November 30, 2023

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CFPB Proposes To Registry Of Lending Terms, Conditions In Contracts

The Consumer Financial Protection Bureau (CFPB) announced on Wednesday that it intends to establish a public registry of potentially contentious terms and conditions in the contracts of supervised nonbanks. These terms and conditions could waive or limit consumer rights and protections such as bankruptcy rights, liability amounts, and complaint rights.

According to the bureau, such “take it or leave it” contracts, which are typically drafted by a company and its lawyers, have the potential to conceal consumer harm, suppress product and service criticism, and undermine consumer financial protection law.

When a consumer purchases a product, downloads an app, or signs up for a service, these contracts appear, but consumers are unable to negotiate. According to the bureau, Americans check a box to accept the terms of service or sign contracts with standard fine print.

“There has been renewed interest in consumer contracts here in the U.S., because of this asymmetry in power between the company and the consumer,” CFPB Director Rohit Chopra stated in a statement. Additionally, governments all over the world have attempted to regulate unilateral contracts or specific contract terms.

The CFPB stated that the proposed rule would require the supervised nonbanks to submit terms and conditions information in an effort to improve risk-based oversight and market transparency.

The bureau said on Wednesday that the public and other enforcers of consumer financial protection would be able to access the registry.

According to the statement, the proposed rule will be made available for public comment for either 30 days after publication in the Federal Register or 60 days after publication on the CFPB’s website, whichever comes first.

Chopra stated, “The CFPB would use data from the registry to identify supervised nonbanks and the risks their terms and conditions pose,” prioritize which firms to investigate, and plan the scope of those investigations.

Due to the financial institutions’ presence in the market and the significant roles their products and services play in people’s day-to-day lives, most customers succumb to their demands.

Chopra stated, “Some businesses attempt to censor their customers and deprive them of their rights by including fine print in non-negotiable contracts.” A registry of these contract clauses is being proposed by the CFPB to identify situations in which individuals are unable to voice their grievances.

The CFPB’s December proposal to establish a registry of nonbank financial institutions to identify repeat offenders is pushed forward by Wednesday’s proposed rule.

Some examples of terms and conditions that would be included in the registry include limiting lender liability for bank fees caused by a lender’s repeated debit attempts, undermining credit reporting rights, and misleading consumers by using unenforceable waivers in mortgage contracts.

According to Chopra, a lot of contracts favor the business over the customer and sometimes include “gag clauses” that prevent customers from writing bad reviews or filing complaints online.

Despite the fact that financial institutions frequently take customers to court, some contracts may even waive a customer’s right to sue. According to Chopra, waivers of liability are used in such instances to prevent consumers from suing when they are harmed and to shift responsibility for the harm to the consumer.

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