CFPB Wants to Tackle Form Contracts

On January 11, 2023, the Consumer Financial Protection Bureau (CFPB) announced that it is considering the creation of an online, public database of the form contracts being used by “nonbanks,” companies that aren’t banks but provide financial services to their customers (such as a car company that provides loans).

According to the CFPB, these nonbanks rely on a “take it or leave it” approach to customer contracts. When they force clients into signing them, they mislead customers into believing these contracts are legally enforceable. However, some of these contracts include unenforceable provisions, such as a waiver of the join a class action suit.

Of particular concern to the CFPB are form contracts by some companies that offer credit monitoring services. In the concerning agreements, these companies require that customers cannot pursue legal action to remedy violations of the Fair Credit Reporting Act. Such provisions would be unenforceable because private firms cannot use contracts to circumvent statutory requirements. But the consumers who sign these contracts might not know that, so they might fail to file suit if the companies fail to fulfill their responsibilities under the agreement.

For example, consumers might not complain if a credit monitoring company fails to sufficiently investigate errors on their credit report—such as those caused by a mixed file or identity theft—even though, under the law, the consumers would be entitled to report that failure or even file suit.

Under the CFPB’s new proposed rule, the agency would collect nonbanks’ form contracts and analyze these contracts for any terms and conditions that might seek to limit a consumer’s rights under the law. The CFPB would then post the contracts and their analysis on a publicly-available website. The agency would also track and publish if the companies had enforced those provisions and, if so, how they’d done so.

At this point, this is a proposed rule, and the public (including industry) has 60 days from publication to comment on the proposal.

If you have a credit monitoring service that’s failed you or see any errors (e.g., names, addresses,  or accounts that aren’t yours) on your credit report, you aren’t without recourse. No matter what a contract says. So contact an attorney who specializes in representing clients like you. A lawyer can not only help you repair your record, but they can also help you obtain compensation for any damages you sustained.