CFPB Abandons Proposed Registry of Nonbanks Using Certain Form Contracts

The Consumer Financial Protection Bureau ("CFPB") withdrew a proposed rule to create a public registry of nonbanks using contract terms — such as arbitration clauses, liability limits, and claim waivers — that limit consumer legal protections.

In its Notice, the CFPB explained that the proposed rule would have required covered entities to report court or arbitrator decisions on the enforceability of those terms, which the CFPB also intended to compile and publish in the public registry. The CFPB stated that proceeding with the rulemaking was not necessary or appropriate given: (i) substantial costs of establishing and maintaining the registry that were not justified by its uncertain benefits; (ii) significant paperwork and compliance burdens on nonbanks, estimated at more than 200,000 hours for initial implementation; (iii) added administrative and financial costs to the Bureau amid reduced resources; (iv) a "misguided use" of its authority by collecting large volumes of data on lawful, commonly used contract terms with limited consumer value; and (v) the risk of unfairly "nam[ing] and sham[ing]" firms for standard contractual practices.

The CFPB noted that it considered alternative approaches, including narrowing the scope of the registry to unlawful terms or removing the publication requirement, but concluded that such modifications would not resolve the underlying concern that the anticipated costs outweighed the speculative benefits.

The CFPB said the withdrawal takes effect immediately and that it does not plan to revisit the rulemaking in its current form.