Consumer Financial Protection Circular 2024-03: Unlawful and Unenforceable Contract Terms and Conditions

Publisher lists this guidance as withdrawn/rescinded: Consumer Financial Protection Circular 2024-03: Unlawful and Unenforceable Contract Terms and Conditions, 89 FR 51955 (June 21, 2024); withdrawn on May 12, 2025 .

This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
Rules and Regulations
Federal Register
51955
Vol. 89, No. 120
Friday, June 21, 2024
1
12 U.S.C. 5481(6), (26), 5531, 5536. For
simplicity, the remainder of this Circular refers to
covered persons and service providers as ‘‘covered
persons.’’
2
CFPB, Bulletin 2022–05: Unfair and Deceptive
Acts or Practices That Impede Consumer Reviews
(Mar. 22, 2022), https://files.consumerfinance.gov/f/
documents/cfpb_bulletin-2022-05_unfair-deceptive-
acts-practices-impede-consumer-reviews.pdf.
3
15 U.S.C. 45b.
4
12 CFR 1026.36(h)(1), implementing 15 U.S.C.
1639c(e)(1).
5
15 U.S.C. 1693l; see also, e.g., Choice Money
Transfer, Inc. d/b/a Small World Money Transfer,
¶¶ 79–83, File No. 2022–CFPB–0009 (Oct. 4, 2022)
(consent order) (finding remittance transfer
provider violated section 1693l by including waiver
of consumer rights in disclosure consumers were
required to sign); Chime, Inc. d/b/a Sendwave,
¶¶ 26–29, File No. 2023–CFPB–0012 (Oct. 17, 2023)
(consent order) (finding violation of section 1693l
where remittance transfer provider required
consumers to sign a remittance services agreement
containing language limiting consumers’ damages
and claims for costs and attorney fees, contrary to
the provisions for defendant liability contained in
section 1693m(a)(3)).
6
32 CFR part 232.8(b), implementing 10 U.S.C.
987(e)(2).
7
Espin v. Citibank, N.A., No. 5:22–CV–383–BO–
RN, 2023 WL 6449909, at *3 (E.D.N.C. Sept. 29,
2023) (denying defendant’s motion to compel
arbitration and observing that the SCRA was
‘‘amended to codify the unwaivable right of
servicemembers to bring and participate in class
actions, ‘notwithstanding any previous agreement
to the contrary’ ’’) (quoting 50 U.S.C. 4042(a)).
8
See 16 CFR part 442(a)(2) (FTC’s 1984 Credit
Practices Rule, prohibiting the use of contract terms
purporting to waive a consumer’s State law right to
block creditors from seizing personal or real
property of the consumer in which they do not hold
security interests). The FTC also has interpreted
section 604(b)(2)(A) of the Fair Credit Reporting Act
(FCRA) to prohibit the inclusion of a waiver of
consumer rights in a disclosure form required under
that section, observing that ‘‘it is a general principle
of law that benefits provided to citizens by federal
statute generally may not be waived by private
agreement unless Congress intended such a result.’’
FTC, Division of Credit Practices, Staff Opinion
Letter (June 12, 1998), 1998 WL 34323756, at *1
(citing Brooklyn Savings Bank v. O’Neill, 324 U.S.
697 (1945)). In addition, while not an express
prohibition on waivers, the FTC’s Preservation of
Consumers’ Claims and Defenses rule, commonly
known as the ‘‘Holder Rule’’ and also enforced by
the CFPB, requires sellers of goods or services to
consumers to include a provision in their finance
contracts that ensures that if another person holds
the loan or lease a consumer uses to finance
acquisition of a good or service from a seller or
lessor, then the holder is subject to the same
consumer rights and defenses that the consumer
had with respect to the seller or lessor, thereby
emphasizing the importance of preserving
consumer rights. 16 CFR part 433.
