In the latest Weekly Wright Report:

• CFPB Proposes Rule to Require Certain Entities to Register Terms and Conditions of their Contracts with Consumers

CFPB Proposes Rule to Require Certain Entities to Register Terms and Conditions of their Contracts with Consumers

By: Doug Seitz

Under the auspices of the Consumer Financial Protection Act of 2010, the Bureau of Consumer Financial Protection (CFPB) is proposing to require certain nonbank entities to publicly register the terms and conditions contained in their form contracts with consumers.  These terms and conditions will be available online for the public to examine and the company imposing such  terms be identified.

CFPB Director Rohit Chopra on January 11^th stated:

Today, the CFPB is proposing to create a registry of contract terms that financial companies use to censor their customers and force individuals into surrendering their legal rights.

In a related release, the CFPB stated that:

The Bureau has statutory responsibilities to monitor for risks to consumers in markets for consumer financial products and services and to conduct a risk-based nonbank supervision program.  Pursuant to these authorities, the CFPB is proposing a rule to require that nonbanks subject to its supervisory authority, with limited exceptions, annually register with the CFPB regarding their use of certain terms and conditions in form contracts for consumer financial products and services that pose risks to consumers.

Under the proposed rule, insured depository institutions, insured credit unions, and related financial institution entities will not be subject to this regulation. However, “non-banks” under the CFPB’s supervision and control that trade with consumers in the markets for mortgage lending, payday lending, and private student lending, as well as larger participants in markets for consumer reporting, consumer debt collection, student loan servicing, international money transfers, and automobile financing will be required to annually report their terms and conditions if those terms attempt to waive consumers’ legal protections or to restrict consumers’ rights to file lawsuits or post reviews.

Focusing in on the particular terms and conditions that it claims are of concern to the CFPB, it stated in the proposed rule that it seeking to collect information about supervised nonbanks’ use of terms and conditions in form contracts that expressly seek to impose the following limitations on consumer rights:

1. Waivers of claims a consumer can bring in a legal action;
2. Limits on the company’s liability to a consumer;
3. Limits on the consumer’s ability to bring a legal action by dictating the time frame, forum, or venue for a consumer to bring a legal action;
4. Limits on the ability of a consumer to bring or participate in collective legal actions such as class actions;
5. Limits on the ability of the consumer to complain or post reviews;
6. Certain other waivers of consumer rights or other legal protections; and arbitration agreements.

It went on to say:

The proposal defines these terms and conditions as covered terms and conditions. Covered terms and conditions would be covered by the proposal whether they are legally enforceable or not.

Already the proposed rule has however met with resistance.  The current Chairman of the House Financial Services Committee, Representative Patrick McHenry, in a statement, said:

“This is another attempt by Director Chopra to unilaterally expand the CFPB’s authority beyond Congress’ intent and to mandate what Democrats were unable to legislate. This proposed registry of terms and conditions will facilitate the naming and shaming of firms to empower progressive activists. Requiring nonbank financial firms to register publicly with the Bureau is unprecedented—no other industry is required to make public such detailed contract information. The days of Congress giving Director Chopra a free pass for his reckless actions have come to an end. Committee Republicans will finally ensure Director Chopra and the CFPB are held accountable.”

The window to comment on the proposed rule closes on March 13, 2023.

If you have questions regarding this post, please do not hesitate to contact Doug Seitz at 410-659-1358/dseitz@wcslaw.com.