The Consumer Financial Protection Bureau (CFPB) announced on October 29, 2025, the withdrawal of its proposed rule aimed at creating a registry for supervised nonbanks using form contracts that impose terms seeking to waive or limit consumer legal protections. Published initially on February 1, 2023, the proposal sought to collect and publish information on such contract terms to enhance market monitoring and supervisory efforts. However, after reviewing public comments and reassessing costs and benefits, the CFPB determined that legislative rulemaking is unnecessary at this time. This withdrawal highlights ongoing debates about regulatory burdens in consumer finance, potentially signaling a broader emphasis on efficiency and targeted enforcement over expansive data collection.
Background on the Proposed Rule
The proposed rule emerged from concerns about the prevalence of form contracts in consumer financial markets. These contracts often include non-negotiable terms that may limit consumer rights, such as waivers of legal claims, liability caps, restrictions on lawsuit timelines or venues, limits on class actions, constraints on consumer reviews, and arbitration agreements. The CFPB noted that while many such terms are lawful and even favored by statutes like the Federal Arbitration Act, others could violate federal, state, or tribal laws.
Under the proposal, over 7,300 supervised nonbanks—including those in mortgage lending, payday lending, consumer reporting, debt collection, auto finance, student loan servicing, and international money transfers—would have been required to annually report details on these 'covered terms and conditions.' The CFPB aimed to use this data for risk-based supervision and market monitoring, with plans to publish registrant information publicly. Exclusions applied to states, federally recognized Indian tribes, and small firms with under $1 million in annual receipts from supervised activities. The legal basis rested on sections 1022 and 1024 of the Consumer Financial Protection Act (CFPA), focusing on facilitating supervision and monitoring without directly prohibiting terms.
The proposal's background section discussed risks like reduced consumer understanding, diminished enforcement incentives, and decreased accountability. It cited examples such as the FTC's Credit Practices Rule and the Consumer Review Fairness Act, which restrict certain terms. However, the CFPB acknowledged limited data on the frequency of unlawful terms and emphasized that most covered terms would likely be permissible.
Public Comments and Key Concerns
The CFPB received 35 unique comments during the rulemaking process. Opposition came from 12 members of Congress, four tribes, 20 trade associations representing nonbanks, depository institutions, and credit unions, as well as input from the Small Business Administration and government-sponsored enterprises in the mortgage market. Supporters included two coalitions of 66 nonprofits and consumer advocacy groups, two law professors, four law students, and three individuals.
Critics argued the proposal imposed excessive paperwork burdens, underestimated compliance costs (estimated at 202,875 hours across firms), and risked reputational harm by 'naming and shaming' entities for using lawful terms. They highlighted potential stigma from public registration, questioned the CFPB's authority under CFPA sections 1022 and 1024, and raised issues like infringement on tribal sovereignty and conflicts with the Federal Arbitration Act. Industry groups noted the registry would collect vast data on common, legal terms, offering little value for risk assessment, and unfairly targeted nonbanks while exempting banks.
Supporters viewed the registry as a tool to reveal patterns in risky terms, citing the CFPB's 2015 Arbitration Study showing consumer disadvantages in arbitration. They suggested it could empower public advocacy, foster competition, and aid regulators in spotting emerging harms. Some urged expanding coverage to include more terms, like mass arbitration provisions, and applying similar rules to banks. However, few addressed direct consumer benefits, with some noting potential confusion without education efforts.
Rationales for Withdrawal
The CFPB withdrew the proposal due to its assessment that significant costs outweighed uncertain benefits. The agency estimated high paperwork burdens, including 15 to 214 hours per firm for contract review and registration, but commenters indicated underestimation, citing needs for legal consultations, technology investments, and marketing adjustments. Reputational risks from public disclosure were also unquantified but deemed substantial, potentially creating consumer confusion or undue stigma for lawful practices.
Benefits were seen as speculative. The proposal lacked data on unlawful term prevalence and failed to quantify deterrence effects or supervisory improvements. The CFPB noted existing laws already restrict prohibited terms, with enforcement actions demonstrating their effectiveness. Collecting data on mostly lawful terms would flood the system with low-value information, burdening the agency with over 10,000 annual staff hours and $2.5 million in vendor costs—resources strained by a reduced statutory funding cap.
The withdrawal aligns with Executive Order 14219, issued by President Trump on February 19, 2025, promoting deregulation and lawful governance. Alternatives considered, such as limiting registration to unlawful terms or eliminating publication, were rejected as still burdensome without clear advantages.
Implications and Perspectives
This decision reflects competing views on regulation. Industry stakeholders welcome reduced burdens, arguing the proposal overreached by targeting legal terms without evidence of widespread harm. Consumer advocates express disappointment, seeing lost opportunities for transparency and accountability, potentially allowing risky terms to persist unchecked.
From a legal standpoint, the withdrawal avoids challenges under the major questions doctrine or Congressional Review Act resolutions, such as the 2017 disapproval of a prior CFPB arbitration rule. Politically, it underscores a shift toward minimizing regulatory loads, prioritizing targeted tools like examinations over broad registries.
In summary, the CFPB's withdrawal emphasizes efficiency in consumer protection. Potential next steps include using existing supervisory powers for targeted data collection or pursuing narrower rules if new evidence emerges. Ongoing debates may focus on balancing innovation in financial services with robust safeguards, influencing future policy in nonbank supervision. (Word count: 912)