Registry of Supervised Nonbanks that Use Form Contracts To Impose Terms and Conditions That Seek To Waive or Limit Consumer Legal Protections 

CFPB Summary: Proposed Rule re: Registry of Supervised Nonbanks that Use Form Contracts To Impose Terms and Conditions That Seek To Waive or Limit Consumer Legal Protections 

12 CFR Part 1092

The Consumer Financial Protection Bureau (CFPB) is issuing this proposed rule to require that nonbanks subject to its supervisory authority, with limited exceptions, register each year in a nonbank registration system established by the CFPB information about their use of certain terms and conditions in form contracts for consumer financial products/services that pose risks to consumers.

Comments must be received by April 3, 2023, and the proposed rule can be found here.

Summary

The Consumer Financial Protection Act of 2010 (CFPA) requires the Consumer Financial Protection Bureau (CFPB) to monitor markets for consumer financial products/services for risks to consumers in order to support the various statutory functions of the CFPB, and to conduct a risk-based nonbank supervision program for the purpose of assessing compliance with Federal consumer financial law.  Under this proposal, nonbanks would be required to register if they use specific terms and conditions defined in the proposed rule that attempt to waive consumers’ legal protections, to limit how consumers enforce their rights, or to restrict consumers’ ability to file complaints or post reviews.

The Bureau would collect information about supervised nonbanks’ use of terms/conditions in form contracts that expressly seek to impose the following limitations on consumer rights and other legal protections applicable to the offering or provision of consumer financial products/services in markets the Bureau supervises: waivers of claims a consumer can bring in a legal action; limits on the company’s liability to a consumer; limits on the consumer’s ability to bring a legal action by dictating the time frame, forum or venue for a consumer to bring or participate in collective legal actions such as class actions; limits on the ability of the consumer to complain or post reviews; certain other waivers of consumer rights or other legal protections; and arbitration agreements.  The information collected by the registry would facilitate the Bureau’s prioritization and implementation of examination work n its statutorily-mandated risk-based nonbank supervision program.

The proposal notes that the Bureau will focus on the covered terms/conditions used by nonbanks in certain product/service lines:

  • Mortgage Markets
  • Payday Lending
  • Private Student Lending
  • Student Lending
  • Automobile Financing
  • Consumer Reporting Market
  • Consumer Debt Collection Market
  • Remittance Market