On April 3, 2023, AFSA submitted a comment letter to the Consumer Financial Protection Bureau (CFPB) relating to its proposed rule creating a registry of contract terms (such as arbitration provisions) used by supervised non-bank financial institutions. If adopted, this rule would require a subset of financial institutions to deliver information on contract terms to the CFPB that would be used for supervision, enforcement, and related purposes.
This proposal and the CFPB’s past statements leave no doubt that the CFPB seeks to regulate contract terms such as arbitration clauses and similar clauses that control how consumers and creditors will manage their transactions. The CFPB has seemingly overlooked that:
- Arbitration and similar types of contract terms are perfectly legal;
- Federal law encourages and supports the use of arbitration clauses in private contracts; and
- The CFPB has no authority to police contracts between motor vehicle dealers and customers.
Most importantly, the CFPB has overlooked its own history. The CFPB proposed an arbitration rule in 2017, and that rule was revoked by operation of the Congressional Review Act. As a result of this action, the CFPB’s authority to propose another arbitration rule was revoked. Without a new grant of authority to the CFPB, the agency is legally prohibited from issuing a new arbitration rule.
AFSA also signed onto a joint trade letter in this matter.
Now that the comment period for this proposal has closed, AFSA hopes to have the opportunity to engage with the CFPB on this subject in order to share its members’ views directly with policymakers. If you have any questions about this topic, please contact Philip Bohi at pbohi@afsamail.org.
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