COVID-19: CFPB Requires Consumer Debt Collectors to Add CDC Eviction Moratorium Disclosures to Residential Tenant Eviction Notices | Practical Law

COVID-19: CFPB Requires Consumer Debt Collectors to Add CDC Eviction Moratorium Disclosures to Residential Tenant Eviction Notices | Practical Law

The Consumer Financial Protection Bureau (CFPB) issued an interim rule to require debt collectors under the federal Fair Debt Collection Practices Act (FDCPA) to provide written notice to certain consumers about temporary tenant eviction protections under the current Centers for Disease Control and Prevention (CDC) residential eviction moratorium. The moratorium is for tenants suffering financial hardships caused by the 2019 novel coronavirus disease (COVID-19) global pandemic. The CFPB rule also prohibits a defined FDCPA debt collector from misrepresenting that a consumer is ineligible for existing CDC eviction protection. The new rule takes effect May 3, 2021.

COVID-19: CFPB Requires Consumer Debt Collectors to Add CDC Eviction Moratorium Disclosures to Residential Tenant Eviction Notices

by Practical Law Real Estate
Published on 19 May 2021 • USA (National/Federal)
The Consumer Financial Protection Bureau (CFPB) issued an interim rule to require debt collectors under the federal Fair Debt Collection Practices Act (FDCPA) to provide written notice to certain consumers about temporary tenant eviction protections under the current Centers for Disease Control and Prevention (CDC) residential eviction moratorium. The moratorium is for tenants suffering financial hardships caused by the 2019 novel coronavirus disease (COVID-19) global pandemic. The CFPB rule also prohibits a defined FDCPA debt collector from misrepresenting that a consumer is ineligible for existing CDC eviction protection. The new rule takes effect May 3, 2021.
Update: A Tennessee federal court recently declined to issue a temporary restraining order blocking the CFPB Rule, rejecting a group of landlords' argument that the CFPB Rule violates the First Amendment because it requires false speech (The Property Management Connection, LLC v. The Consumer Financial Protection Bureau, (M.D. Tenn. May 14, 2021)). The landlords argued that because the Sixth Circuit found the CDC Order invalid, the CFPB Rule compels false speech by requiring disclosure to tenants that they may be eligible for protection from eviction under the CDC Order.
The court found that because the CFPB Rule has no application where the CDC Order is not in effect, the CFPB Rule does not require these notices in the Sixth Circuit, and accordingly does not require false speech.
On April 19, 2021, the federal Consumer Financial Protection Bureau (CFPB) issued an Interim Final Rule (CFPB Rule) in support of the Centers for Disease Control and Prevention (CDC) Eviction Moratorium Order (CDC Order). The CFPB Rule:
  • Requires debt collectors as defined under the Fair Debt Collection Practices Act (FDCPA) to provide written notice to residential tenants of their rights under the CDC Order.
  • Prohibits debt collectors from misrepresenting tenant eligibility for eviction protection under the CDC Order.

Background

The CDC Order prohibits residential evictions of qualifying tenants in covered jurisdictions through June 30, 2021 to halt the further spread of the 2019 novel coronavirus disease (COVID-19). To qualify, a residential tenant must meet certain income levels, sign an Eviction Protection Declaration under penalty of perjury, and provide the signed form to the landlord or its agent (such as the landlord's attorney).
The scope of the CDC Order is limited to evictions resulting from non-payment of rent. A tenant's other obligations under the lease or other occupancy agreement remain in effect and subject to enforcement by the landlord, including eviction of the tenant for:
  • Engaging in criminal activity on the premises.
  • Threatening the health or safety of other residents.
  • Damaging or posing an imminent risk of significant damage to the premises.
  • Violating any codes, ordinances, or regulations related to health and safety.
  • Breaching any contractual obligation of the tenant regarding the premises, other than the non-payment of rent or penalties.
The CDC Order does not prohibit a landlord or its agent from sending an eviction notice or from filing an eviction action for reasons including failing to pay rent (see Limited Scope of CFPB Rule). It only serves to prevent the physical removal of the tenant if the person meets the criteria and submits the Eviction Protection Declaration.
For more information on the CDC moratorium, see Legal Update, COVID-19: CDC Extends Residential Eviction Moratorium.

