CFPB Proposes Rule Creating Registry of Nonbank Contract Terms

The Consumer Financial Protection Bureau yesterday announced a proposed rule to establish a public registry of the “take it or leave it” terms and conditions used in contracts that “claim to waive or limit consumer rights and protections” such as preventing private rights of action and making consumers agree to unenforceable waivers.

A copy of the proposed rule can be accessed by clicking here.

We’ve all come across sites that require you to check a box affirming your agreement with the terms and conditions of whatever service you’re signing up for, and if you don’t agree to the terms, you’re not able to proceed. There is no negotiation or opportunity to amend the terms. In some cases, the CFPB said, those terms and conditions prevent consumers from posting negative reviews of a company’s product or service, and even allow companies to fine individuals for making disparaging comments about a company. This, according to the CFPB, creates an asymmetrical power dynamic between companies and consumers, and the public registry would attempt to level the playing field.

In prepared remarks, Rohit Chopra, the Director of the CFPB, made mention of laws in Australia, Japan, and the United Kingdom that prohibit unfair contract terms or one-sided contracts involving consumers.

Banks and credit unions are already subject to supervision by the CFPB, but nonbanks are not as closely regulated. The proposed rule aims to “use data from the registry to identify supervised nonbanks and the risks their terms and conditions pose, prioritize which firms to examine, and plan the scope of those exams,” Chopra said.

Rep. Patrick McHenry [R-N.C.], the chair of the House Financial Services Committee, had harsh words in sharing his thoughts on the proposal.

““This proposed registry of terms and conditions will facilitate the naming and shaming of firms to empower progressive activists,” he said in a statement. “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.”

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