Last week, the Biden Administration released a “Blueprint for a Renters Bill of Rights” (Blueprint), which sets forth five principles intended to “create a shared baseline for fairness for renters in the housing market” and directs various federal agencies, including the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC), to take various actions to further those principles. 

The principles provide that renters should have access to: (1) safe, quality, accessible and affordable housing; (2) clear and fair leases; (3) education, enforcement and enhancement of rights; (4) the right to organize; and (5) eviction prevention, diversion and relief.  While the Blueprint does not assign a role to the FTC or CFPB in furthering the principle of clear and fair leases, it is noteworthy that in articulating what is a “fair lease,” the Blueprint states that “[l]eases should not include mandatory arbitration clauses.” 

The CFPB’s efforts to eliminate arbitration provisions in contracts involving consumer financial products and services—and Congress’ rejection of those efforts when it overturned the CFPB’s final arbitration rule under the Congressional Review Act—are well-known to readers of this blog.  The only agency assigned a role by the Blueprint regarding leases is the Department of Agriculture (USDA), which is directed to develop a form of lease similar to the model lease used in HUD Section 8 properties.  However, the Blueprint does not identify any congressional statute or other federal authority that would permit the USDA (or any other federal agency) to carve out residential leases from the coverage of the Federal Arbitration Act (FAA), which makes written predispute arbitration agreements “valid, irrevocable, and enforceable.” 

In a landmark 2018 decision, Epic Systems, Inc. v. Lewis, the U.S. Supreme Court held that in order for another federal statute to override the FAA, the other statute must “manifest a clear intention to displace” the FAA.  In that case, the Court concluded that the National Labor Relations Act (NLRA) did not preclude the enforcement of arbitration provisions with class action waivers in employment agreements because the NLRA “does not express approval or disapproval of arbitration.  It does not mention class or collective action procedures.  It does not even hint at a wish to displace the Arbitration Act—let alone accomplish that much clearly and manifestly, as our precedents demand.”  As the Court emphasized, “when Congress wants to mandate particular dispute resolution procedures it knows exactly how to do so.” 

The Blueprint does not cite any federal statute or authority that “manifests a clear intention” by Congress to authorize the USDA (or any other federal agency) to prohibit the use of predispute arbitration agreements in residential leases.  Notably, the Blueprint’s introductory Legal Disclaimer acknowledges that it “is a statement of principles; it is not binding and does not itself constitute U.S. government policy.  It does not supersede, modify, or direct an interpretation of any existing Federal, state, or local statute, regulation, or policy …. Adoption of these principles may not meet the requirements of existing statutes ….”

The Blueprint describes the following actions to be taken by the CFPB and FTC to further the principles of “Access to Safe, Quality, Accessible and Affordable Housing” and “Education, Enforcement, and Enhancement of Rights”:

  • Access to Safe, Quality, Accessible and Affordable Housing.  This principle includes the concepts that renters “should have access to housing that is safe, decent, and affordable” and “should face minimal barriers when applying for housing and receiving housing assistance, which includes minimally burdensome application and documentation requirements and fair and equal tenant screening.”  The roles of the CFPB and FTC are:
    • The FTC will explore ways to expand use of its authority under the FTC Act to take action against acts and practice that unfairly prevent consumers from obtaining and retaining housing. 
    • The FTC and CFPB will issue requests for information (RFI) to obtain data to assist in identifying these practices and the harms they cause to housing applicants and those renting for use in enforcement and policy actions.  The White House fact sheet on the Blueprint indicates that this will be the first time that the FTC has issued a RFI exploring unfair practices in the rental market.  It also indicates that in the RFIs, “[t]he two agencies will seek information on a broad range of practice that affect the rental market, including the creation and use of tenant background checks, the use of algorithms in tenant screenings, the provision of adverse action notices by landlords and property management companies, and how an applicant’s source of income factors into housing decisions.”
  • Education, Enforcement, and Enhancement of Rights.  This principle includes the concept that “[f]ederal, state, local governments should do all they can to ensure renters know their existing rights, and to protect renters from lawful discrimination and exclusion that can take many different forms.”  It also includes the concept that “[g]overnment bodies at all levels should ensure that rights and protections provided under the Fair Housing Act and other federal laws and regulations, as well as state and local fair housing laws and regulations, are known and enforced.”  The roles of the CFPB and FTC are:
    • The CFPB will identify guidance and rules that it can issue to ensure compliance with the law by the background screening companies and coordinate enforcement with the FTC regarding the obligation of tenant background check companies to have reasonable procedures to ensure accurate information in the credit reporting systems.
    • The CFPB will continue to coordinate with federal and local government agencies to ensure that tenant screening companies do not illegally disseminate false and misleading information about tenants and that tenants can challenge erroneous information.
    • The FTC (as well as the Department of Housing and Urban Development, the Federal Housing and Finance Agency, and the USDA) will work with the CFPB to release best practices on the use of tenant screening reports, including the importance of communicating clearly to tenants the use of background checks in denying rental applications or increasing fees and providing tenants the opportunity to address inaccurate information contained within background screening reports.

