Maryland Legal Alert for Financial Services
CFPB Withdraws Proposed Rule on Registry of Nonbank Form Contract Terms
The Consumer Financial Protection Bureau (CFPB) announced that it has withdrawn its proposed rule titled Registry of Supervised Nonbanks That Use Form Contracts To Impose Terms and Conditions That Seek To Waive or Limit Consumer Legal Protections, which was originally issued on February 1, 2023. The proposed rule would have required supervised nonbank entities to submit annual reports describing the terms and conditions in their form contracts that purported to waive or limit consumer legal protections, as well as any court or arbitration decisions regarding the enforceability of such provisions. The CFPB would also have been required to publish this information along with identifying information about registrants.
CFPB cited two main reasons for withdrawing the rule. First, CFPB determined that the need for a registry of this nature was speculative. After reviewing public comments, the CFPB concluded that collecting extensive data about contract terms that are “typically lawful” would amount to regulatory overreach and would divert resources from efforts to identify actual risks to consumers.
Second, CFPB concluded that the potential public benefit of disclosing contract-term data did not justify the compliance burden associated with the requirement. The CFPB expressed concern that the publication would pressure regulated entities into revising form contracts that largely contain lawful terms, despite limited evidence that such an approach would provide meaningful benefit to consumers.
For more information concerning this topic, please contact Tamia J. Morris