The Little Rule that Could … Be Enacted by the New Administration?

On January 13, 2025, the outgoing Consumer Financial Protection Bureau (“CFPB”) issued a Notice of Proposed Rulemaking (“NPRM”) intended to forbid certain types of contract clauses that “censor speech or wipe away rights enshrined in law.” The proposed rule comes on the heels of a 2023 proposed rule designed to limit terms that may be allowed in “contracts of adhesion,” or contracts for which the terms may not be negotiated by the consumer, which includes the contracts and terms of service for most consumer products and services.

The proposed rule is comprised of two substantive sections. The first, subpart B, is intended to codify the Credit Practices Rule by prohibiting certain practices that are already largely eradicated, such as confessions of judgment, which are provisions in which a consumer waives their right due process in a lawsuit, enabling a creditor or other business to obtain a judgment against them without notice and opportunity to appear in court.

It similarly would prohibit waivers of exemption that would allow a creditor to seize assets beyond what is normally permitted under applicable law, an attachment of wages allowing a creditor to seize wages without a garnishment order or in excess of the legal maximum for wage garnishments, non-purchase money security interests in household goods, and pyramiding of late charges. Subpart B would also require creditors to provide a “Notice to Cosigner” informing any cosigner of their potential liability if the primary borrower does not pay an obligation. Because regulators generally already view these practices as UDAAP/UDAP issues, enactment of this portion of the rule would likely have relatively little effect on banks’ existing practices.

Subpart C focuses on ways that contractual provisions may interfere with consumers’ basic rights. It would prohibit:

  • Waivers of law: Provisions that require a consumer to waive a consumer protection established in State or Federal law, such as a waiver of the right to sue;
  • Unilateral amendments: Changes to the terms of an agreement made without the consumer’s agreement and without providing the consumer notice and the opportunity to opt out of the change; and
  • Restraints on expression: Restrictions on the consumer’s free and lawful expression, including reviews of the company, product, or service that is the subject of the agreement, but also prohibiting practices such as de-banking a customer based on their political or religious views.

It is not clear yet what will happen to the numerous pending NPRMs, including this one, proposed by Chopra’s CFPB but requiring further action by the new administration in order to become effective. Based on the way this rule is framed, it appears that the CFPB was aware of many observers’ hope or expectation that the new administration will not pursue many of the rules proposed under the prior administration. Where it goes beyond codifying practices that are largely already in place, this rule focuses on issues, like freedom of expression and belief, that are popular across a broad political spectrum.

While predictions indicate that the CFPB will be significantly different under the new administration and new director, we don’t yet know specifics. It is not impossible to envision a new CFPB that could continue to move forward with this rule or portions of it; only time will tell.