Government Bans Banks From Silencing Customers Who Complain Online
Published Date: 1/14/2025
Proposed Rule
Summary
The Consumer Financial Protection Bureau wants to stop companies from sneaky contract tricks that take away your legal rights or punish you for speaking up. This rule affects anyone offering consumer financial products, like loans or credit cards, and aims to keep contracts fair and clear. You’ve got until April 1, 2025, to share your thoughts before these changes could save you money and hassle down the road!
Analyzed Economic Effects
7 provisions identified: 7 benefits, 0 costs, 0 mixed.
Ban on Confessions and Harsh Remedies
The rule would re-codify the FTC Credit Practices Rule and bar certain creditor remedies in consumer credit contracts. Specifically, lenders could not use confessions of judgment (cognovits), waivers of exemption, assignments of wages, security interests in household goods, misrepresent cosigner liability, obligate a cosigner without prior notice, or collect certain delinquency charges described by the Credit Practices Rule.
No Waiving Your Legal Rights
Covered providers would be banned from including contract terms that ask you to waive substantive legal rights or remedies given by Federal or State law. The CFPB proposes that contracts may not purport to waive statutory protections or the remedies those laws provide.
Limits on Gag Clauses and Speech Rules
The proposal would forbid contract clauses that restrain lawful free expression, including terms that limit negative reviews, certain political speech, or that threaten account closure, fines, or breach-of-contract claims to silence consumers. Companies could not use such terms in agreements for consumer financial products or services.
Blocks Unilateral Contract Changes
The CFPB would prohibit terms that give a company the unilateral right to amend a material contract term without notice and consumer consent. Contracts could not reserve to the covered person the power to change core terms on its own.
State AGs Get New Enforcement Power
If finalized, the rule would give State attorneys general new authority to enforce the Credit Practices Rule and the additional prohibitions against national banks under section 1042(a) of the CFPA. The CFPA allows civil money penalties of up to $5,000 per violation per day, $25,000 per violation per day if 'recklessly' committed, and $1,000,000 per violation per day if 'knowingly' committed.
Who the Rule Covers
The proposed rule would apply to 'covered persons' that offer or provide consumer financial products or services and their affiliates acting as service providers. Covered products include credit, leases, real estate settlement services, deposits, payment processing, and credit reporting. Subpart B (the Credit Practices provisions) applies to credit transactions; subpart C (waivers, unilateral amendments, and free expression) applies across consumer financial products and services.
Small Entities Exempted from Some Rules
Section 1027.102(b) would exempt 'small business,' 'small organization,' and 'small governmental jurisdiction' (as defined in 5 U.S.C. 601 and SBA rules) from subpart C. That means the prohibitions on waiving law, unilateral amendments, and restraints on free expression would not apply to those small entities.
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