The Consumer Financial Protection Bureau has withdrawn a proposed rule to prohibit contractual provisions in agreements for consumer financial products or services that waive “substantive” consumer legal rights and protections.
The CFPB in January proposed preventing agreements and contracts from containing language in which the signers “opt-out” of or waive federal and state consumer protection laws, among other changes. The bureau cited its authority to prohibit acts or practices that are unfair, deceptive or abusive, or UDAPP, under the Dodd-Frank Act. However, the American Bankers Association joined other associations in arguing the CFPB does not have the UDAPP authority it claimed concerning contract language.
In a Federal Register notice today, the CFPB said the proposed rule is largely duplicative of the Federal Trade Commission’s Credit Practices Rule. It also cited public comments from ABA and others about its lack of authority in the matter. “In light of these comments, the bureau believes it necessary to withdraw the proposed rule pending further consideration of whether the Bureau has the authority to issue it,” it said.
Earlier this month, the CFPB rescinded dozens of guidance documents as part of a directive by President Trump to reduce regulation. Among the rescinded guidance was a 2024 circular on whether unlawful or unenforceable terms and conditions in contracts for consumer financial products and services violate UDAPP, which is separate from the proposed rule withdrawn today.
CFPB reverses course on state enforcement
In related news, the CFPB also rescinded a 2022 interpretive rule stating its view that state regulators and state attorneys general have enforcement authority with regard to all provisions of the Consumer Financial Protection Act.
In a Federal Register filing, the CFPB’s current leadership took issue with the legal rationale for the rule, which was released under former Director Rohit Chopra. “If Congress had intended the CFPA to permit states to enforce any provision of any federal consumer financial law, it would have said so explicitly,” the bureau said about its decision to rescind the rule.
However, the CFPB added that its decision to walk back the rule “is not altering, limiting or affecting the authority of states to take any action authorized by any separate provision of state or federal law.”
