Press Release

Washington, DC — The American Association for Justice (AAJ), along with 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 certain terms and conditions in form contracts for consumer financial products and services that pose risks to consumers. Nonbank entities covered by this proposed rule include private education loans, payday lenders, auto financing, credit reporting agencies and consumer debt collectors. The proposed registry would bring transparency to the terms and conditions that are routinely weaponized by corporations to undermine consumer rights.

“The registry, as proposed, would shine a light so-called ‘gotcha’ clauses that force consumers to waive their constitutional right to court, limit what someone can recover when they are harmed, and make it more burdensome to file claims for wrongdoing,” said AAJ President Tad Thomas. “Nonbank financial services abuse low-income communities and people of color who utilize these companies when traditional forms of credit are not available. The CFPB’s registry would increase transparency on the predatory terms and conditions that undermine consumer’s rights.”

 AAJ and 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.

Full comments are available here.

AAJ also cosigned 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, signed by National Consumer Law Center, 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 is available here.