Last month, the Consumer Financial Protection Bureau (CFPB) announced its plans to issue new regulations for the debt collection industry. CFPB’s notice states, “Debt collection generates more complaints to the CFPB than any other financial product or service.”
The CFPB’s proposed rules would help consumers by increasing the requirements that debt collectors must meet to document the correct amount of a debt, increasing the consumer’s opportunities to dispute a debt, making more specific the rules against repetitive and harassing contacts, and requiring that consumers requests to limit communications apply to subsequent collectors working on the same debt.
However, the CFPB’s notice makes no mention of a relatively new legal protection for the employees of debt collection firms. Since the 2010 enactment of the Dodd-Frank Act (which created the CFPB), employees of debt collection firms have had a legal protection against retaliation whenever they raise concerns about violations of consumer rights.
The way that Congress enacted this protection has made it so obscure that hardly anyone has ever noticed it and I am not aware that anyone has ever used it.
Congress passed the Dodd-Frank Act in the wake of the 2007-08 fiscal crisis. Our financial markets, here and around the world, ground to a halt as widespread fraud in the consumer mortgage market came to light. Within a decade of passing the Sarbanes-Oxley Act in 2002 (SOX), Congress was rightfully concerned that our systems were inadequate to detect the frauds that could be so harmful.
As part of the Dodd-Frank Act, Congress created the Consumer Financial Protection Bureau (CFPB) believing that a dedicated watchdog could protect our markets from future crises in a way that SOX had not. CFPB would have independent power to protect consumers from frauds and other mistreatment and thereby have eyes and ears in the consumer financial markets.
As a young legal aid lawyer, I counseled many consumers who were distressed by harassment from debt collectors. They suffered symptoms of stress similar to those of domestic violence victims. They felt shame and embarrassment. They felt powerless to stop the abuse. They lose sleep, suffer medical problems and are constantly anxious about how to make it stop. I could explain how the harassment was illegal, and sometimes that would lessen their immediate anxiety. A few clients were willing to let their harassment become the basis of a lawsuit to hold the collectors accountable for their actions. While my clients’ recoveries would be immensely satisfying for them, it became just a cost of doing business for the collections firms that continued their practices against other consumers who didn’t know or would not use their legal rights.
In creating the CFPB, Congress wisely understood that one of the best sources of information about frauds and violations would be the employees that companies use to carry out their misdeeds. Therefore, in Section 1057, Congress created a whistleblower protection for the employees in all the industries that CFPB would regulate. As I walk with you through this section of law, I suspect that you will quickly see that it is convoluted and difficult to discern the actual meaning.
Now codified at 12 U.S. Code § 5567(a), this protection bars any “covered person or service provider” from terminating or “in any other way discriminat[ing] against,” “any covered employee” “by reason of the fact that such employee or representative … has” —
(1) provided, caused to be provided, or is about to provide or cause to be provided, information to the employer, the Bureau, or any other State, local, or Federal, government authority or law enforcement agency relating to any violation of, or any act or omission that the employee reasonably believes to be a violation of, any provision of this title or any other provision of law that is subject to the jurisdiction of the Bureau, or any rule, order, standard, or prohibition prescribed by the Bureau;The key to understanding the significance of this section, particularly subsections (1) and (4), is understanding the scope of “this title” and what is “subject to the jurisdiction of, or enforceable by, the Bureau.” The answer is contained in 12U.S.C. § 5481(14). There, the Dodd-Frank Act lists all the laws that are now within CFPB’s jurisdiction. They are:
(2) testified or will testify in any proceeding resulting from the administration or enforcement of any provision of this title or any other provision of law that is subject to the jurisdiction of the Bureau, or any rule, order, standard, or prohibition prescribed by the Bureau;
(3) filed, instituted, or caused to be filed or instituted any proceeding under any Federal consumer financial law; or
(4) objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any law, rule, order, standard, or prohibition, subject to the jurisdiction of, or enforceable by, the Bureau.
the Alternative Mortgage Parity Act of 1982, 12 U.S.C. § 2801; Consumer Leasing Act of 1976, 15 U.S.C. § 1667; most of the Electronic Funds Transfer Act, 15 U.S.C. § 1693; Equal Credit Opportunity Act, 15 U.S.C. § 1691; Fair Credit Billing Act, 15 U.S.C. § 1666; most of the Fair Credit Reporting Act, 15 U.S.C § 1681; Home Owners Protection Act of 1998, 12 U.S.C. § 4901; Fair Debt Collection Practices Act, 15 U.S.C. § 1692; parts of the Federal Deposit Insurance Act, 12 U.S.C. § 1831t(c)-(f); parts of the Gramm-Leach-Bliley Act, 15 U.S.C. § 6802-09; Home Mortgage Disclosure Act of 1975, 12 U.S.C § 2801; Home Ownership and Equity Protection Act of 1994, 15 U.S.C. § 1601 note; S.A.F.E. Mortgage Licensing Act of 2008, 12 U.S.C. § 5101; the Truth in Lending Act, 15 U.S.C. § 1601; the Truth in Savings Act, 12 U.S.C. § 4301; section 626 of the Omnibus Appropriations Act, Pub. L. No. 111-8; and the Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701
For my purpose in this blog, this list explicitly includes the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692. Each of these laws, however, now has the same explicit whistleblower protections for any employees who want to raise concerns about the violations of the consumer’s rights.
By placing the whistleblower protection in this provision of the Dodd-Frank Act, and making its application dependent on finding and understanding each reference, Congress did make it harder for practitioners to find and use the law. In other whistleblower laws, the provision protecting whistleblowers is a part of the law that is being enforced. For the FDCPA, one has to know to look in the CFPB statute to find the employee protection.
As a legal aid lawyer, I fantasized about how great it would be if the employees of the debt collectors I sued could have a legal protection for refusing to abuse and harass the debtors. Most of them are paid on commission, so it was in their interest to continue whatever tactics would get consumers to pay the most. Would the CFPB protection today allow a debt collector to refuse to engage in harassment, but still pursue a claim for the commissions that would have been earned but for that refusal? This question remains unanswered as there are no reported cases enforcing this protection for debt collectors.
Perhaps the CFPB will consider an addition to their final rules for debt collectors. They could require debt collection firms to post the Department of Labor’s fact sheet for CFPB whistleblower claims. Then debt collectors could learn about their protections and the 180 day time limit to file retaliation complaints.
If there are debt collectors, or other employees in the consumer financial industry, looking for advice about their rights, or concerned that they have suffered retaliation, they are welcome to apply to our offices for legal advice and representation.