WASHINGTON—The CFPB has withdrawn its proposed rule that would have banned contractual clauses in consumer financial product or service agreements that waive key legal rights and protections.
Originally introduced in January, the rule aimed to prevent companies from including terms that allow consumers to "opt out" of or waive federal and state consumer protection laws. The CFPB cited its authority under the Dodd-Frank Act to prohibit unfair, deceptive, or abusive acts or practices (UDAAP). However, the American Bankers Association and other industry groups challenged this authority, arguing that the CFPB lacked the legal basis to regulate such contract language, the ABA Banking Journal said.
In a notice published in the Federal Register, the CFPB explained that the proposed rule overlapped significantly with the Federal Trade Commission’s existing Credit Practices Rule. The Bureau also acknowledged public comments, including those from the ABA, questioning its authority to proceed. “In light of these comments, the bureau believes it necessary to withdraw the proposed rule pending further consideration of whether the Bureau has the authority to issue it,” the notice stated.