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Employers Face CFPB Scrutiny Over Job Training Repayment Demands

April 21, 2022, 10:00 AM

The Biden administration plans to crack down on employer-mandated training repayment agreements that can saddle workers with thousands of dollars in debt when they leave jobs.

Employment contracts that require workers to remain at a company for a certain time period or shoulder the cost of their job training are increasingly being viewed as predatory and anti-competitive by the Consumer Financial Protection Bureau and other agencies.

The increased attention is part of broader push to boost competition in the labor market following President Joe Biden’s July 2021 executive order directing federal agencies to promote a “fair, open marketplace.”

Employers face potential new restrictions on how they structure employment training repayment provisions as advocates push the Biden administration for greater scrutiny over the arrangements when it doles out federal job training grants. The CFPB—a consumer watchdog largely unknown outside of the financial sector—also has the authority to bring aggressive enforcement actions against all types of employers.

“The mere fact that these are agreements between employers and employees doesn’t take it out of the realm of the consumer,” said Eric Fink, a labor and employment professor at Elon Law School.

While the Department of Labor may seem like the natural choice to take on training repayment agreements, the CFPB is poised to take a lead role because of its oversight of consumer financial laws and debt collection practices. The Federal Trade Commission—which has both consumer protection and competition mandates—is also well suited to crack down on the practice.

Reduced Earning Power

Training repayment programs can prevent workers from looking for higher-paying work, which in turn “reduces their bargaining and earning power,” the Treasury Department said in a March report on “The State of Labor Market Competition.”

CFPB Director Rohit Chopra echoed similar sentiments at an April 4 competition enforcement conference hosted by the FTC and Justice Department. Workers are being held back from pursuing new job opportunities because of the “potentially large balloon payment that they may face” at their current jobs, he said.

A March 9 CFPB blog highlighted a “large retailer” where employees looking to become specialists face payments of between $500 and $5,000 if they leave or are fired within two years of completing training.

A fully licensed nurse told the CFPB that a health-care company required employees to complete a mandatory company training course that required a $10,000 payment if they didn’t work full-time for the company.

The CFPB will take a close look at training-related debts “and their collection by employers and third-party debt collectors” for potential violations of federal consumer protection laws, the bureau said in the blog post.

Nurses Seek Fed Probe

The CPFB isn’t alone. Advocacy groups and at least one union have been pushing the FTC and state regulators to investigate and halt training repayment agreements for some time.

The National Nurses Union, which represents 175,000 U.S. workers, raised concerns to the FTC in August 2021 about workers being saddled with lump-sum repayments for training programs if they wanted to depart early.

Carmen Comsti, lead regulatory policy specialist with the California Nurses Association, an affiliate of the NNU, said the programs didn’t offer new skills to nurses, but were mostly orientation sessions to acclimate them to the facility.

At least one state has moved to restrict the use of training repayment agreements. California in 2020 passed a law that required state employers to cover costs for employer-mandated training for workers who provide direct patient care at certain hospitals. The NNU urged the FTC to consider adopting the law as a national model.

Training repayment agreements are a “win-win for patients and nurses,” Federation of American Hospitals President and CEO Chip Kahn said in a statement.

“Patients get quality bedside care, while nurses further their careers and practice at the top of their licenses,” he said.

One of the hospital operators named in the NNU’s comment letter, MedStar Health, says it hasn’t sought repayment for training from nurses for “many years” although it has the authority to do so under a collectively bargained contract.

“MedStar Health and all of our hospitals are fully committed to supporting the professional development and growth of our nurses,” So Young Pak, director of media relations, communications, and public affairs for MedStar Health, said in a statement.

FTC Fit?

Comsti and others have called on the Biden administration to attach language to job training grants and other funding opportunities that would explicitly outlaw training repayment agreements, among other solutions.

“We would want the administration to use all the tools that it can to prevent these types of contracts from being used,” Comsti said.

The Labor Department, which helped produce the Treasury report, would mainly have jurisdiction through publicly funded workforce programs authorized through the Workforce Innovation and Opportunity Act. But outside of those instances, the agency’s power is limited.

The publicly funded workforce programs authorized through the WIOA are the main way the agency communicates its priorities to states and localities, as well as ensuring that funding dollars are going to high quality programs, Acting Employment and Training Secretary Angela Hanks said in an interview.

The FTC may be a more natural fit to deal with training repayment agreements outside of the Labor Department’s reach. The agency is already looking at reforming and potentially restricting noncompete agreements, which employers use to stop employees from departing for competitors.

Critics say that training repayment agreements act as a sort of de facto noncompete, but without any specific restrictions on where a person can work.

“In some ways they’re worse because they restrict workers’ ability to leave for any job,” said Sandeep Vaheesan, the legal director at the Open Markets Institute.

Any rule the FTC comes up with will be sweeping and rope in all employers. But rulemaking in itself poses some risks, said Chris J. Willis, the co-head of Troutman Pepper Hamilton Sanders LLP’s Consumer Financial Regulatory practice.

“When you make a rule, it’s very visible politically and it’s very easily challengeable in court,” he said.

Meet the CFPB

For Chopra and other CFPB officials, training repayment agreement programs look similar to student loans because they saddle consumers with loads of debt, said Jonathan Harris, a professor at Loyola Marymount Law School.

“Employers that use these TRAPs have, by doing so, chosen to wade into the CFPB’s jurisdiction,” Harris said.

The CFPB could require Truth in Lending Act disclosures and debt collection protections in training repayment agreements, said David Seligman, the executive director of Toward Justice, a nonprofit law firm representing employees.

The agency might find a more expedient solution by using vast enforcement powers against what it determines to be “unfair, deceptive and abusive acts and practices,” Seligman added.

“If these training repayment agreements are unreasonable and amount to unenforceable noncompete agreements, then they’re an unfair practice. Then the CFPB could say that the entire scheme is unfair and illegal,” he said.

The enforcement battle would then be to determine whether the CFPB has authority over agreements between employers and their workers, Willis said.

“Reaching employer-employee relations is probably well outside anybody’s expectations of what the CFPB was designed to regulate,” he said.

To contact the reporters on this story: Evan Weinberger in New York at; Rebecca Rainey in Washington at

To contact the editor responsible for this story: Michael Ferullo at; Laura D. Francis at