Circular 2024-03: Unlawful and unenforceable contract terms and conditions

NASCUS Summary re: Consumer Financial Protection Bureau Circular 2024-03

• The Bureau issued CFPB Circular 2024-03 to emphasize that covered persons who include unlawful or unenforceable terms in their consumer contracts may violate the Consumer Financial Protection Act’s prohibition on deceptive acts or practices.
• Covered persons may violate the Consumer Financial Protection Act’s (CFPA) prohibition on deceptive acts or practices if they include terms, including waiver provisions, in their consumer contracts that are rendered unlawful or unenforceable by federal or state law. Under the CFPA, a representation or omission is deceptive if it is likely to mislead a reasonable consumer and is material.  A representation is “material” if it “involves information that is important to consumers and, hence, likely to affect their choice of, or conduct regarding, a product.”  The Circular provides several examples such as waivers of legal rights or legal consumer protections.
• The CFPB noted that the examples provided in the Circular demonstrate the inclusion of unlawful or unenforceable terms and conditions in consumer contracts that would likely lead a reasonable consumer to believe the terms are lawful and/or enforceable when in fact, they are not.
• The Circular was issued on June 4, 2024 and can be accessed here.