Center and NACA File Comment Supporting CFPB Registry Addressing Abusive Terms and Conditions

April 10, 2023

Buried in most consumer contracts these days are complicated and dense “terms and conditions” presented on a take-it-or-leave-it basis. Corporations routinely leverage their superior bargaining power to insert terms and conditions in their form contracts that diminish consumers’ legal rights, including ones barring consumers from challenging unfair practices as class actions in court or filing public complaints against the products; that severely limit the time period consumers have to bring lawsuits, or that require disputes to be litigated in far-off places or in private arbitration.

The Consumer Financial Protection Bureau (CFPB) has now issued a proposed rule to tackle the proliferation of abusive fine print in consumer financial products. They’ve proposed adoptinga new public registry of terms and conditions from nonbank entities such as auto and mortgage lenders, credit reporting agencies, private student loan providers, remittance services, and FinTech companies. Nonbanks would be required to annually submit the text of the terms and conditions in their form contracts to the CFPB registry and identify their products that contain those terms. The registry will help the CFPB monitor onerous form contracts, identify consumer financial products with possible unlawful terms for investigation and possible enforcement actions, and deter nonbanks from including these kinds of conditions in their contracts.

The Center joined forces with the National Association of Consumer Advocates and UC Berkeley Law students Lilith Gamer ‘23 and Jerry Zhang ‘25 to file a public comment in support of the Bureau’s proposed registry. The comment describes how form terms and conditions severely hinder the rights of consumers to participate in a fair and equitable marketplace—and how the registry offers multiple benefits for consumers and regulators alike. We call out specific types of terms and conditions that our research and the communities we represent have identified are particularly harmful, such as waivers of substantive rights, damages caps, forced arbitration provisions, class action bans, and others. The comment also recommends additional terms and conditions for the Bureau to collect beyond the eight categories it has already identified, and it points to various concrete examples from existing nonbank contracts to show how boilerplate legalese severely harms consumers, who are generally powerless to challenge these restrictions on their rights.