On January 13, 2025, the Consumer Financial Protection Bureau (CFPB) announced that it proposed a rule (the Proposed Rule) seeking to ban certain terms and conditions in agreements for consumer financial products or services that purport to waive or limit consumer rights and protections.
Under the Proposed Rule, covered institutions would be prohibited from including or enforcing the following terms in agreements with consumers for consumer financial products or services:
- Terms purporting to waive causes of actions or remedies under state or federal consumer protection laws, unless an applicable statute expressly states they are waivable;
- Terms purporting to give covered institutions the right to unilaterally amend the agreements; and
- Terms purporting to limit or restrain consumers’ free and lawful expression.
Additionally, the Proposed Rule would make it an unfair act or practice for covered institutions to use or enforce agreements for extensions of credit containing the following terms:
- Terms purporting to waive consumers’ rights to notice or the opportunity to be heard;
- Terms purporting to waive consumers’ rights to protect their real or personally-held property from creditors; and
- Terms purporting to assign consumers’ wages.
The Proposed Rule would also make it an unfair act or practice for covered institutions to levy or collect delinquency charges on payments when the delinquency is due to earlier-assessed delinquency charges. The Proposed Rule would allow for state exemptions for transactions subject to state requirements or prohibitions that provide consumers with at least the same rights as those under the Proposed Rule. If the application for the exemption is approved, this subpart of the Proposed Rule would not be in effect in that state.
The Proposed Rule aligns with the CFPB’s recent enforcement priorities around form contracts involving financial services institutions and consumers. On January 11, 2023, the CFPB had proposed a rule to establish a public registry for covered institutions using form contracts with terms purporting to limit or waive consumer protections. This proposed rule has not yet been finalized. And, on June 4, 2024, the CFPB had issued Consumer Financial Protection Circular 2024-03, wherein it stated that covered institutions may violate the prohibition on deceptive acts or practices by including unlawful or unenforceable terms in their agreements. The CFPB considered terms that limit how consumers communicate reviews of goods and services, arbitration provisions in residential mortgage loans secured by a principal dwelling, and waivers of rights under the Electronic Fund Transfer Act to be examples of unlawful and unenforceable terms.
Comments to the Proposed Rule must be received by April 1, 2025, and Goodwin’s coverage of the 2023 proposed rule can be found here.
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