On October 24, the CFPB released its final rule for overseeing debt collectors, and included attorneys among those who will be subject to direct federal supervision for the first time. Under the rule, which goes into effect on January 2, the CFPB will have the power to send field examiners out to the law offices of attorneys who engage in debt collection to review their procedures, evaluate the quality of their compliance and identify risks to consumers.
Under the rule, any firm that has more than $10 million in annual receipts from consumer debt collection activities will be subject to the CFPB's supervisory authority. The American Bar Association, the Commercial Law League of America, and the National Association of Retail Collection Attorneys oppose the rule and say they have Michigan Congressman John Conyers in their corner. Conyers said in a floor speech during debate on Dodd-Frank:
[G]iving the new Bureau authority to regulate the practice of law could materially interfere with and jeopardize sensitive aspects of the attorney-client relationship. Any regulation from a new source would unavoidably conflict with the existing rules and lines of accountability….Our committee was determined to avoid any possible overlap between the Bureau's authority and the practice of law."
CFPB Director (and MSU grad) Richard Cordray has an answer. The rule says that Conyers was talking about lawyers who represent consumers, not those who represent commercial clients adverse to consumers:
The Bureau does not understand [Conyers'] statement to suggest that all activity conducted by attorneys is outside the Bureau's authority. Consumer debt collection is a consumer financial service…debt collection attorneys do not provide 'legal advice or services' to those consumers. ... [Nothing in the rule] requires attorneys to engage in or refrain from engaging in any particular conduct. Of course, Federal consumer financial law does impose some conduct rules that apply to attorneys. These requirements are unlikely to be inconsistent with state professional conduct rules, as such rules presumably do not obligate attorneys to violate Federal law.
A legal challenge along the lines of the ABA's successful challenge to the application of Gramm-Leach-Bliley to lawyers is expected. In that case, the D.C. Circuit said that it is "undisputed" that the regulation of the practice of law is traditionally the province of the states:
If Congress intends to alter the 'usual constitutional balance between the States and the Federal Government,' it must make its intention to do so 'unmistakably clear in the language of the statute.
