Editor's note: This article appears in the March 2021 issue of DS News magazine, available here.
Formerly a Deputy Attorney General in charge of the Harrisburg office of the Pennsylvania Bureau of Consumer Protection, Stephen M. Hladik brings a broad range of experience to his mortgage foreclosure, bankruptcy, tax sale, and UDAP legal practice. A graduate of the Pennsylvania State University, Hladik obtained his law degree from Widener University, with honors, where he served as Internal Managing Editor of the Law Review. Hladik gained significant expertise in lending law enforcement while serving in the Pennsylvania Attorney General’s Bureau of Consumer Protection, handling UDAP, FDCPA, RESPA, and TILA cases.
What are the biggest challenges facing default legal firms right now?
There are myriad challenges. There are challenges from every angle. How do you maintain staff? How do you work virtually? How do you conduct hearings and trials virtually? These are all things that were a year ago unheard of in the industry. And yet here we are. Our firm has now done several federal trials over Zoom. Who would have thought a year ago that you would be able to do that?
So, while this is a serious national crisis, in some regards, it has been a beneficial experience to learn how we maximize use of technology, become more efficient, and work with our staff virtually. But there are also other regulatory burdens created by the pandemic. There are multiple moratoriums that are in place, and for good reason, to protect borrowers, but that has an obvious impact on a lot of default firms nationwide. So, we have to deal with those issues by refocusing work, cross-training staff to handle different or new aspects of the practice, and by comprehensive future planning to deal with the backlog of files when the moratoriums ease.
Even though a file may be on hold for a moratorium, there is still a lot of work that’s going on with those files. Borrowers still ask us for reinstatement quotes, payoff quotes. Courts want to know what’s going on, and we have local courts with all different rules. That’s another one of the challenges. Not only do you have to deal with moratoriums, but you also have instances with different counties in Pennsylvania or in New Jersey, where they have different requirements. Some counties will currently proceed, and some won’t. Some counties have implemented different kinds of programs to assist borrowers. It’s a lot to stay on top of.
The other thing is also just keeping your clients informed. We have 67 counties, and it’s a lot for us to keep track of in one state, let alone on the servicer side—having to keep track of that many states and counties. The biggest thing our firm can do is continually communicate with our clients and communicate with those borrowers that are reaching out to us. We all want to see this work out for everybody.
If you asked me last March, I would have thought everyone would be back to work and back to normal by April, but here we are, a year later. Somehow, we are all persevering, and we found ways to quickly adapt and keep our clients fully serviced. We found ways to deal with these challenges. There are going to be a lot more to come, but I am confident from what we have learned in the last 12 months that we will be able to handle any future challenges as well.
With California having introduced its own state-level version of the CFPB, do you anticipate other states following suit?
That’s an excellent question, and yes, I do. Pennsylvania already has, for instance. Our attorney general created a mini-CFPB and retained one of the top litigators from the CFPB to run it. We already have it in place, and they are doing the exact type of regulatory investigative work on the statewide level that the CFPB does on a national level.
I think you are going to see more states do that as well, and I understand why. There’s a perception out there amongst some in the legal community that the CFPB is not enforcing things the way it did under prior years. There’s a perception among various state attorneys general that they are needed to fill a perceived void in enforcement. We have seen a stepped-up enforcement in Pennsylvania. Our Department of Banking and our Office of the Attorney General have certainly concentrated more on borrower and consumer protection. And I understand why.
In times like this, with higher unemployment and a crisis on a national level, the attorneys general and the regulatory bodies are going to want to look out for borrowers and consumers. This is one of the natural repercussions you are going to see of that: an enhanced regulatory environment and additional bodies like mini-CFPBs popping up around the country.
However, once those are created, they’re not just going to go away when COVID-19 ends. So there is just another regulatory layer—and a double layer of enforcement, ultimately—that services are going to have to be on the lookout for it. You are going to have to deal with the AGs, the CFPB, mini-CFPBs, and others, so ultimately it may actually further complicate the process. With a new administration in place, I expect that CFPB enforcement by regulation and legal action will increase, and there will be more joint CFPB-state enforcement actions.