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CFPB Opens Comment on Nonbank Supervision in Proposed Rule on Registry of Contract Conditions

CFPB logo with magnifying glassACA International is seeking member feedback on the proposed rule, which would require nonbank entities in the CFPB’s supervisory jurisdiction to submit information on terms and conditions in their contracts on consumer rights and protections. In December, the CFPB proposed a rule to create registry of regulated entities’ enforcement actions or court orders.

02/01/2023 10:50 A.M.

4.5 minute read

The Consumer Financial Protection Bureau has proposed a rule (PDF) that would create a registry on supervised nonbank entities with arbitration agreements in their contracts.

According to a news release from the CFPB, the proposed rule would “establish a public registry of supervised nonbanks’ terms and conditions in ‘take it or leave it’ form contracts that claim to waive or limit consumer rights and protections, like bankruptcy rights, liability amounts, or complaint rights.”

The CFPB seeks for nonbanks subject to its supervisory jurisdiction to “submit information on terms and conditions in form contracts they use that seek to waive or limit individuals’ rights and other legal protections,” according to the news release.

Comments on the proposed rule on arbitration agreements in contracts are due on or before April 3, 2023, according to the CFPB’s notice in the Federal Register, which also outlines how to submit comments.

ACA International is reviewing the proposed rule on contracts for its potential impact on a past congressional challenge to an arbitration rulemaking from the CFPB and to respond through public comments.

To share your input for comments, email ACA’s advocacy team at [email protected].

What the Rule Would Do

If the rule passed, the information would be available in a public registry, including for other consumer financial protection enforcement agencies.

Contract terms and conditions proposed to be included in the registry are:

  • Waiving servicemembers’ legal protections.
  • Credit reporting rights.
  • Limiting lender liability for bank fees caused by a lender’s repeated debit attempts.
  • Waivers in mortgage contracts.

The proposed rule, if finalized, would:

  • Identify and collect information on form contract terms and conditions that seek to waive or limit consumer rights and other legal protections.
  • Increase market transparency and improve risk-based oversight.

The bureau reports, aside from certain exceptions, that “all nonbanks subject to CFPB supervisory jurisdiction, including those operating in payday lending, private student loan origination, and mortgage lending and servicing would be subject to this proposed rule. Larger participants operating in student loan servicing, automobile financing, consumer reporting, consumer debt collection, and international remittances would also be subject to the rule.”

CFPB Proposed Public Registry

The CFPB also added a proposed rule to its list for 2022 that would require certain nonbank covered entities, including debt collectors, to register with the bureau “when they become subject to certain local, state, or federal consumer protection agency or court orders,” ACA International previously reported.

As part of the rule, the CFPB is proposing to publish the orders and company information on an online registry and certain registration information about companies on the bureau’s public-facing website, according to a news release.

Congressional Response

House Financial Services Committee Chairman Patrick McHenry responded to the bureau’s registration of nonbank financial firms in a statement following the announcement of the plan.

House Financial Services is one of the primary committees in Congress with oversight over the CFPB, and McHenry has said that is a priority as chair.

“This is another attempt by Director Chopra to unilaterally expand the CFPB’s authority beyond Congress’ intent and to mandate what Democrats were unable to legislate,” McHenry said. “This proposed registry of terms and conditions will facilitate the naming and shaming of firms to empower progressive activists. 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. Committee Republicans will finally ensure Director Chopra and the CFPB are held accountable.”

ACA’s Take

The proposed rule on contracts seems to ignore that buyers and sellers use arms-length transactions to agree or not to agree to buy specific goods and services at certain prices. While the CFPB may not appreciate the value of certain terms and conditions, it should be the marketplace that determines them—including consumers. The price of goods and services includes the value of the terms and conditions. Having the government arbitrarily value certain terms and conditions over others will result in higher prices for consumers, who may not appreciate the trade-off.

Regarding the CFPB’s proposed rule on a public registry, establishing such a registry and requiring regulated entities to register if they are subject to a court or other regulatory order, including at the state level, is duplicative.

Courts and other financial regulators at the federal and state level have their own processes for enforcement actions, as does the bureau through its supervisory highlights report, supervisory examinations, court filings and news releases.

The CFPB’s goal appears to be to name and shame companies, which will stymie negotiations and self-reporting to regulators.

According to the CFPB, “the repository will allow the CFPB to track and mitigate the risks posed by repeat offenders, while also being able to monitor all lawbreakers subject to agency and court orders.”

The CFPB will collect public input to inform revisions to the regulation text. The deadline for submitting comments is 60 days after publication in the Federal Register.

ACA has previously raised concerns about the bureau’s interpretive rules and advisory opinions, noting coordination with state attorneys general should be fair and reasonable, for example.

The latest proposed rule on contracts could apply to debt buyers with contracts as well.

Remember, to share your input to inform ACA’s comments, email ACA’s advocacy team at [email protected].

If you have executive leadership updates or other member news to share with ACA, contact our communications department at [email protected]. View our publications page for more information and our news submission guidelines here.

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If you have executive leadership updates or other member news to share with ACA, contact our communications department at [email protected]. View our publications page for more information and our news submission guidelines here.

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