The CFPB soon plans to issue a final rule that would require certain supervised nonbank entities to register with it and provide information about their use of certain terms and conditions in standard-form contracts for consumer financial products or services that seek to waive or limit consumer rights or legal protections (“Covered Terms”).
In February 2023, the Bureau issued a proposed rule that would establish a publicly accessible registry that would identify registrants. In addition, under the proposed rule the CFPB would also publish information about registrants and the Covered Terms they use, except where prohibited by applicable law.
On June 4, 2024, the CFPB issued a Consumer Financial Protection Circular 2024-03 (“Circular”) warning that the use of unlawful or unenforceable terms and conditions in contracts for consumer financial products or services may violate the prohibition on deceptive acts or practices in the Consumer Financial Protection Act.
Many followers of the Bureau’s activities thought that the Bureau would abandon the Registry once it published the Circular. No dice!
We have previously blogged about out the Circular and explained how almost every consumer financial services contract in use (including government forms used by FHA, VA, the Department of Education for federal student loans, Fannie Mae and Freddie Mac Uniform Mortgage instruments) will need to be revised in order to comply with the Circular.
The Registry will make matters much worse for supervised non-banks.
We expect a legal challenge to this rule shortly after it is finalized.
The CFPB also listed several other final rules it expects to issue:
Overdraft Programs. The CFPB said that in January 2025, it plans to issue a final rule governing overdraft programs at large financial institutions. “While the nature of overdraft services, including how accounts can be overdrawn and how financial institutions determine whether to advance funds to pay the overdrawn amount, has significantly changed since 1969, the special rules remain largely unchanged,” it said. The Bureau issued a proposed rule on Jan. 17, 2024. The final rule could be affected by the presidential election. Many Democrats have voiced their support for the rule, while Republicans have opposed it. If a Republican wins the 2024 presidential election, and if the Republicans control both houses of Congress, the final rule may never see the light of day.
Personal Financial Data Rights. The CFPB said it plans to issue a final rule in October governing the types of information that covered entities must make available to consumers upon request. The CFPB noted that Section 1033 of the Consumer Financial Protection Act directs the CFPB to issue the rule. The agency issued a proposed rule in October, 2023.
PACE Financing. The Bureau said it will issue in May, 2025, a FINAL rule related to Property Assessed Clean Energy (PACE) financing. The rule, required by the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”), would implement statutory requirements that subject PACE financing to the Truth in Lending Act’s ability-to-repay requirements. The CFPB proposed the rule on May 1, 2023.
NSF Fees. The Bureau also expects to issue a final rule governing nonsufficient fund fees, even though it noted that some financial institutions have stopped charging such fees. It issued a proposed rule in January that preliminarily identified the assessment of NSF fees in certain circumstances to be an abusive act or practice. The Bureau is expected to issue a final rule in October.
The CFPB also provided details about proposed rules it may issue:
FCRA. The Bureau may issue a proposal to regulate the activities of data brokers as covered by the Fair Credit Reporting Act. (The Bureau previously issued a proposed rule that would eliminate the medical debt exemption in Regulation V, prohibit credit bureaus from including medical debt in reports provided to creditors, and prevent lenders from both taking medical devices as collateral and from repossessing them in the event of default).
Financial Data Collection. The CFPB, Federal Reserve Board, Office of the Comptroller of the Currency, Securities and Exchange Commission, Federal Deposit Insurance Corp., Federal Housing Finance Agency and the National Credit Union Administration are coordinating efforts on a proposed rule establishing data standards for the collection of information reported to each agency by financial entities under their jurisdiction and the data collected from the agencies on behalf of the Financial Stability Oversight Council, as required by the Financial Data Transparency Act.
Other Contract Terms. The Bureau is considering whether to issue a proposed rule regarding the inclusion or enforcement of certain provisions in contracts for consumer financial products or services. Before Dodd-Frank, the Federal Reserve Board (the Board) adopted and enforced Regulation AA, which made it unlawful for banks to include or enforce in their contracts (a) confessions of judgment; (b) waivers of exemptions, or limitations on exemptions, protecting real or personal property from execution (unless the property was subject to a security interest executed in connection with the obligation); assignments of wages (unless revocable at will, part of a payroll deduction or preauthorized payment plan, or applicable to wages already earned); and provisions granting a nonpossessory security interest in household goods (other than a purchase-money security interest). With the establishment of the CFPB, Dodd-Frank removed the Federal Reserve Board’s authority for issuing Regulation AA and the Board subsequently revoked the rule (although the financial institution regulatory agencies indicated that they would still deem the inclusion of these provisions to be an unfair practice).
We will continue to monitor and report on these regulatory developments and on any related litigation.
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