CFPB proposes nonbank contract database

The Consumer Financial Protection Bureau is looking to establish a public registry of the terms and conditions used by nonbanks in contracts that waive or limit consumer rights and protections. 

The Consumer Financial Protection Bureau is looking to establish a public registry of the terms and conditions used by nonbanks in contracts that waive or limit consumer rights and protections. 

According to a Jan. 11 press release, the registry could include any terms and conditions that waive servicemembers’ legal protections; undermine credit reporting rights; limit the liability of lenders for bank fees incurred by a lender’s repeated debit attempts; and use unenforceable waivers in mortgage products.

“Many companies’ financial products and services require consumers to sign lengthy form contracts,” the CFPB stated. “The companies write the form contracts as well as define any choices offered, and consumers cannot negotiate.” 

The CFPB stated that some nonbanks quietly insert terms and conditions that “try to take away consumer protections, try to limit how consumers exercise their rights, or try to quiet consumer complaints or criticism, and more broadly, the terms and conditions potentially undermine consumer financial protection law. 

“Some companies seek to censor their customers and strip them of their rights by inserting fine print into non-negotiable contracts,” said Director Rohit Chopra. “The CFPB is proposing a registry of these contract clauses to find out where people are unable to speak up when they’ve been harmed.”

The proposal came one month after the regulatory agency proposed establishing a registry of nonbank financial institutions to detect repeat offenders. The plan would require nonbanks to report state and local court orders or judgments involving consumer financial products to the CFPB. The agency would then pool those into a database of violators that the public could view. 

Fredrikson & Byron Law