April 3, 2023 — Press Release

Proposed registry would shine a light on the terms and conditions consumer advocates say are routinely weaponized by corporations 

WASHINGTON — The National Consumer Law Center and 65 consumer advocacy, civil rights, environmental, and workers’ rights organizations submitted comments today on the Consumer Financial Protection Bureau (CFPB) proposed rulemaking to require that regulated nonbank entities annually register with the CFPB regarding their use of forced arbitration clauses and other terms and conditions in form contracts that pose risks to consumers. 

Nonbank entities covered by this proposed rule include private education lenders, payday lenders, auto financers, credit reporting agencies, and consumer debt collectors. 

“By shining a light on financial service providers that sneak predatory terms and conditions into the fine-print of consumer contracts, the CFPB’s proposed registry will help combat forced arbitration clauses that take away our day in court,” said Lauren Saunders, associate director at the National Consumer Law Center. 

The consumer coalition’s comments read, in part:

“The increasing use of these pernicious terms and conditions often forces consumers into unknowingly giving up their fundamental Constitutional rights, such as accessing the courts, or limiting their ability to seek full and meaningful accountability when they’ve been cheated or defrauded by financial institutions. Obtaining credit reports, taking out private student loans, or taking out a car loan, should not suddenly strip individuals of local, state, and federal consumer protections, yet these contract provisions continue to destroy lives by allowing repeat offenders to contract away and avoid all legal accountability.”

NCLC also cosigned longer, detailed comments that read, in part:

“We strongly support the Bureau’s choice of terms and conditions selected for inclusion in the proposed registry. Of these clauses, forced arbitration clauses have emerged as one of the most prevalent, overarching tools used to deprive consumers of their rights. The proliferation of forced arbitration clauses imposed in contracts for prepaid cards, payday loans, private student loans, auto lending, and other forms of nonbank credit hurts all consumers, but especially affects people of color, who are even more likely to be subject to such restrictions than white consumers.

“With few laws curbing forced arbitration abuses and a legal ecosystem that almost always defers in favor of forced arbitration, the deck is stacked against consumers forced into arbitration. As a result, with little to no accountability for repeat offenders, some of the top corporate enforcers of forced arbitration in the financial services industry were also later found to have committed egregious consumer harms, both by the CFPB and in private actions.”

The full comment letter was also signed by the American Association for Justice, National Association of Consumer Advocates, Americans for Financial Reform Education Fund, Public Justice, US PIRG, Better Markets, Consumer Action, Public Citizen and the Consumer Federation of America.

Support NCLC

Please support NCLC's work to advance consumer rights and economic justice with a tax-deductible contribution today!