Podcast - The CFPB's Proposal to Create a Public Registry
In this episode of his "Clearly Conspicuous" podcast series, "The CFPB's Proposal to Create a Public Registry," consumer protection attorney Anthony DiResta dives into the Consumer Financial Protection Bureau's (CFPB) proposed rule to establish a public registry of supervised nonbanks' terms and conditions in form contracts that potentially waive or limit consumer rights and protections. Mr. DiResta explains the CFPB's origin, purpose and defined role as a federal consumer protection agency with circumscribed powers. The CFPB was not designed to act as a legislative body or as a platform to publish information. According to the bureau, the proposed public registry will increase market transparency and improve governmental and regulatory oversight.
Good day. Welcome to our podcast of Clearly Conspicuous. Our goal in these podcasts is to make you succeed in this environment, make you aware of what's going on in the consumer protection agencies and give you practical tips for success. As always, it's a privilege to be with you today. Today's topic is the CFPB's proposal to create a public registry of terms and conditions and contracts that potentially waive or limit consumer rights and protections. Is this an overreach by the bureau?
A Rule Establishing a Public Registry
The bureau is proposing a rule to establish a public registry of supervised nonbanks' terms and conditions and form contracts that potentially waive or limit consumer rights and protections. Under the proposed rule, nonbanks subject to the CFPB's supervisory jurisdiction would be required to submit information on certain terms and conditions in these form contracts. The CFPB will then post that information in a registry that would be open to the public, including to other consumer financial protection enforcers. In particular, the terms and conditions in the form contracts at issue include the following:
- waivers of claims a consumer can bring legal action limits on the company's liability to a consumer
- limits on the consumer's ability to bring a legal action by dictating the time frame, the form or the venue for a consumer to bring a legal action
- limits on the ability of a consumer to bring or participate in collective legal actions such as class actions
- limits on the ability of a consumer to complain or post reviews and certain other waivers of consumer rights or other legal protections and arbitration agreements
The inherent policy behind this initiative is to level the playing field as consumers cannot negotiate such terms in these form contracts. In addition, according to the bureau, such a registry would allegedly increase market transparency and improve governmental and regulatory oversight. However, I ask by creating a registry under these circumstances, isn't it arguable, and can't we expect this to be advanced in comments, that the CFPB is acting outside of its authority?
The CFPB's Origins and Authority
Let's start with the beginning here. The CFPB has a defined role as a federal consumer protection agency with circumscribed powers. It was not designed to act as a legislative body or as a media forum or as a platform to publish information. Rather, the CFPB was born out of the Great Recession. During the period between 2007 to 2009, millions of Americans saw their home values drop, their savings shrink, their credit dry up and their loans go into default. Many Americans took on loans that they did not fully understand because lenders misled them with promises of low payments and complicated fine print. In the wake of this tumultuous economic time, former President Obama envisioned an agency tasked with consumer protection. This agency would protect families from unfair, deceptive and abusive practices by financial institutions. To that end, Congress passed the Dodd-Frank Act in 2010, which created the CFPB. The mission of the CFPB is to implement, not legislate and enforce, federal consumer financial laws. Therefore, the proposed rule here is neither within the confines of the statutory authority delegated to the CFPB nor directed at rooting out unfair, deceptive or abusive practices that harm consumers. It can certainly be advanced that the proposed rule is an attempt to unilaterally expand the CFPB's authority beyond Congress' intent. In fact, such a public registry is at odds with Congress' direction. In addition, the CFPB seeks to establish an unprecedented system. No other industry is required to make public such detailed contract information.
So here's the key takeaway. Pay attention. Pay attention to the efforts of the CFPB and other regulatory activity at this time. After all, the FTC is proposing to change the negative option requirements with the new click to cancel provision. The FTC is proposing to ban non-compete clauses in employment agreements, and now the CFPB is proposing to create a public registry. So stay tuned to further programs as we identify and address the key issues and developments and attempt to provide strategies for success. I wish you continued success and have a meaningful day. Thank you.