Debt Relief Industry

The Beginning of the End for the Attorney Loophole?

Written by Steve Rhode

A sidebar in a recent article by Jenna Greene identified an important fact that should not be lost of attorneys who feel the “attorney loophole” for debt relief services is getting thinner and thinner.

According to Greene, the Consumer Financial Protection Bureau (CFPB) has been going after entities like banks and some debt relief companies. But take a guess what class of entities is the top of the list of targets of lawsuits by the CFPB?

Ready?

The agency has filed more lawsuits against lawyers than almost any other group, according to an analysis by The National Law Journal, bringing six suits against legal services providers. Only the banking industry — also the subject of six suits by the CFPB — was equally stung. In addition, the agency has asserted that debt-collection lawyers are subject to its direct supervision, including on-site examination of books and records.

When the consumer agency opened its doors in July 2011, banks, mortgage companies and other lenders braced for lawsuits — and loudly complained about the new agency’s powers. But lawyers were quiet, seemingly unaware that they, too, could find themselves in the CFPB’s cross hairs.

What makes the actions so surprising is that the Dodd-Frank Act that created the agency specifically exempts lawyers from CFPB oversight. Section 1027 of the act states that the agency “may not exercise any supervisory or enforcement authority with respect to an activity engaged in by an attorney as part of the practice of law.” … A CFPB spokesman in an email acknowledged that limitation, but said that “nothing prevents the bureau from exercising its authority with respect to a consumer financial product or service offered or that is provided outside of the scope of an attorney-client relationship.” – Source

Maybe it’s time for debt relief attorneys to keep this in mind who have been pushing the limits in selling mortgage modification, mortgage relief, debt settlement, and now student loan assistance services.

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Sincerly,
Steve

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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