9
For instance, the California Consumer Privacy
Act affords consumers certain rights to know how
their information will be used, instructs businesses
Continued
CONSUMER FINANCIAL PROTECTION
BUREAU
12 CFR Chapter X
Consumer Financial Protection
Circular 2024–03: Unlawful and
Unenforceable Contract Terms and
Conditions
AGENCY: Consumer Financial Protection
Bureau.
ACTION: Consumer financial protection
circular.
SUMMARY: The Consumer Financial
Protection Bureau (CFPB) has issued
Consumer Financial Protection Circular
2024–03, titled, ‘‘Unlawful and
Unenforceable Contract Terms and
Conditions.’’ In this circular, the CFPB
responds to the question, ‘‘Can persons
that include unlawful or unenforceable
terms and conditions in contracts for
consumer financial products and
services violate the prohibition on
deceptive acts or practices in the
Consumer Financial Protection Act
(CFPA)?’’
DATES: The CFPB released this circular
on its website on June 4, 2024.
ADDRESSES: Enforcers, and the broader
public, can provide feedback and
comments to Circulars@cfpb.gov.
FOR FURTHER INFORMATION CONTACT:
George Karithanom, Regulatory
Implementation & Guidance Program
Analyst, Office of Regulations, at 202–
435–7700 or at: https://
reginquiries.consumerfinance.gov/. If
you require this document in an
alternative electronic format, please
contact CFPB_Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
Question Presented
Can persons that include unlawful or
unenforceable terms and conditions in
contracts for consumer financial
products and services violate the
prohibition on deceptive acts or
practices in the Consumer Financial
Protection Act (CFPA)?
Response
Yes. ‘‘Covered persons’’ and ‘‘service
providers’’ must comply with the
prohibition on deceptive acts or
practices in the CFPA.
1
The inclusion of
certain terms in contracts for consumer
financial products or services may
violate the prohibition when applicable
Federal or State law renders such
contractual terms, including those that
purport to waive consumer rights,
unlawful or unenforceable.
Background on Unlawful and
Unenforceable Contract Terms
Many Federal laws—including
statutes enforced by the CFPB—render
unlawful or unenforceable various
contract terms in certain contexts. For
example, as highlighted in a recent
CFPB compliance bulletin,
2
the
Consumer Review Fairness Act of 2016
generally prohibits the use of form
contracts that limit how consumers
communicate their reviews,
assessments, or similar analysis of the
sale of goods or services, and invalidates
these types of contract terms and
conditions.
3
As another example,
Regulation Z, which implements the
Truth in Lending Act (TILA), prohibits
the inclusion in a residential mortgage
loan or open-ended consumer credit
plan secured by the principal dwelling
of terms requiring arbitration or any
other nonjudicial procedure as the
method for resolving any controversy or
settling claims arising out of the
transaction.
4
The Electronic Fund
Transfer Act (EFTA) prohibits contract
terms that contain a ‘‘waiver of any right
conferred’’ by EFTA and prohibits
waivers of any ‘‘cause of action’’ under
EFTA.
5
And the Military Lending Act
and its implementing regulations
generally prohibit terms in certain
consumer credit contracts that require
servicemembers and their dependents to
‘‘waive the covered borrower’s right to
legal recourse under any otherwise
applicable provision of State or Federal
law ....’’
6

In addition to express prohibitions
like these, a recent Federal district court
decision held that the Servicemembers
Civil Relief Act (SCRA) renders
unenforceable provisions in contracts
with servicemembers that purport to
waive their right to participate in class
actions to enforce the SCRA.
7
The
Federal Trade Commission also
administers laws that forbid certain
contractual waivers.
8
And certain State
laws similarly prohibit or restrict the
use of waivers in consumer contracts.
9

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51956 Federal Register/ Vol. 89, No. 120 / Friday, June 21, 2024 / Rules and Regulations
not to sell consumers’ personal information, and
deems ‘‘void and unenforceable’’ any contractual
provision ‘‘that purports to waive or limit in any
way rights under this title, including, but not
limited to, any right to a remedy or means of
enforcement.’’ See generally Cal. Civ. Code sec.
