CFPB Considers Regulating Certain Employer-Employee Agreements as Financial Products | Venable LLP


The Consumer Financial Protection Bureau, under Director Rohit Chopra, has taken the first step toward regulating what the CFPB describes as “employer debt,” which refers to a range of arrangements and employment practices that could cause an employee to owe money to an employer (or other third party), such as requiring employees to purchase equipment and supplies in advance or to reimburse their employer for training if the employee leaves before a certain time.

Last June, without much fanfare, the CFPB published a Information request (RFI) on these practices to the public. The RFI consists of 77 individual questions, divided into the following categories: pre-origination; creation; service and collections; disputes; and credit reports. The objective of the RFI is to collect information “in the service of a better understanding of the relationship between labor practices and the market for consumer financial products or services and the identification of priority areas for future action” .

Director Chopra cited the risk such arrangements pose to consumers – overextending household finances, service and collection errors, default and inaccurate credit reports – as the reason for this venture. It also identified risks specific to the employment context, such as whether failure to repay debt threatens continued or future employment, or whether debt status is impacted by a decision to seek alternative employment.

Whether these arrangements qualify as financial products or services as defined in the Consumer Financial Protection Act will largely depend on the specific action the CFPB ultimately takes. That said, whatever action it takes, its authority to regulate such arrangements will no doubt be controversial and subject to challenge.

The CFPB’s foray into employment relations and labor markets is part of a broader federal government initiative to use its full authority to protect workers and ensure labor market competition, such as the ordered President Biden. Decree of July 2021 encourage federal agencies to implement a “whole-of-government approach” to combat over-concentration, monopolization and unfair competition in the US economy.

Comments in response to the RFI must be provided to the CFPB by September 6, 2022.


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