Gregory A. Brower is a Shareholder with Brownstein Hyatt Farber Schreck, LLP. He writes regularly for the WLF Legal Pulse as its Featured Expert Contributor on White Collar Crime and Corporate Compliance. He also serves on WLF’s Legal Policy Advisory Board. Leah C. Dempsey is also a Shareholder with the firm, for which she co-chairs the financial services practice.
In the days leading up to the recent State of the Union address, the White House introduced a new “strike force” to take on “unfair and illegal” corporate pricing. The Federal Trade Commission (FTC) and the Department of Justice (DOJ) will jointly lead this effort. Simultaneously, the Consumer Financial Protection Bureau (CFPB) finalized a controversial rule severely limiting credit card late fees.
During his address to Congress, the President identified housing as one of the key sectors where the strike force will focus its efforts to “root out and stop illegal corporate behavior that hikes prices on American families through anti-competitive, unfair, deceptive, or fraudulent business practices.” He also outlined plans to implement a temporary $400 per month tax credit for first-time homeowners to address rising mortgage costs and stated that his administration is “cracking down” on landlords whom he alleged are in violation of antitrust laws by “price-fixing and driving up rents.” Many of these initiatives sound good on paper and—in a vacuum—they could make life easier for many Americans. But, as always, the devil is in the details. What the speech did not highlight or even mention are the recently issued regulations that could make it harder for housing providers to conduct business. These regulations could limit their ability to increase supply and address the demand for more affordable housing—the very problem the President aims to fix.
Also relevant to this discussion are the numerous new policies emerging from the Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC) and other agencies, which are poised to create challenges for financial services providers seeking to offer credit. For instance, when lenders are unable to recoup their costs or address delinquencies through fees, economic principles dictate a reduction in lending to the riskiest borrowers—those with low incomes or low credit scores. Ironically, these are the very individuals both sides of the political aisle purportedly aim to assist.
It’s important to recognize that the financial services industry, along with other sectors accused of imposing junk fees, are not primarily focused on “ripping off” Americans, as some suggest. Rather, these fees often serve to offset losses, provide additional services and maintain necessary product offerings while ensuring financial stability. Furthermore, financial services providers already operate under stringent regulations and specific disclosure requirements.
Last fall, the FTC proposed a wide-reaching rule using its “unfair or deceptive” authority to target certain fees, including those commonly encountered in the rental housing market and more than a dozen other industries. The potential rule creates opaque new requirements for disclosing any possible fees at the outset of the landlord/tenant relationship. Additionally, if there are unforeseen future fees—such as costs related to unit damage or future needs like private trash removal—housing providers could face liability or other regulatory consequences for not initially identifying them. Furthermore, the Federal Housing Finance Agency (FHFA), the Department of Housing and Urban Development (HUD) and the CFPB have proposed several other rules expected to be finalized in the coming months. These rules may add complexity and cost for those involved in creating housing options for lower-income Americans. It’s worth noting that many of these new rules overlap or clash with the already robust state laws and regulations governing the housing market.
In light of the above, one wonders if a “strike force” is the best approach when engaging in a constructive discussion with industry partners could be more beneficial in furthering the common goal of helping consumers.