1798.100 et seq. described at https://oag.ca.gov/
privacy/ccpa; Cal. Civ. Code sec. 1798.192. Further,
certain State laws, including those of California,
Illinois, Kansas, and Tennessee, contain outright
prohibitions of waivers of legal protections in
general consumer protection laws. See Cal. Civ.
Code. sec. 1751 (barring waivers of protections
under California Consumers Legal Remedies Act);
Ill. St. Ch. 815 sec. 505(10c), Waiver or modification
(barring waiver or modification of protections under
consumer fraud and deceptive practices statute);
Kan. Stat. 50–625(a), Waiver (generally prohibiting
waivers of rights or benefits under the Kansas
Consumer Protection Act, unless otherwise
specified in the statute); Tenn. Stat. 47–18–113(a)
(generally prohibiting waivers ‘‘by contract,
agreement, or otherwise’’ of provisions of the
Tennessee Consumer Protection Act of 1977).
10
Covered persons also should comply with other
consumer protection laws enforceable by the CFPB
that may apply to their conduct, including but not
limited to EFTA, Regulation E; RESPA, Regulation
X; and TILA, Regulation Z.
11
Novartis Corp. v. FTC, 223 F.3d 783, 786 (D.C.
Cir. 2000) (quoting In re Cliffdale Assocs., Inc., 103
F.T.C. 110, 165 (1984)) (emphasis added).
12
See, e.g., CFPB v. Chou Team Realty LLC, Case
No. 8:20–cv–00043–SB–ADS, 2021 WL 4077110, at
*4 (C.D. Cal. Aug. 10, 2021) (citing FTC v. Pantron
I Corp., 33 F.3d 1088, 1095–96 (9th Cir. 1994)); FTC
v. NCH, Inc., Civ.A. No. CV–S–94–138LDG, 1995
WL 623260, at *8 (D. Nev. May 25, 1995) (‘‘express
representations that are shown to be false are
presumptively material’’) (citing Cliffdale Assocs.,
103 F.T.C. at 168, 182).
13
CFPB, Bulletin 2022–05: Unfair and Deceptive
Acts or Practices That Impede Consumer Reviews
(Mar. 22, 2022), https://files.consumerfinance.gov/f/
documents/cfpb_bulletin-2022-05_unfair-deceptive-
acts-practices-impede-consumer-reviews.pdf
(Bulletin 2022–05).
14
Id. at 4–5; cf. Ruth v. Triumph P’ships, 577
F.3d 790, 801–02 (7th Cir. 2009) (‘‘To threaten to
take some action ‘to the extent permitted by law[ ]’
. . . is to imply that, under some set of
circumstances and to some extent, the law actually
permits that action to be taken.’’).
15
Bulletin 2022–05 at 5 (citing FTC v. IAB
Marketing Assocs., LP, 746 F.3d 1228, 1233 (11th
Cir. 2014)).
16
See Supervisory Highlights: Summer 2015, at
15, available at https://files.consumerfinance.gov/f/
201506_cfpb_supervisory-highlights.pdf (deceptive
waivers of borrowers’ rights in mortgage loan
agreements that were unenforceable under
Regulation Z, implementing TILA); Supervisory
Highlights: Fall 2015, at 17, available at https://
files.consumerfinance.gov/f/201510_cfpb_
supervisory-highlights.pdf (same); Supervisory
Highlights: Summer 2017, 82 FR 48703, 48708 (Oct.
