ILA Members and Friends: Today, the CFPB issued a proposed rule essentially codifying the Credit Practices Rule with regard to all “covered persons.” 2025-00633.pdf.
The proposal does include something new and different from the Credit Practices Rule: A new Subpart C, Section 1027.301—Prohibited terms and conditions—will forbid covered persons from including in their consumer contracts any terms or conditions:
- That purport to waive substantive legal rights and protections
- That reserves the right to unilaterally amend a material term of the contract, or
- That restrain a consumer’s lawful free expression.
The CFPB has concluded that use of these types of provisions constitutes an unfair or deceptive act or practice.
The CFPB does not anticipate that this provision of the proposed rule will have a substantial, material effect on the market as covered persons are already likely to be in compliance with these prohibitions. I concur, at least for Alabama licensees. Our installment lenders have long been subject to the FTC Credit Practices Rule; and as to the Subparts’ restrictions and prohibitions, in my years in consumer finance law, it has been my experience that the use of waivers has always been restricted by other applicable state and federal law; and, I’ve never seen an Alabama contract form purporting to allow unilateral amendments nor have I ever seen language purporting to restrain a consumer’s “expressions.”
So, whether this proposed rule does or does not survive the change in Administrations, I think that it will have no material impact on traditional Alabama installment lenders.
In any event, the proposed rule is open for comment until April Fool’s Day, 2025.
-Maury