Federal oversight of collection, credit agencies could benefit civil plaintiffs

Consumer Financial Protection Bureau (CFPB) director Richard Cordray announced today that collection agencies could  be subject to federal oversight by the newly-created bureau. This is good news for people who have lost their jobs because of a personal injury, a work injury and/or a wrongful termination.  Loss of a job goes hand in hand with financial insecurity and mental and emotional distress. Any new federal regulations could give victims of injuries and wrongful terminations a bit more piece of mind if their attorneys are diligent in applying the potential new regulations.

One pro-debtor idea that has been discussed as a regulation would be heightened documentation standards for filing collections suits.  This would be a preemption argument. The Roberts Court and the Federal Courts generally favor preemption. Plaintiffs lawyers, especially the class action bar, hates preemption. I think most plaintiff’s lawyers would be wary of federal intervention in state courts. But if the Supreme Court favors preemption it makes sense for attorneys who advocate for debtors to use whatever tools are available.

According to the New York Times article, the oversight will cover the 150 biggest collection firms that comprise about 2/3rds of the market share of the collections industry. But even if an over-aggressive collection agency is not covered by the new regulations, Nebraska lawyers defending collection cases for plaintiff’s in injury and employment cases have other remedies such as the option of removing collection actions from county court into district court in order to seek injunctive relief. Lawyers in other states should also check their jurisdictional statutes to see how they can use equitable remedies in collection defense.

The CFPB also announced a proposal of credit reporting agencies. I heard a speaker at the recent AAJ Winter Convention in Phoenix mention that insurers will run credit checks of plaintiff’s firms during litigation in order to gain more leverage in settlement negotiations. If that is true it would stand to reason that insurers and employers would run credit checks on the plaintiffs themselves.  Such a tactic would likely run afoul of the Fair Credit Reporting Act and possibly create another cause of action. One practice pointer to counter such tactics would be to include questions about credit checks in written discovery.


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