Federal Regulators Require Rent Collectors To Lie About the CDC's Illegal Eviction Moratorium

The Consumer Financial Protection Bureau claims to be enforcing a law that prohibits "false or misleading representations."

A federal rule that took effect yesterday requires that anyone attempting to collect unpaid rent tell tenants they may be protected by the residential eviction moratorium that the Centers for Disease Control and Prevention (CDC) imposed in September. Yet federal courts have repeatedly held that the moratorium, which the CDC recently extended through June 30, is invalid because it exceeds the agency's legal authority.

The New Civil Liberties Alliance (NCLA), which yesterday sued the CFPB on behalf of residential property managers and Louisiana real estate attorney Gordon Schoeffler, argues that the rule, which the Consumer Financial Protection Bureau (CFPB) issued under a statute that forbids "false or misleading representations," requires debt collectors to lie. The NCLA's complaint, which it filed in the U.S. District Court for the Middle District of Tennessee, says the CFPB's rule violates the Administrative Procedure Act because it is not authorized by the Fair Debt Collection Practices Act.

The NCLA also argues that the rule violates the First Amendment by mandating false statements. "The rule requires Plaintiffs to falsely inform tenants, in writing, that they are entitled to protection under the Halt Order, when, in fact, the Order has been deemed unenforceable by multiple judges," the NCLA says.

The CDC calls its eviction moratorium a "Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19." It applies to tenants who affirm that they make less than $99,000 a year (or twice that for joint filers); that they are unable to pay rent "due to substantial loss of household income, loss of compensable hours of work or wages, lay-offs, or extraordinary out-of-pocket medical expenses"; that they are trying to "make timely partial payments that are as close to the full payment as…circumstances permit"; and that they are "likely to become homeless" if they are evicted.

As the NCLA notes, "state courts rarely allow inquiry as to whether the facts behind the declaration are truthful." Instead, "mere mention of the Halt Order forestalls evictions." That situation has caused serious hardship for landlords across the country, including many who are far from rich, forcing them to forego rental income or risk $100,000 fines for violating the CDC's order.

The moratorium is based on a breathtakingly broad reading of the CDC director's authority to "take such measures" he "deems reasonably necessary" to stop the interstate spread of communicable diseases. The CDC reasoned that evicted tenants might "become homeless" or "move into close quarters in shared housing," thereby increasing the risk of virus transmission. Yet as the NCLA notes, the moratorium applies even when there is no reason to think evicted tenants will move across state lines, and it covers tenants who are immune to the coronavirus because they have been vaccinated or because they had COVID-19 and recovered.

The CDC's legal rationale suggests the agency's authority encompasses any policy that is plausibly related to disease control, including business closures and a national stay-at-home order as well as the federal face mask mandate that President Joe Biden concluded he did not have the power to impose. Three federal judges and a federal appeals court have rejected that premise, saying the CDC does not have the power it claims.

On February 25, J. Campbell Barker, a federal judge in Texas, ruled that even Congress does not have the power to authorize or impose a broad nationwide eviction moratorium like this one. Barker concluded that blocking enforcement of rent obligations exceeds the federal government's authority to regulate interstate commerce. He noted that the eviction moratorium, which the government claimed it could impose even in the absence of a public health threat like COVID-19, was historically unprecedented, did not involve interstate commerce, and was not necessary to enforce a broader scheme of economic regulation.

On March 10, J. Philip Calabrese, a federal judge in Ohio, ruled that the moratorium exceeded the CDC's authority under the Public Health Service Act. That law mentions these examples of disease control measures: "inspection, fumigation, disinfection, sanitation, pest extermination," and destruction of infected or contaminated "animals or articles." It then refers to "other measures" deemed "necessary."

In this context, Calabrese said, the phrase "other measures" means steps "reasonably of this type"—i.e., measures similar in nature to the specific examples. "The most natural and logical reading of the statute as a whole does not extend the CDC's power as far as Defendants maintain," he wrote. "Such a broad reading of the statute, and the term 'other measures' in particular, would authorize action with few, if any, limits—tantamount to creating a general federal police power. It would also implicate serious constitutional concerns."

Less than a week later, Mark Norris, a federal judge in Tennessee, reached the same conclusion based on similar reasoning. "If the Director were not limited in his or her authority, why list any specific examples of measures within that authority?" he wrote. "Why not simply provide [that] the Director 'is authorized to make and enforce such regulations as in [her] judgment are necessary to prevent the introduction, transmission, or spread of communicable diseases'? In other words, Defendants' theory renders the limitations of the statute—e.g. inspection, fumigation, disinfection, sanitation, pest extermination, destruction of animals, or articles to be so infected or contaminated—superfluous or surplusage."

The U.S. Court of Appeals for the 6th Circuit agreed with Norris' conclusion, saying the Public Health Service Act "cannot support the broad power that the CDC seeks to exert." Contrary to the CDC's reading of "other measures," the 6th Circuit said when it rejected the government's request for a stay on March 29, "government intrusion on property to sanitize and dispose of infected matter is different in nature from a moratorium on evictions."

The CDC has carried on as if these rulings never happened, repeatedly extending its moratorium. Now the CFPB has followed suit, mandating that tenants "to whom the CDC Order reasonably might apply" receive notice "clearly and conspicuously in writing" that they "may be eligible for temporary protection from eviction under the CDC Order." Its rule also prohibits rent collectors from "falsely representing or implying" that a tenant "is ineligible for temporary protection from eviction."

The rule suggests the following language: "Because of the global COVID-19 pandemic, you may be eligible for temporary protection from eviction under Federal law. Learn the steps you should take now: visit www.cfpb.gov/​eviction or call a housing counselor at 800-569-4287."

These demands put property managers in an awkward situation. They can comply with the CFPB's edict by telling tenants they may be able to avoid eviction (and live rent-free) thanks to the CDC's order, which will frustrate their attempts to collect rent by inviting hardship claims. Or they can risk civil liability by flouting the rule.

Real estate attorneys like Schoeffler face a similar dilemma. "On behalf of his clients," the NCLA complaint says, Schoeffler "seeks to collect rent and seek eviction when warranted under Louisiana law." But under the CFPB rule, "he will be required to make inaccurate disclosures to those tenants concerning the possibility of protection under the Halt Order, even though the Halt Order has been repeatedly held unlawful, and he believes it to be unlawful." These "forced, untrue disclosures," the NCLA argues, would violate Louisiana's Rules of Professional Responsibility, which say an attorney may not, in the course of representing a client, "make a false statement of material fact or law to a third person."

Perversely, the CFPB says telling tenants they may be eligible for protection does not violate the Fair Debt Collection Practices Act "even if the consumer is not reasonably eligible to be a covered person." It is likewise perfectly OK to give tenants false hope when they live in "a jurisdiction in which the CDC Order does not apply."

In other words, telling the truth is prohibited, while telling lies is either mandatory or at least permitted. All this in the name of enforcing a statute that forbids "false or misleading representations."