CFPB proposed rule targets nonbank contracts
The CFPB issued a proposed rule yesterday to require nonbanks subject to its supervisory authority to annually register with the CFPB regarding their use of certain terms and conditions in form contracts for consumer financial products and services that pose risks to consumers. While the proposal does not directly affect how the bureau assesses terms and conditions used by credit unions, scrutiny of contracts used by supervised registrants could impact how credit unions conduct business with third parties.
According to the proposed rule, the bureau is attempting to collect information about supervised nonbanks’ use of terms and conditions in form contracts that expressly seek to impose limitations on consumer rights and other legal protections – including arbitration. NAFCU previously wrote to the Senate Banking Committee in defense of arbitration, calling it a “fair, effective, and less expensive means of resolving disputes compared to going to court.”
“Some companies seek to censor their customers and strip them of their rights by inserting fine print into non-negotiable contracts,” said CFPB 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.”
In its statement, the bureau said it has “determined that a nonbank registration system to continuously and systematically monitor and assess these risks to consumers is needed to support its functions in promoting a fair, transparent, and competitive consumer financial marketplace.”
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