CFPB Proposes Rule to Ban Contract Clauses that Deprive Consumers of Fundamental Freedoms

Regulatory Developments

CFPB Proposes Rule to Ban Contract Clauses that Deprive Consumers of Fundamental Freedoms
On January 13, the CFPB issued a notice of proposed rulemaking, seeking to prohibit financial companies from including certain contractual provisions in financial services agreements that (a) waive substantive consumer legal rights and protections grant by state or federal law; (b) allow a company to unilaterally amend the contract; or (c) restrict a consumer’s free expression, such as limiting the right to provide a negative review. The proposed rule follows on the CFPB’s June 2024 Consumer Financial Protection Circular warning against deceptive terms or conditions in consumer contracts. Comments on the proposed rule must be received by April 1, 2025.

CFPB Proposes Rule Interpreting EFTA’s Applicability to Emerging Digital Payment Mechanisms
On January 10, the CFPB issued a proposed interpretive rule for determining when EFTA’s protections apply to emerging digital payment mechanisms. The rule, if finalized as written, would interpret the term “funds” to include assets that act or are used like money, including stablecoins, and other similarly-situated fungible assets that operate as a medium of exchange or a means of paying for goods or services. The rule would bring other consumer asset accounts, such as certain video game accounts, virtual currency wallets, and credit card rewards points accounts within the scope of EFTA. Comments on the rule must be received by March 31, 2025. To read Goodwin’s alert on this proposed interpretive rule, click here.

CFPB Seeks Public Input on Strengthening Privacy Protections
On January 10, the CFPB issued a request for information, seeking public input to better understand how companies that offer or provide consumer financial products or services collect, use, process, transmit, share, store, aggregate, sell, or otherwise generate insights from or act upon consumer data, as well as potential proposals on how Regulation P, which implements the Gramm-Leach-Bliley Act, can be revised or reformed. The CFPB’s request also seeks comments on the effectiveness and shortfalls of existing federal regulations, ways to strengthen existing frameworks, and types of information that the public believes the CFPB should monitor. Comments must be received by April 11, 2025.

“In ten days, there will be a change in leadership at the FDIC. The agency needs a new direction, and — one way or another — I expect that work to begin on January 20th.”

— Travis Hill, FDIC Vice Chairman

CFPB Updates FAQs to Clarify Applicability of EFTA’s Prohibition on Compulsory Use
On January 15, the CFPB updated its FAQs with Question 6 under “Coverage: Transactions” to confirm that EFTA prohibits requiring workers to establish an account with a particular financial institution to receive tips.

CFPB Increases Asset-Size Exemption Threshold under Regulation C
On December 18, the CFPB issued a final rule amending the official commentary that interprets the requirements of Regulation C, to increase the asset-size exemption threshold for banks, savings associations, and credit unions from $56 million to $58 million, based on the 2.9% increase in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers for the 12-month period ending in November 2024. Entities with assets of $58 million or less as of December 31, 2024 are exempt from Regulation C’s data collecting requirements in 2025. The increased asset-size exemption threshold became effective on January 1, 2025.

CFPB Increases Asset-Size Exemption Threshold under Regulation Z
On December 18, the CFPB published a final rule amending Regulation Z, which implements the Truth in Lending Act, to increase the exemption threshold from $2.640 billion to $2.717 billion on the requirement for creditors to establish an escrow account for certain first-lien higher-priced mortgage loans (i.e., mortgage loans with an APR greater than the Average Prime Offer Rate by 1.5% or more). Creditors with assets of less than $2.717 billion as of December 31, 2024, are exempt, if other requirements of Regulation Z also are met, from establishing escrow accounts for higher-priced mortgage loans in 2024. Certain lenders are also exempt from this rule if they extend no more than 2,000 first-lien covered transactions during the preceding calendar year and the transactions had total assets below the Regulation Z threshold.

This rule also increased the asset size exemption threshold from $11.835 billion to $12.179 billion for certain insured depository institutions and credit unions meeting certain conditions, whereby such institutions that had assets of $12.179 billion or less on December 31, 2024, meet the asset-size exemption threshold for any loan consummated in 2025 and for purposes of loans secured by a first lien on a principal dwelling of a consumer consummated in 2026 for which the application was received before April 1, 2026.

CFPB and OCC Increase Maximum Civil Penalties for 2025
On January 3 and January 10, the CFPB and OCC, respectively, increased the maximum amount of each civil penalty within their jurisdictions to adjust for inflation, as required by the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 and further amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. These adjustments apply to penalties assessed on or after January 10, 2025 for violations occurring on or after November 2, 2015.

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New Client Alert: Massachusetts Amends State Money Transmission Law to Apply to Domestic Transactions and Stored Value
On January 1, Massachusetts Gov. Maura Healey approved House Bill No. 4840, which repeals and replaces Massachusetts’ money transmission law with a revised law (MTL Law), which is based in part on the model Money Transmission Modernization Act that was developed by the Conference of State Bank Supervisors (Model Act). Under the prior law, only entities engaged in transmitting money internationally were required to obtain a license in Massachusetts. The new MTL Law now requires persons engaged in transmitting money domestically or internationally to obtain a license in Massachusetts. It also applies to stored value. The new MTL Law better aligns Massachusetts with other states. The operative provisions of the MTL Law become effective on October 1, 2025. To read the full alert, click here. 

New Client Alert: Shielding Staking from UK Funds Regulation: The First Crypto Law of 2025
On January 9, the HM Treasury published the Staking Order, which provides that, effective January 31, 2025, arrangements for “qualifying crypto-asset staking” (QCS) do not amount to a collective investment scheme (CIS). While the Staking Order may not represent the final word on the regulation of staking services in the UK, it is useful in making it clear that certain staking arrangements will be captured by the complex CIS regime, a regime designed primarily to capture the management of investment funds. To read the full alert, click here.

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