US CFPB proposes a registry with terms and conditions for nonbank financial institutions

The US Consumer Financial Protection Bureau (CFPB) has proposed creating a registry that contains the terms and conditions for non-banking financial institutions. The registry that will be open to the public will target the nonbank firms that can inhibit consumer rights.

CFPB proposes terms and conditions for nonbank financial firms

This proposal will target nonbank financial institutions such as mortgage lending firms, payday lending, private student loan origination, and servicing firms. These firms must submit the terms and conditions to waive or limit consumer rights. The move seeks to give the CFPB more supervisory authority in the market and boost transparency.

The CFPB has also mentioned that some examples of terms and conditions that could be seen as infringing on consumer rights include undermining the rights to credit reporting, waiving the legal protections for military members, and limiting the liability of the lender for bank fees.

Protecting consumer rights

The CFPB director, Rohit Chopra, commented on the development, saying that some companies wanted to censor the rights of their customers by inserting some conditions in their non-negotiable contracts.

“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,” Chopra said. With the CFPB having a clear view of how these nonbank financial firms operate, it will be easier for the regulatory body to protect consumers.

Chopra noted that in most cases, these firms give their customers “lengthy” contracts, in which, in most cases, customers do not have the time to go through the terms and conditions before agreeing to the contract. Moreover, the contracts are also non-negotiable, inhibiting the consumer’s rights to further.

Some firms come up with contracts that strip consumers of their protections. They also limit their rights and inhibit their ability to criticize or complain on any terms they find unfair. The CFPB noted that this model undermines the consumer financial protection law.

The CFPB further noted that customers end up signing these contracts because of the need to access the financial products and services these institutions provide. Therefore, many customers still bind themselves with these contracts despite the lack of negotiable contracts and hidden terms and conditions. However, the customers have limited protection and rights as the contracts undermine the existing protections.

The CFPB added, “There is often little choice for consumers except sign these form contracts due both to their market pervasiveness and the critical role the products and services play in people’s daily lives.”