WASHINGTON— The Consumer Financial Protection Bureau (CFPB) has issued a circular warning against the use of unlawful or unenforceable terms and conditions in contracts for consumer financial products or services.
“Companies use this fine print tactic to try to trick consumers into believing they have given up certain legal rights or protections,” the Bureau said in a statement. “When financial institutions take these types of actions, they risk violating the Consumer Financial Protection Act. Today’s warning is part of the CFPB’s broader efforts to ensure freedom and fairness in people’s interactions with financial institutions.”
The Bureau noted that many consumer contracts include terms and conditions that claim to limit consumer rights and protections.
Attempt to ‘Confuse’ People?
“This fine print may just be an attempt to confuse people about their rights,” the CFPB said. “A common example is the general liability waiver, which purports to fully insulate companies from suits even though most states have laws that create hosts of exemptions to these waivers.”
The CFPB said the circular explains how and when fine print tricks and intimidation in contracts for consumer financial products and services may violate the Consumer Financial Protection Act’s prohibition on deceptive acts and practices. Companies may be liable even if the unenforceable terms are borrowed from form templates or widely available contracts, the CFPB said.
Actions Taken
The CFPB said it has taken action with respect to “this unlawful conduct on many occasions over the past several years,” including on deceptive behavior toward:
- Mortgage borrowers. The CFPB said its examiners have repeatedly found examples of deceptive contract terms purporting to waive mortgage borrowers’ rights that cannot be waived.
- Bank accountholders. The CFPB said it found that a bank deceived consumers through contract terms that it claimed waived consumers’ right to hold the bank liable for improperly responding to garnishment orders when, in fact, this right could not be waived. “The bank inserted these terms into deposit agreements with broad fine print language,” the Bureau said.
- Remittance transfer consumers. The CFPB said it found that a remittance transfer provider violated the Consumer Financial Protection Act’s deception prohibition when it included misleading statements in disclosures purporting to limit consumers’ error resolution rights, which would be unenforceable under the Electronic Fund Transfer Act and the Remittance Rule.
- Auto loan borrowers. According to the CFPB, it found an auto loan servicer deceptively included language in contracts that indicated that consumers could not exercise bankruptcy rights, when in fact, waivers of bankruptcy rights generally are void as a matter of public policy.
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