The Consumer Financial Protection Bureau, now with a new director, is poised to target mortgage servicers that don't do right by homeowners facing economic hardship. But it also has an eye on landlords that mistreat tenants.
Just as the agency is concerned about what will happen to borrowers when their pandemic assistance ends, the CFPB is focused on a looming crisis for low-income renters after a nationwide eviction moratorium expired.
Although the bureau's authority to pursue landlords is under debate, observers believe the agency could attempt certain enforcement tactics, such as investigating mistreatment of renters by debt collectors or asset managers with residential management portfolios.
“The CFPB, like so many other federal agencies, is obviously really concerned about this eviction crisis and is trying to use all the tools at its disposal to address it,” said Chi Chi Wu, a staff attorney at the National Consumer Law Center.
The CFPB has been warning financial companies all year of the need to help struggling consumers during the pandemic. The bureau specifically has
Reducing evictions and
But how the CFPB responds to evictions is likely to revive debate about the limits of the bureau’s authority and Chopra’s willingness to push those limits, experts say.
Though Chopra has not yet laid out his specific priorities, he highlighted the pandemic response in an inaugural
“This is an extremely fragile moment for our economy and our country,” Chopra wrote. “We have experienced an uneven recovery, as many families and businesses continue to feel left behind. COVID-19 has also put into clearer focus the longstanding systemic and structural barriers we must overcome to build a more inclusive economy.”
Some think Chopra’s message signaled that the CFPB will look at the financial stability of consumers broadly, across all markets. The CFPB is a member of the Financial Stability Oversight Council and Chopra said he intends to play a key role in addressing large-scale risks.
“Our agency plays an essential role within the Federal Reserve System to safeguard household financial stability,” Chopra wrote. “We must anticipate emerging risks so we can act before a crisis, rather than acting after it is too late.”
Large landlords in particular are concerned about the potential bad press and fines that could come from a CFPB investigation. Most landlords are Mom-and-Pop investors who own fewer than 10 properties. Large asset managers like New York-based Blackstone Inc., one of the largest landlords in the U.S., own fewer than 2% of single-family properties, said Rick Sharga, an executive vice president at RealtyTrac.
“Does the CFPB plan to 'regulate' hundreds of thousands of individual investors?” Sharga asked. “The CFPB approach is novel, but I can see an argument for it: Landlords, in effect, become the mortgage servicers of the rental industry.”
Federal and state eviction moratoriums issued last year were meant to help ease the economic effects of the pandemic on renters. In many areas, the eviction freezes meant that the eviction rate was lower than historic averages.
After a congressionally mandated freeze ended in July 2020, the Centers for Disease Control and Prevention announced successive moratoriums. But the federal eviction relief ended in August 2021 after the Supreme Court ruled that the CDC had exceed its authority.
"When these programs end, renters and their families may be at heightened risk," the CFPB said in a September report warning of the effects of the safety net expiring.
While the CFPB has authority over mortgage servicers and debt collectors, some experts question whether it has any jurisdiction over landlords. The Consumer Financial Protection Act covers companies that sell financial products and services, and rent typically is not considered in that mix.
More likely, the CFPB would take action by teaming up with the Federal Trade Commission or states to enforce consumer protections.
"The financial product or service limitation only applies to CFPB, it doesn't apply to the FTC and it doesn't apply to states generally," said Eric Sirota, director of housing justice at the Shriver Center on Poverty Law.
In April, the bureau
“The bureau will have to find a way to assert jurisdiction over landlords who would not generally be expected to be subject to CFPB jurisdiction,” said Jeff Naimon, a partner at the law firm Buckley LLP.
The CFPB also is expected to use its broad authority to penalize companies for “unfair, deceptive or abusive acts or practices.” Some attorneys have warned landlords that misleading or illegal lease terms, demands or threats for rental payments, and failures to maintain a property could be considered UDAAP violations.
Still, a sizable minority of states have interpreted UDAAP as not applying to tenants, Sirota said. He thinks tenants would benefit from receiving more attention from consumer enforcement agencies.
“I do think it's heartening that the CFPB has shown willingness to broaden its efforts to assist tenants," Sirota said. "Renters are in an incredibly vulnerable position right now, and prone to a lot of harm and consumer abuse."
Meanwhile, consumer advocates expect the CFPB to target tenant screening companies that violate the Fair Credit Reporting Act, if they provide inaccurate information in background reports that property management companies purchase to screen renters for housing.
Debt collectors are often involved in both evictions and in pursuing post-rental debt, Wu said, and inaccurate information about debts also may get reported to credit bureaus and show up on tenant screening reports.
“These background check and tenant screening agencies are very problematic,” said Wu. “They will regularly tag people with the wrong criminal record, especially if that person has a common name, and that prevents people from getting housing.”
Chopra weighed in on the issue this week in
“This case highlights a dangerous argument that could be used by market participants to sidestep laws expressly designed to cover them,” Chopra said in a joint statement with FTC Chair Lina M. Khan. “Across the economy such a perspective would lead to a cascade of harmful consequences.”
