The CFPB has published a proposed rule that would ban companies from using contract clauses that the bureau said limit fundamental freedom, including those that waive a consumer’s legal rights and fine print that suppresses speech.
“For decades, companies have slowly eroded Americans’ rights by slipping clauses into take-it-or-leave-it contracts that seek an unfair leg up by attempting to deny individuals the benefits of a free market,” the bureau said, in releasing the proposed rule. “Over time, fine print governing Americans’ lives has grown to impose increasingly intrusive and unusual burdens on Americans, impinging on fundamental freedoms.”
CFPB officials said they are issuing the proposed rule in an effort to ensure that consumer finance contracts focus on the main terms of a deal, rather than “fine print to take away people’s rights.”
“Companies should not weaponize fine print to deplatform or purge people from the financial system,” CFPB Director Rohit Chopra said.
The CFPB singled out the types of speech it is targeting through the rule, including contract clauses that:
- Undermine the rule of law by attempting to ensure that large companies cannot use form contracts to opt out of statutes passed by Congress or state legislatures, including protection for elder fraud and servicemembers.
- Suppress speech by fining, suing or deplatforming consumers based on comments, customer reviews or political or religious views that disagree with company management.
- Unilaterally update contracts in a company’s favor.
- Force consumers to turn over property without judicial due process or oversight. This would include prohibitions against “confessions of judgment,” which force consumers to plead guilty even if they have defenses.
The bureau said that while many terms already are unenforceable in various circumstances, some companies still use them. “The rule would create a bright line of prohibition and heightened prohibition and heightened accountability by, for example, giving state Attorneys General authority to enforce these prohibitions against national banks,” the CFPB concluded.
The proposal includes prohibitions on certain practices regarding the following that currently are prohibited by the Federal Trade Commission’s Credit Practices Rule:
- Confessions of judgment
- Waivers of exemptions from attachment, execution or other process on real or personal property
- Assignments of wages
- Nonpossessory security interests in household goods
- Practices with cosigners
- Late fees
The proposal also provides that it would be prohibited to include in an agreement with a consumer for a consumer financial product or service any of the following terms or conditions:
- Any term or condition that disclaims or waives, or purports to disclaim or waive, any substantive state or federal law designed to protect or benefit consumers, or their remedies, unless an applicable statute explicitly deems it waivable.
- Any term or condition that expressly reserves the covered person’s right to unilaterally change, modify, revise, or add a material term of a contract for a consumer financial product or service.
- Any term or condition that limits or restrains, or purports to limit or restrain, the free and lawful expression of a consumer.
Comments on the proposed rule must be received on April 1, 2025.
As with most recent CFPB actions, it is uncertain whether this rule will ever be adopted in its final form. The incoming Trump Administration opposes the aggressive regulatory regime of current CFPB Director Rohit Chopra. In the closing days of the Biden Administration, the bureau has issued several proposed rules, final rules, and other regulatory guidance, and has announced several enforcement actions. As a proposed rule, the ban on companies using certain language would be an easy one for the Trump Administration to abandon.