAGA

There are two competing attorney general associations: DAGA, or Democratic Attorney General Association, and RAGA, or Republican Attorney General Association. 

The Washington Post opines about members of DAGA: “AGs have also become the muscle of the resistance.”  DAGA’s website boasts, “Under the Trump Administration, Democratic AGs were routinely successful in taking on the Trump Administration’s efforts to undermine the rule of law and rollback key protections.”  It states that its mission includes “… Protect[ing] consumers and our elderly from harmful practices and scams.” Members of DAGA will attempt to fill the vacuum left by the federal agencies. 

Conversely, RAGA’s mission is far more restrained, and one of its mission statements is to seek limited government. 

Make No Mistake: Consumer Law Will Continue to be Prosecuted

The FTC and CFPB will reduce or even discontinue their rulemaking and supervisory activities, but they cannot completely ignore their legally mandated duties of enforcement. DAGA members will fill the gaps by implementing new state rules and supervisory activities. DAGA members can also draw upon Dodd-Frank authority in certain cases. Moreover, both DAGA and RAGA members will continue working in tandem to engage in needed multistate enforcement activities, participate in joint state and federal actions when necessary, and undertake joint advocacy and initiatives. 

The reality remains that malefactors will be prosecuted and punished. Dealers, when appropriate, will be defined as malefactors and prosecuted, regardless of the controlling political party. 

Initiatives and Examples of the Returning Regulatory Empire

Various states have initiated legislation as a consequence of these developments:

• In February, California introduced Senate Bill 766, the California Combating Auto Retail Scams Act, or “California CARS Act”, which echoes the FTC CARS Rule in both title and content.

• The Massachusetts AG issued a regulation in March providing that it is an unfair practice for a seller to misrepresent or fail to disclose the “total price” of a product. A similar provision was in the CARS Rule.

• Amendments to the Pennsylvania Automotive Industry Trade Practices took effect in August 2024 after the state legislature proactively introduced the updates while awaiting the Fifth Circuit’s decision on the FTC CARS Rule. 

• Various states have enacted mini-CFPBs, such as California, New Jersey and Pennsylvania. 

• Various municipalities initiated additional consumer-protection programs, such as New York, Albuquerque, Philadelphia and Salt Lake City.

In addition, states have filed enforcement actions against dealers within the past year for alleged misconduct targeted by the CARS Rule, at times jointly with the FTC. It may continue. 

Given all of this, it's best to be careful out there. Bad behavior will continue to be prosecuted. The regulatory empire will see to it. 

Terry O’Loughlin is director of compliance for Reynolds and Reynolds and is admitted to the Pennsylvania and Florida bars. Before joining Reynolds, he was employed by the Florida Office of the Attorney General, where he investigated automobile dealers and financing sources. He previously was a public accountant.