June 17, 2022

In today’s Federal Register, the Consumer Financial Protection Bureau (CFPB) published a request for information (RFI) regarding practices and financial products that may leave workers indebted to their employers. This RFI follows an April 21, 2022 letter from Senate Banking Committee Chair Sherrod Brown and Senate Health, Education, Labor and Pensions Committee Chair Patty Murray (as well as Senators Elizabeth Warren, Robert Casey, Tina Smith, and Bernie Sanders) specifically urging the CFPB to investigate the use of “training repayment agreements” (TRAs) between workers and businesses. Importantly, although the Senators cited pilots, truckers, securities brokers, and nurses as examples of occupations in which these agreements are a specific concern, the CFPB’s RFI is not limited to these occupations, so this RFI needs to be considered in the context of any TRAs that may be used by apprenticeship training funds in which SWACCA members participate.

The RFI may also advance SWACCA’s fight against misclassification of construction workers as independent contractors because it focuses on employer-driven debt regardless of the legal status of the worker’s relationship to the employer and the CFPB notes that its use of the term “employee” refers to the worker subject to the debt obligation, regardless of whether a worker is considered an employee under the Fair Labor Standards Act, an independent contractor, or whether they may have been misclassified. The employer-driven debt products the CFPB is focused on can take many forms, including: (1) TRAs that require workers to pay their employers or third-party entities for previously undertaken training provided by an employer or an associated entity if they separate voluntarily or involuntarily within a set time period; and (2) debt owed to an employer or third-party entity for the up-front purchase of equipment and supplies essential to their work or required by the employer, but not paid for by the employer. Regardless of the form it takes, the CFPB asserts that employer-driven debt, like other debt, poses risks to consumers, including overextension of household finances, errors in servicing and collection, default, and inaccurate credit reporting.  Moreover, CFPB explains that workers may not understand whether these arrangements involve an extension of credit, whether they have the ability to comparison shop for credit offered by others, or whether entering into the debt agreement is a condition of employment.

As a result, the CFPB is seeking feedback from the public on how employer-driven debt has impacted workers. The RFI includes 77 questions (available via the Federal Register notice here in their entirety) that collectively address topics at both the market level and transaction-specific level, including: (1) the effects of employer-driven debt and related practices on employers, employees, and their families; (2) how the CFPB might use its supervision, enforcement, research, rulemaking, and consumer complaint functions with respect to employer-driven debt; (3) pre-origination issues for employers, including whether employers evaluate the employee’s likelihood of repayment; (4) origination issues (e.g., the purposes for which employer-driven debts are incurred and whether debts are incurred before or after an employee accepts employment); (5) servicing and collections, including the collection practices used by employers collecting employer-driven debt; (6) disputes, including whether employers who impose employer-driven debt have processes, policies, and procedures for taking and handling disputes about the debt; (7) credit reporting, including the extent to which employers or related third parties furnish information to credit reporting companies regarding employer-driven debts; and (8) financial health (i.e., the effects of employer-driven debt were on worker finances, employment experience, professional mobility, workplace health and safety, compensation, and the well-being of workers’ families.

The CFPB highlights that it is particularly interested in feedback from employers (including employers trying to compete with other employers using employer-driven debt), labor unions and worker organizations, consumers, social services organizations, consumer rights and advocacy organizations, legal aid attorneys, academics and researchers, financial institutions, small businesses, and state and local government officials.

Reponses to this RFI are due by September 7, 2022 and can be submitted by email to employer-drivendebt@cfpb.gov including Docket No. CFPB-2022-0038.

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