The CFPB Tuesday issued a circular warning against the use of unlawful or unenforceable terms and conditions in contracts for consumer financial products or services.
The CFPB stated many consumer contracts include terms and conditions that claim to limit consumer rights and protections and this fine print may just be an attempt to “confuse people about their rights.” A common example, the CFPB wrote, is the general liability waiver, which purports to fully insulate companies from suits even though most states have laws that create hosts of exemptions to these waivers. The bureau explained that when financial institutions take these types of actions, they risk violating the Consumer Financial Protection Act’s prohibition on deceptive acts and practices.
In addition, the CFPB detailed several instances where it has taken action with respect to this unlawful conduct over the past several years.
The circular follows a proposed rule issued by the CFPB last January that would 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. America’s Credit Unions’ legacy organizations responded to the proposed rule by calling on the bureau to narrow its scope to ensure credit unions’ partnerships with third-party vendors are not stifled.
The bureau also finalized a rule earlier this week to establish a registry requiring certain nonbank entities that have broken consumer laws and are subject to federal, state, or local government or court orders to report them to the bureau.