The FDCPA

The FDCPA (15 U.S.C. §§ 1692 to 1692p) and the rules implementing it, Regulation F (12 C.F.R. §§ 1006.1 to 1006.8), are the primary federal statute and rules governing consumer debt collection. The CFPB and the Federal Trade Commission (FTC) enforce the FDCPA. The FDCPA covers the collection of debts of a natural person for personal, family, or household purposes, but not for business purposes. Debts for the purposes of the FDCPA include:
For more information on the FDCPA, see Practice Notes, Consumer Regulations Governing Debt Collection and US Consumer Mortgage Regulations: Overview: Fair Debt Collection Practices Act (FDCPA).

Third-Party Debt Collectors

The FDCPA applies to debt collectors. A debt collector is an entity that uses any instrumentality of interstate commerce or mail in any business whose principal purpose is the collection of debts or regularly collects or attempts to collect, directly or indirectly, debts owed or due, or asserted to be owed or due, to another party Generally, an entity attempting to collect its own debt is not considered a debt collector. (15 U.S.C. § 1692a(6).)
Depending on the activities, debt collectors under the FDCPA can include:
  • Third-party collection agencies.
  • Attorneys and law firms even if the activity includes litigation.
Many landlords and property owners engage debt collectors for pre-eviction collections.
For more information on attorneys and law firms debt collectors, see Practice Note, FDCPA Litigation: Key Issues and Considerations: Attorneys and Law Firms as Debt Collectors.

The CFPB Rule

Rationale

According to the April 19, 2021 CFPB press release, nearly 9 million households are behind on their rental payments and many thousands are being evicted every week, often without being made aware of their rights under the CDC Order. The public policy conclusions of the CFPB Rule include that stopping evictions saves lives and improve racial equality.
Relying in part on a recent Government Accountability Office report that many tenants do not understand that an eviction moratorium is in existence or the steps necessary to qualify and properly file a signed Declaration, the CFPB determined that many evictions were proceeding "informally" with tenants vacating on demand to avoid being named defendants in a court action or after being given false or misleading information about their rights from debt collectors.

New Tenant Protections

Written Disclosures

Before filing an eviction action for the non-payment of rent against a consumer, if the CDC Order might reasonably apply to that consumer, a debt collector must disclose that the consumer may be eligible for temporary protection from eviction under the CDC Order (new 12 C.F. R. 1006.9(c)(1)).
The disclosure:
  • Must be in writing. Email or telephone disclosure does not satisfy the requirement.
  • Must be clear and conspicuous, although no minimum type is mandated.
  • Must be given with the eviction notice, or if no notice is required, with the eviction filing.
  • May be given even to those who might not be covered by the CDC Order.
  • May be provided more than once, such as in each subsequent communication with the consumer.
The CFPB has published sample language for COVID-19 Tenant Eviction Protection disclosures.

Prohibition on Misleading about the CDC Moratorium

A debt collector must not falsely represent or imply to a consumer that the consumer is illegible for temporary protections from eviction under the CDC Order (new 12 C.F.R. 1006.9(c)(2)).

Covered Jurisdictions and Effective Period

The CFPB Rule applies only to the jurisdictions where the CDC moratorium is in effect and only during the effective period of the moratorium including any future extensions. The CFPB Rule does not preempt more protective applicable laws.
For more information on state and local eviction moratoriums, see Practice Note, COVID-19: Commercial and Residential Tenant Eviction Moratoriums Select State and Local Laws Tracker (US).

Limited Scope of CFPB Rule

Like the CDC Order, the scope of the CFPB Rule is limited to eviction activities resulting from non-payment of rent. Generally, evictions actions unrelated to the payment of rent are not considered debt collection activities for the purpose of the FDCPA.
The CFPB Rule does not apply to collection activities on a defaulted mortgage, although other provisions of the FDCPA continue to apply.

Penalties

CFPB Rule violation penalties can be severe. They include the availability of:
These penalties are in addition to fines that a landlord can be subject for violating the CDC Order (see Legal Update, COVID-19: CDC Extends Residential Eviction Moratorium: Penalties).

Practical Implications

The CFPB Rule will impose affirmative duties on debt collectors to educate tenants in default of monetary obligations and penalize those debt collectors who engage in eviction-related contact with consumers that violates the CDC Order and the FDCPA.
Attorneys engaged in residential eviction proceedings should familiarize themselves with the new disclosures and implement new office protocols before the May 3rd effective date of the CFPB Rule. Because it will be nearly impossible for a debt collector to know whether the debtor is a consumer entitled to the new protections, the disclosures should be incorporated in all written communications with the party in default of monetary obligations on a residential lease, including any eviction notice and eviction filing.
For a continuously updated collection of resources addressing COVID-19, see Practical Law's Real Estate Global Coronavirus Toolkit.