CFPB Leaps Into Employees and Contractors Indebted to “Employers”

The Consumer Financial Protection Bureau has announced a review into “employer” practices and employer-provided financial services that could leave employees and contractors indebted to employers.  In conjunction, the agency issued a request for information, seeking available information about “employer-driven debt”, a blogpost, and a YouTube video.

In its press release, the CFPB indicated that it was seeking more information to determine whether employees were able to freely choose to use employer-driven debt products.  The CFPB also wants to obtain more information about the types of debt obligations being issued and the requirements laid out in those obligations. The CFPB went on to describe employer-driven debt, providing examples such as the requirement that employee’s purchase equipment and supplies essential to work or obtaining an agreement that employees must stay with an employer for at least one year or be required to pay back the costs for training or other services provided to the employee during the course of their employment.

In overseeing consumer financial products, the agency asserted that employer-driven debt continues to grow as an area of “consumer” debt.  Accordingly, the CFPB stated that it intends to focus on whether employees understand the requirements related to employer debt and understand that employer debt is considered a credit extension.  The CFPB also indicated that it is examining the impact of employer-driven debt on future employment opportunities on consumers impacted.

It is far from clear where the agency is headed.  The CFPB’s blogpost expressly announced an initiative with the U.S. Department of Transportation and U.S. Department of Labor.  But the video mentions much more, including coaching, training, and equipment.  By stating directly that the arrangements are “extensions of credit”, and the workers should be able to shop around, and also referring to arrangements where certain “debt” must be repaid if an employee leaves within a certain period, the agency potentially opens an enormous “can of worms”.  What about signing and retention bonuses?  What about advances?  What about compensation structures to management and senior staff?

This broad leap into the unknown evidences an agency continuing to expand its turf.  Where it stops; nobody knows. 

Comments are due September 7, 2022.  Mortgage companies should not sit idly by.

If you would like to discuss any of the issues in this post, please contact Troy Garris at troy@garrishorn.com.