CFPB Issues Circular Regarding Unlawful and Unenforceable Contract Terms

The CFPB recently issued Consumer Financial Protection Circular 2024-03 stating that the Consumer Financial Protection Act’s prohibition on deceptive acts or practices may be violated when consumer financial products and services contracts include terms that are unlawful or unenforceable under applicable federal or state law.

The Circular cites specific examples of contractual terms that have been rendered unlawful or unenforceable in certain contexts, including contract terms that:

• Require arbitration, when otherwise prohibited under Regulation Z;
• Waive causes of action under the Electronic Funds Transfer Act, when otherwise prohibited by that law;
• Waive right to recourse, when otherwise prohibited under the Military Lending Act; and
• Limit honest reviews, when otherwise prohibited under the Consumer Review Fairness Act, as previously discussed by WBK here.