On January 13, the CFPB proposed a new rule to ban large banks and consumer finance companies from using certain contractual provisions in agreements with consumers under Regulation AA. The CFPB’s proposal warns against the use of contracts of adhesion—which it qualifies as standard-form contracts offered on a “take it or leave it” basis — that often include coercive terms limiting consumer rights. The Bureau argues that such contracts can undermine fundamental consumer freedoms and the rule of law by allowing companies to unilaterally amend material terms or restrict consumers’ free speech.

As proposed, the rule would bar covered entities from including clauses that effectively waive substantive consumer legal rights and protections provided by state or federal law. The proposed rule also seeks to eliminate contract terms that limit “free expression,” such as those that threaten account closure, fines, or breach of contract claims for negative reviews. It further prohibits companies from unilaterally updating contracts in their favor and codifies existing prohibitions against taking consumer property without judicial due process or oversight. In addition, the CFPB intends to re-codify certain prohibitions outlined in the FTC’s Credit Practices Rule to apply these restrictions to banks and other companies within the CFPB’s jurisdiction. According to the Bureau, however, these restrictions would only apply to credit transactions, but the rule’s other contract term prohibitions would apply to all consumer financial products or services, such as deposit accounts, payments, and other services. Re-codification of the Credit Practices Rule is also intended to equip state attorneys general and regulators with new authority to enforce these prohibitions against national banks and federal savings associations under the CFPA. The Bureau is soliciting public comments which must be received by April 1.