Millions of consumers in pandemic-related financial straits have also faced housing instability due to the difficulty in paying rents, according to the Government Accountability Office.
Part of the government response was the Centers for Disease Control eviction moratorium, based on public health concerns. The Consumer Financial Protection Bureau began to publicly consider in March 2021 what steps it could take.
One result has been the recent issuance of an interim final rule on debt collections and tenant evictions. The rule technically involves third-party debt collectors, their duty to provide adequate information on potential help during an eviction, and the ability of tenants to hold collection agencies liable.
But property owners had best pay attention. Experts say the move is likely just part of broader heightened scrutiny from federal and state regulators that might entangle them as well.
The new rule addresses the duties of debt collectors under the Fair Debt Collection Practices Act (FDCPA).
“The CFPB already took swift action against credit card companies and banking institutions during the initial months of the pandemic for falsely reporting delinquencies,” Adem Selita, CEO of The Debt Relief Company, tells GlobalSt.com.
Debt collectors will be able to use specific guidance and model language from the CFPB, so “the potential for liability for a debt collector that is conscientious is quite low,” Quyen Truong, a partner at the law firm Stroock and former assistant director of the CFPB, tells GlobalSt.com. However, the “CFBP emphasized that the rule is not directed at the landlords or owners of these properties.”
Still, better information to consumers could have an effect on owners.
“The rules requirement for debt collectors to provide written notice to the tenant of their rights under the eviction moratorium likely would result in more tenants taking advantage of that moratorium to prevent eviction,” says Truong.
Although payment issues immediately rise from the pandemic, the problem is larger. “The greater issue is that housing prices are climbing astronomically while development is increasingly burdensome,” Paul Monsen, vice president at real estate capital advisory George Smith Partners, tells GlobeSt.com. “Controversial eviction practices are often a result of societal issues which were present far before COVID-19 existed, the main culprit being the difficulty of building housing, affordable or otherwise.”
“As an attorney for property managers and landlords, the interim ruling is a harsh remedy for a situation where our clients are struggling to stay afloat during the pandemic,” J. Andrew Murrell, of the Andrew Murrell Law Firm, tells GlobeSt.com. “My experience thus far has been that the moratorium has been subject to a variety of interpretations by judges and without consistent guidance, it is impossible to determine when you cross that threshold into illegal evictions.”
But even if landlords are not directly targeted, they could still become entangled in the legal fallout. “There is nevertheless the possibility that a court could be convinced that the landlord is providing substantial assistance to the debt collector’s violation of the rule,” Truong says. “There’s a possibility that either the private litigants or a government enforcer might try to advance that theory, to hold the landlord liable.”
The question also goes beyond the immediate rule. “Landlords can expect there will be rigorous scrutiny of debt collection activities, even past the eviction moratorium, especially as it might seem to be connected to the financial impact of the pandemic,” says Truong. The scrutiny could come not only from the CFPB, but other regulators, both federal and state.