CFPB Proposes Public Posting of Confusing ‘Terms and Conditions’ Clauses

A federal regulatory agency wants to take a closer look at nonbanks’ terms and conditions.

The Consumer Financial Protection Bureau (CFPB) proposed a rule Wednesday (Jan. 11) that would require supervised nonbank financial companies to submit terms and conditions in their form contracts so that they can be posted in a public registry, according to a Wednesday press release.

“Some companies seek to censor their customers and strip them of their rights by inserting fine print into non-negotiable contracts,” CFPB Director Rohit Chopra said in the release. “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.”

Many form contracts are lengthy, include terms and conditions that try to take away consumer protections and mislead consumers into thinking those terms and conditions are legally enforceable, according to the release.

Consumers often feel they don’t have a choice but to accept the terms and conditions because the form contracts are written by the companies and are non-negotiable, and the financial products or services covered by the form contracts are pervasive in the marketplace and play a critical role in consumers’ lives, the release said.

Collecting terms and conditions and posting them in a registry that is open to the public would provide greater transparency to the CFPB, other agencies and members of the public, per the release.

“While banks and credit unions are subject to routine examination by regulators, many nonbank companies are not,” Chopra said in a Wednesday statement about the proposed registry. “The CFPB would use data from the registry to identify supervised nonbanks and the risks their terms and conditions pose, prioritize which firms to examine, and plan the scope of those exams.”

Chopra added in the statement that Australia, Japan, the United Kingdom and the European Union have laws regarding unfair contract terms or one-side consumer contracts.

As PYMNTS reported in February, the U.K.’s Financial Conduct Authority (FCA) pushed buy now, pay later (BNPL) firms to update their contract terms to comply with consumer protections and make them fairer, easier for consumers to understand and to better reflect how they use them in practice.