19, 2017) (deceptive waivers of borrowers’ rights in
loss mitigation agreements that were unenforceable
under Regulation Z, implementing TILA);
Supervisory Highlights, Issue 24, Summer 2021, 86
FR 36108, 36117 (July 8, 2021) (deceptive waivers
of rights in security deed riders that were
unenforceable under Regulation X, implementing
the Real Estate Settlement Procedures Act);
Supervisory Highlights, Issue 28, Fall 2022, 87 FR
72449, 72455 (Nov. 25, 2022) (deceptive waiver of
borrowers’ rights in loan security agreements that
was unenforceable under Regulation Z,
implementing TILA).
17
In re Bank of America, N.A. (2022–CFPB–
0002), https://www.consumerfinance.gov/
enforcement/actions/bank-of-america-na/.
18
In re Nissan Motor Acceptance Corp. (2020–
BCFP–0017), https://www.consumerfinance.gov/
policy-compliance/enforcement/actions/nissan-
motor-acceptance-corporation/.
19
See 11 U.S.C. 524(a) (providing that a
bankruptcy discharge under title 11 voids
judgments and operates as an injunction against the
commencement or continuation of an action
‘‘whether or not discharge of such debt is waived’’).
20
In re Trans-Fast Remittance LLC, also d/b/a
New York Bay Remittance (2020–BCFP–0010),
https://www.consumerfinance.gov/policy-
compliance/enforcement/actions/trans-fast-
remittance-llc/.
21
CFPB, Tuition Payment Plans in Higher
Education (Sept. 2023), at 29–30, available at
https://files.consumerfinance.gov/f/documents/
cfpb_tuition_payment_plan_report_2023-09.pdf.
Analysis
The CFPB is issuing this Circular to
emphasize that covered persons who
include unlawful or unenforceable
terms in their consumer contracts may
violate the CFPA’s prohibition on
deceptive acts or practices.
10

Covered persons may violate the
CFPA’s prohibition on deceptive acts or
practices if they include terms,
including waiver provisions, in their
consumer contracts that are rendered
unlawful or unenforceable by Federal or
State law. Under the CFPA, a
representation or omission is deceptive
if it is likely to mislead a reasonable
consumer and is material. A
representation is ‘‘material’’ if it
‘‘involves information that is important
to consumers and, hence, likely to affect
their choice of, or conduct regarding, a
product.’’
11
A contractual provision
stating that a consumer agrees not to
exercise a legal right is likely to affect
a consumer’s willingness to attempt to
exercise that right in the event of a
dispute. Moreover, certain categories of
information, including express
representations, are presumptively
material.
12

In the recent compliance bulletin
noted above, the CFPB reminded
covered persons that they could be
liable under the CFPA if they deceive
consumers using form contract
restrictions on consumer reviews that
are unenforceable.
13
The CFPB
explained that ‘‘including an
unenforceable material term in a
consumer contract is deceptive, because
it misleads consumers into believing the
contract term is enforceable,’’ and that
‘‘disclaimers in a contract such as
‘subject to applicable law’ do not cure
the misrepresentation caused by the
inclusion of an unenforceable contract
term.’’
14
Similarly, qualifying a
provision that purports to waive a
consumer right with ‘‘except where
unenforceable’’ is unlikely to cure the
provision’s misleading or material
nature. Neither do disclaimers that are
issued after the fact.
15

CFPB supervisory examiners have
identified several violations of the
CFPA’s prohibition on deception
stemming from covered persons’ use of
unlawful or unenforceable contract
terms and conditions.
16
In addition, in
several prior enforcement matters, the
CFPB has found covered persons to
have violated the CFPA by including in
contracts for consumer financial
products or services terms that are
unlawful or unenforceable under
Federal or State law, such as waivers
that are prohibited by Federal or State
law. For example, the CFPB found that
a respondent bank engaged in a
deceptive practice under the CFPA
when it represented to consumers that
because they signed a deposit agreement
including broad language directing the
bank not to contest legal process,
consumers had waived their right to
hold the bank liable for improperly
responding to garnishment notices; in
fact, regardless of the language in the
account agreement, consumers had the
right to challenge the garnishments.
