CFPB Claims They Will Go After Individuals and Not Just Their Companies. Is Their Bark Worse Than Their Bite?

Regulatory agencies are changing the way they handle enforcement actions in response to pressure from lawmakers to go after financial misdeeds more aggressively.  This past Wednesday, Richard Cordray, director of the Consumer Financial Protection Bureau (“CFPB”), stated that the agency will seek admissions of wrongdoing not only from the companies that commit violations, but also from individuals who are in positions of power in these companies.  Cordray commented “I’ve always felt strongly that you can’t only go after companies.  Companies run through individuals, and individuals need to know that they’re at risk when they do bad things under the umbrella of a company.” In reality, however, the CFPB is subject to the same limitations as everyone else when it comes to obtaining individual liability against corporate officers, shareholders, and employees of collection agencies.  Courts have repeatedly rejected attempts to hold owners, officers and employees of debt collectors personally liable under the FDCPA.  “Because such individuals do not become ‘debt collectors’ simply by working for or owning stock in debt collection companies, [courts have] held that the Act does not contemplate personal liability for shareholders or employees of debt collection companies who act on behalf of those companies, except perhaps in limited instances where the corporate veil is pierced.”  Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057, 1059 (7th Cir. 2000).  Accordingly, unless some basis for piercing the corporate veil is met, the CFPB may find it difficult to obtain individual liability from corporate officers, shareholders, and employees of collection agencies.

By Joseph S. Messer and Katherine Olson