President Biden recently announced his nomination of Democrat Rohit Chopra as the next Director of the Consumer Financial Protection Bureau (CFPB). Chopra’s nomination is likely to be confirmed given the Democrats’ control of the Senate and the fact that his nomination to the Federal Trade Commission (FTC) was unanimously confirmed by the Senate in 2018. Current CFPB Director Kathleen Kraninger has resigned at the President’s request.
Under Chopra, the CFPB is expected to be more aggressive in initiating investigations to pursuing enforcement actions. Chopra is likely to shift resources to the CFPB’s Office of Enforcement and to pursue more enforcement actions against Consumer Reporting Agencies (CRAs) and background screeners in particular. Chopra’s December 8, 2020 Dissent to the FTC’s settlement with AppFolio, Inc. provides insight regarding how he intends to regulate background screeners. [1] (To learn about the Appfolio case, go to https://www.messerstrickler.com/blog)
Expect Thorough CFPB Investigations, Litigation and Increased Penalties and Compliance Measures
In his Dissenting Statement Chopra criticized the FTC’s $4.2 million settlement under which AppFolio promised to follow the Fair Credit Reporting Act (FCRA) which it was already required to do, and to submit non-descript compliance reports to the FTC. Rather than settling, Chopra believed the FTC should have referred the case to the Department of Justice for prosecution. He argued that the FTC should have forced AppFolio to compensate consumers who had been the subject of inaccurate background checks. In lieu of “generalized” reports to the FTC Chopra advocated for public “reporting of specific metrics and qualitative data” He further argued for “increased accountability for individual executives and board directors” of regulated companies.
Expect an Emphasis on Anti-Discrimination
Chopra claimed that AppFolio’s tenant screening practices may have constituted unlawful discrimination, stating “[w]hen it comes to opportunities like housing and employment, background screeners can play a pivotal role in determining whether an applicant is accepted or denied, since they provide detailed dossiers of personal information. If their practices are discriminatory, they can and should be held accountable.” In support for this argument Chopra embraced what he termed the “landmark decision” Connecticut Fair Housing Center v. CoreLogic Rental Property Solutions, LLC, 369 F. Supp. 3d 362 (D. Conn. 2019). In that decision the court found CoreLogic could be liable under the Fair Housing Act (FHA) as a result of its “CrimSAFE” product. CoreLogic marketed CrimSAFE as an “automated tool [that] processes and interprets criminal records and notifies leasing staff when criminal records are found that do not meet the criteria you establish for your community.” The plaintiffs alleged CoreLogic knew CrimSAFE discriminated against minorities but continued to offer it. The court found that CoreLogic could be liable under the FHA if it knew of and had the power to correct and end discriminatory housing practices.
Pointing to U.S. Department of Housing and Urban Development (HUD) Guidance [2], Chopra argued “AppFolio may have contributed to decision-making that ignores the ‘nature, severity, and recency of criminal conduct’ – a practice that HUD has indicated is likely unjustified.”[3]
The CFPB’s emphasis on combatting the potential discriminatory effects of background screening will also be based on goals established by President Biden. On January 20, 2021, Biden issued an Executive Order On Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.[4] That Executive Order requires all Federal agencies to “assess whether, and to what extent, [their] programs and policies perpetuate systemic barriers to opportunities and benefits for people of color and other underserved groups.”
What CRAs Should Do to Prepare For a More Aggressive CFPB
With the assistance of qualified legal counsel CRAs should review and update their FDCPA compliance policies and training procedures. CRAs should establish new written policies and procedures if existing policies and procedures are unclear, outdated, or non-existent. Given the CFPB’s expected emphasis on anti-discrimination measures CRAs should conduct a top down review of their products, procedures, and client contracts for compliance with fair housing and employment laws and regulatory guidance issued by federal agencies. [5] Importantly, background screeners who provide recommendations to their clients regarding whether to accept or reject applicants should ensure that their recommendations do not run counter to anti-discrimination laws. This is true even for background screeners who utilize decision criteria provided by their clients as was the case with CoreLogic’s “CrimSAFE” product.
For assistance in preparing for the CFPB changes, feel free to contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440. Mr. Messer provides comprehensive legal representation to CRAs and related companies throughout the nation in litigation, compliance, and transactional matters. A former Illinois Special Assistant Attorney General, Mr. Messer has extensive trial and appellate experience and is admitted to practice before many federal district courts. He has earned a national reputation for defending lawsuits brought under the FCRA and other consumer protection laws. He has conducted many trials and has substantial class action experience. Mr. Messer is a nationally recognized author and speaker and an active member of the Professional Background Screeners Association.
[1] See, https://www.ftc.gov/system/files/documents/public_statements/1584330/20201208_final_chopra_statement_on_appfolio_-_updated_0.pdf
[2] Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions, DEP’T OF HOUSING AND URB. DEV,
https://www.hud.gov/sites/documents/HUD_OGCGUIDAPPFHASTANDCR.PDF
[3] In relevant part the HUD Guidance states: “a policy or practice that does not consider the amount of time that has passed since the criminal conduct occurred is unlikely to satisfy this standard, especially in light of criminological research showing that, over time, the likelihood that a person with a prior criminal record will engage in additional criminal conduct decreases until it approximates the likelihood that a person with no criminal history will commit an offense.”
[4] https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/executive-order-advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government/
[5] In April 2012, the U.S. Equal Opportunity Commission (EEOC) issued “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII”, although on August 6, 2019 the U.S. Court of Appeals for the Fifth Circuit (covering Texas, Louisiana, and Mississippi) ruled that the EEOC had no authority to issue and could no longer enforce the Guidance or treat it as binding in any respect.