17
In
another matter, the CFPB found that a
respondent auto loan servicer violated
the CFPA’s deception prohibition when
it used loan extension agreements or
written confirmations that included
language that created the net
misimpression that consumers could
not exercise bankruptcy protection
rights, which was false.
18
In fact, an
agreement to waive an individual’s right
to file for bankruptcy is void as against
public policy,
19
rendering terms that
purport to waive such right generally
unenforceable. The CFPB found in a
different matter that a respondent non-
bank remittance transfer provider
engaged in a deceptive act or practice in
violation of the CFPA when it made
misleading statements in disclosures
purporting to limit consumers’ error
resolution rights, in violation of EFTA
and the Remittance Rule.
20
And, in a
recent report, the CFPB highlighted that
certain student tuition payment plan
agreements and financial responsibility
agreements ‘‘include terms and
conditions that purport to waive
consumers’ legal protections, limit how
consumers enforce their rights, or
misrepresent the rights or protections
available to consumers under existing
law.’’
21
Some of these terms and
conditions, such as purported waivers
of the right to retain counsel and the
right to seek discharge in bankruptcy
proceedings, are likely unenforceable
and thus similarly raise deception risk.
As these examples demonstrate, the
inclusion of unlawful or unenforceable
terms and conditions in consumer
contracts is likely to mislead a
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51957 Federal Register/ Vol. 89, No. 120 / Friday, June 21, 2024 / Rules and Regulations
reasonable consumer into believing that
the terms are lawful and/or enforceable,
when in fact they are not. Further, the
representations made by the presence of
such terms are often material,
presumptively so when they are made
expressly. In particular, consumers are
unlikely to be aware of the existence of
laws that render the terms or conditions
at issue unlawful or unenforceable, so in
the event of a dispute, they are likely to
conclude they lawfully agreed to waive
their legal rights or protections after
reviewing the contract on their own or
when covered persons point out the
existence of these contractual terms and
conditions. Deceptive acts and practices
such as these pose risk to consumers,
whose rights are undermined as a result,
and distort markets to the disadvantage
of covered persons who abide by the
law by including only lawful terms and
conditions in their consumer contracts.
Thus, the inclusion of unlawful or
unenforceable terms in consumer
contracts, including unlawful or
unenforceable waiver provisions, may
violate the CFPA’s prohibition on
deceptive acts or practices.
About Consumer Financial Protection
Circulars
Consumer Financial Protection
Circulars are issued to all parties with
authority to enforce Federal consumer
financial law. The CFPB is the principal
Federal regulator responsible for
administering Federal consumer
financial law, see 12 U.S.C. 5511,
including the Consumer Financial
Protection Act’s prohibition on unfair,
deceptive, and abusive acts or practices,
12 U.S.C. 5536(a)(1)(B), and 18 other
‘‘enumerated consumer laws,’’ 12 U.S.C.
5481(12). However, these laws are also
enforced by State attorneys general and
State regulators, 12 U.S.C. 5552, and
prudential regulators including the
Federal Deposit Insurance Corporation,
the Office of the Comptroller of the
Currency, the Board of Governors of the
Federal Reserve System, and the
National Credit Union Administration.
See, e.g., 12 U.S.C. 5516(d), 5581(c)(2)
(exclusive enforcement authority for
banks and credit unions with $10
billion or less in assets). Some Federal
consumer financial laws are also
enforceable by other Federal agencies,
including the Department of Justice and
the Federal Trade Commission, the
Farm Credit Administration, the
Department of Transportation, and the
Department of Agriculture. In addition,
some of these laws provide for private
enforcement.
Consumer Financial Protection
Circulars are intended to promote
consistency in approach across the
various enforcement agencies and
parties, pursuant to the CFPB’s statutory
objective to ensure Federal consumer
financial law is enforced consistently.
