By Jon Hill

Law360 (April 19, 2021, 3:24 PM EDT) -- The Consumer Financial Protection Bureau issued an emergency rule Monday that could create liability for attorneys who engage in residential eviction proceedings for landlords if they take renters to court without informing them of their rights under a recently extended federal eviction moratorium.

In an interim final rule, the CFPB said it is amending its Fair Debt Collection Practices Act regulations to require that tenants facing possible eviction for unpaid rent first be given written notice of the protections available under the moratorium, which the Centers for Disease Control and Prevention originally ordered last September in response to the COVID-19 crisis.

The rule goes into effect May 3 and does not apply directly to landlords, but does apply to third-party debt collectors, including attorneys hired to represent landlords in eviction actions. It also forbids debt collectors from misrepresenting to renters that they're not covered by the national moratorium, which was extended last month to remain in place through June.

"No one should be evicted from their home without understanding their rights, and we will hold accountable those debt collectors who move forward with illegal evictions," the CFPB's acting Director Dave Uejio said in a statement. "We encourage debt collectors to work with tenants and landlords to find solutions that work for everyone."

The CDC's moratorium prohibits evictions of struggling tenants who can't pay their rent and have nowhere else suitable to live. The protections, which were intended as a public health measure to keep at-risk renters out of shelters and crowded living situations conducive to COVID-19 spread, are available to tenants who certify their financial and housing eligibility in writing for their landlords.

But Uejio told reporters Monday that with roughly 9 million U.S. households behind on rent, the nation is "facing an eviction crisis." Tens of thousands of tenants and their families are being evicted each week, and in many cases, those evictions could have been halted if the tenants had given landlords the certification needed under the CDC moratorium, according to Uejio.

"This is an issue with important implications for racial equity," Uejio said. "Black and Hispanic households are roughly twice as likely to be behind on their rent compared to white households. Black and Hispanic households are more than twice as likely to rent compared to white households, a disparity that denies them a key avenue of wealth accumulation."

In its Monday rule, the CFPB said it believes some tenants may not know about the CDC's eviction moratorium or how to take advantage of it. And there are reports that tenants who do try to use the moratorium to halt an eviction may be "falsely informed" that they're not eligible, the agency said.

"Numerous public reports and bureau outreach with consumer advocates, legal aid organizations, and other stakeholders also suggest that parties to the eviction process may be engaged in other conduct in violation of federal, state, or local eviction moratoria," the CFPB said.

Under the CFPB's new rule, debt collectors must disclose the CDC's eviction protections to potentially eligible tenants before filing eviction actions against them. The rule contains further requirements related to the timing and format of this disclosure, for which the CFPB has also developed sample language that debt collectors can use. It will also be putting out a model form.

But failure to provide any such disclosure to tenants is an FDCPA violation, according to the agency.

"The CFPB will move forward with investigations into debt collectors that act illegally, along with state attorneys general who have authority to enforce the FDCPA," Uejio told reporters. "The FDCPA includes a private right of action. Tenants may also hold debt collectors accountable, including through class action."

Monday's rule invokes the CFPB's authority under the FDCPA to regulate the practices of debt collectors, but agency officials stressed in a call with reporters that the CFPB is not trying to claim a broader reach over landlords. Instead, officials said the agency's rule covers third parties, like attorneys, that are using eviction as a tool for collecting on unpaid rent owed to landlords.

And while the CFPB doesn't have firm data on how many landlords nationally use debt collectors for this purpose, there are some markets where almost all eviction cases are brought by law firms that primarily handle debt collection work, agency officials added.

Once they take effect, the requirements of the CFPB's rule will remain in place for the duration of the CDC's moratorium. The rule also does not specifically require disclosure of state or local eviction protections that could be more generous, though the agency acknowledged that their nondisclosure could raise FDCPA concerns.

In statements Monday, consumer advocates applauded the CFPB for issuing the rule and argued it will provide important support for the federal eviction moratorium.

"The CFPB's action today provides immediate action toward protecting the millions of families that are at risk of losing their homes, families that are disproportionately of color or low-income," National Consumer Law Center attorney Andrea Bopp Stark said. "This action provides tenants with the information they need regarding their rights to stay in their homes and defend against an eviction."

--Editing by Marygrace Murphy.

Update: This story has been updated with additional information.

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