{"id":16443,"date":"2023-01-26T19:28:58","date_gmt":"2023-01-26T19:28:58","guid":{"rendered":"https:\/\/fandisentinel.com\/?p=16443"},"modified":"2024-01-31T20:36:44","modified_gmt":"2024-01-31T20:36:44","slug":"cfpb-proposal-to-create-a-public-registry-of-disfavored-contract-terms-and-the-lenders-who-use-them-may-affect-fi-products","status":"publish","type":"post","link":"https:\/\/production-mode.com\/fandisentinel\/cfpb-proposal-to-create-a-public-registry-of-disfavored-contract-terms-and-the-lenders-who-use-them-may-affect-fi-products\/","title":{"rendered":"CFPB Proposal to Create a Public Registry of Disfavored Contract Terms and the Lenders Who Use Them May Affect F&I Products"},"content":{"rendered":"

On January 11, 2023, CFPB published a Notice of Proposed Rulemaking titled \u201cRegistry of Supervised Nonbanks that Use Form Contracts to Impose Terms and Conditions that Seek to Waive or Limit Consumer Legal Protections.<\/a>\u201d<\/p>\n

The new rule<\/a> would create a registry of \u201ccovered terms or conditions\u201d and of the non-bank companies that include those terms in their form contracts. Along with many other market participants, non-bank auto finance companies who are subject to CFPB supervision (i.e., \u201clarger participants\u201d in the auto finance market) would be required to review all of their forms to find \u201ccovered limitations on consumer legal protections\u201d and to file a detailed annual report describing which covered limitations are contained in which forms and for which consumer financial products.<\/p>\n

Registration information includes enumeration of states where the forms are used and, for many covered terms, details about the precise nature of limitations imposed on consumer rights.<\/p>\n

Of importance to the F&I product market, the proposal states that indirect auto finance contracts purchased from auto dealers are \u201centered into\u201d by the indirect auto finance company. Even though auto dealers are themselves generally exempt from all CFPB jurisdiction, a supervised auto finance company is within CFPB jurisdiction and the contracts it purchases are therefore subject to reporting. The draft rule and the supplementary commentary are clear on this point.<\/p>\n

GAP waivers are covered if they amend the lender\u2019s rights or obligations in the case of a post-loss deficiency under the finance contract. If a GAP waiver addendum is included in a finance contract package, then any \u201ccovered terms or conditions\u201d in the GAP addendum must also be reported because a deficiency waiver addendum is part of the purchased contract.<\/p>\n

Other F&I product contracts appear not be covered, so long as their terms are not \u201capplicable to the offering or provision of a consumer financial product or service\u201d or part of a \u201ccovered form contract\u201d that governs the consumer financial product (i.e., the installment sale contract) \u201cacquired or purchased\u201d by the auto finance company. It may be prudent to consider whether any common F&I products, other than GAP waivers, may slip into the definition of \u201cconsumer financial product or service,\u201d which is very broad under the Dodd-Frank Act, and whether any such products might arguably be part of the financial product purchased by the lender.<\/p>\n

Annual reporting is triggered by the use of a \u201ccovered form contract\u201d that contains a \u201ccovered term or condition.\u201d The definition of \u201ccovered term or condition\u201d is both targeted and broad. It includes:<\/p>\n