12 U.S.C. 5511(b)(4).
Consumer Financial Protection
Circulars are also intended to provide
transparency to partner agencies
regarding the CFPB’s intended approach
when cooperating in enforcement
actions. See, e.g., 12 U.S.C. 5552(b)
(consultation with CFPB by State
attorneys general and regulators); 12
U.S.C. 5562(a) (joint investigatory work
between CFPB and other agencies).
Consumer Financial Protection
Circulars are general statements of
policy under the Administrative
Procedure Act. 5 U.S.C. 553(b). They
provide background information about
applicable law, articulate considerations
relevant to the Bureau’s exercise of its
authorities, and, in the interest of
maintaining consistency, advise other
parties with authority to enforce Federal
consumer financial law. They do not
restrict the Bureau’s exercise of its
authorities, impose any legal
requirements on external parties, or
create or confer any rights on external
parties that could be enforceable in any
administrative or civil proceeding. The
CFPB Director is instructing CFPB staff
as described herein, and the CFPB will
then make final decisions on individual
matters based on an assessment of the
factual record, applicable law, and
factors relevant to prosecutorial
discretion.
Rohit Chopra,
Director, Consumer Financial Protection
Bureau.
[FR Doc. 2024–13581 Filed 6–20–24; 8:45 am]
BILLING CODE 4810–AM–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
[Docket No. FAA–2024–0948; Airspace
Docket No. 24–ASW–9]
RIN 2120–AA66
Amendment of Class E Airspace;
Dallas-Fort Worth, TX
AGENCY: Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
SUMMARY: This action amends the Class
E airspace at Dallas-Fort Worth, TX.
This action is the result of an airspace
review conducted due to the
amendment of the instrument
procedures at Bourland Field, Fort
Worth, TX—contained within the
Dallas-Fort Worth, TX, Class E airspace
legal description. This action brings the
airspace into compliance with FAA
orders and supports instrument flight
rule (IFR) operations and procedures.
DATES: Effective 0901 UTC, September
5, 2024. The Director of the Federal
Register approves this incorporation by
reference action under 1 CFR part 51,
subject to the annual revision of FAA
Order JO 7400.11 and publication of
conforming amendments.
ADDRESSES: A copy of the Notice of
Proposed Rulemaking (NPRM), all
comments received, this final rule, and
all background material may be viewed
online at www.regulations.gov using the
FAA Docket number. Electronic
retrieval help and guidelines are
available on the website. It is available
24 hours each day, 365 days each year.
FAA Order JO 7400.11H, Airspace
Designations and Reporting Points, and
subsequent amendments can be viewed
online at www.faa.gov/air_traffic/
publications/. You may also contact the
Rules and Regulations Group, Office of
Policy, Federal Aviation
Administration, 800 Independence
Avenue SW, Washington, DC 20591;
telephone: (202) 267–8783.
FOR FURTHER INFORMATION CONTACT:
Jeffrey Claypool, Federal Aviation
Administration, Operations Support
Group, Central Service Center, 10101
Hillwood Parkway, Fort Worth, TX
76177; telephone (817) 222–5711.
SUPPLEMENTARY INFORMATION:
Authority for This Rulemaking
The FAA’s authority to issue rules
regarding aviation safety is found in
Title 49 of the United States Code.
Subtitle I, Section 106 describes the
authority of the FAA Administrator.
Subtitle VII, Aviation Programs,
describes in more detail the scope of the
agency’s authority. This rulemaking is
promulgated under the authority
described in Subtitle VII, Part A,
Subpart I, Section 40103. Under that
section, the FAA is charged with
prescribing regulations to assign the use
of airspace necessary to ensure the
safety of aircraft and the efficient use of
airspace. This regulation is within the
scope of that authority as it amends the
Class E airspace extending upward from
700 feet above the surface at Bourland
Field, Fort Worth, TX—contained
within the Dallas-Fort Worth, TX,
airspace legal description—to support
IFR operations at these airports.
History
The FAA published an NPRM for
Docket No. FAA–2024–0948 in the
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