The Blueprint raises concerns as to whether the two agencies will attempt to push the envelope on the reach of their respective jurisdictions and authorities in carrying out their assigned roles.  With respect to the CFPB, the rental of real property outside of the rent to own context is not a “consumer financial product or service” subject to the CFPB’s authority to prohibit unfair, deceptive, or abusive acts or practices (UDAAP).  Such rentals are also not “credit” subject to the CFPB’s authority to enforce the Equal Credit Opportunity Act (ECOA). The CFPB does have supervisory authority over “larger participant” consumer reporting agencies (CRAs) and UDAAP enforcement authority as to CRAs. (CRAs include tenant screening companies.)  In addition, the CFPB can enforce the Fair Credit Reporting Act (FCRA) against CRAs (such as the FCRA’s requirement for CRAs to have reasonable procedures to ensure accurate information in consumer reports) and against landlords and other users of consumer reports and furnishers of information to CRAs (such as the FCRA’s adverse action notice requirement).  The CFPB recently issued two reports on tenant background checks, one discussing consumer complaints received by the CFPB that relate to tenant screening by landlords and the other discussing practices of the tenant screening industry.  Much of the Blueprint’s description of the CFPB’s role tracks the CFPB’s planned future actions regarding the tenant screening market that were described in the CFPB’s report on the tenant screening industry. 

With respect to the FTC, the rental of real property is subject to the FTC’s authority under Section 5 of the FTC Act to prohibit unfair or deceptive acts and practices (UDAP).  Accordingly, the FTC can issue UDAP regulations regarding rental practices and take enforcement action to enforce Section 5 against landlords and other members of the rental industry.  It can also exercise its Section 5 authority as to CRAs and can enforce the FCRA against CRAs and against landlords and other users of consumer reports and furnishers of information to CRAs.  Like the CFPB, the FTC cannot not use its ECOA enforcement authority to reach landlords because rentals are not “credit” subject to the ECOA. 

However, the Blueprint’s inclusion of the use of algorithms in tenant screenings and how an applicant’s source of income factors into housing decisions opens the door for the FTC to attempt to use the “unfairness” prong of its Section 5 authority to police discriminatory conduct that is not covered by the ECOA.  The FTC recently settled a lawsuit against an auto dealer in which it alleged that the dealer’s discriminatory financing practices not only violated the ECOA but also constituted unfair practices in violation of Section 5.  Last year, the CFPB updated its UDAAP examination manual to instruct its examiners that discrimination in both the credit and non-credit context can constitute unfair conduct.  (The update is the subject of  lawsuit.)  Accordingly, having already asserted that its Section 5 unfairness authority covers discrimination, it would not be surprising to see the FTC follow the CFPB and take the position that its unfairness authority applies to discrimination in both the credit and non-credit context.  

Given the penchant of the CFPB and FTC for weaving out of their lanes to embrace expansive interpretations of their jurisdiction and authorities, it is incumbent on landlords and other industry members impacted by the Blueprint to closely monitor the agencies’ next steps in carrying out their assigned roles.