Q: Under 32 CFR 232.8, within a single credit agreement may creditors permissibly use a ‘‘savings clause’’ that excludes covered borrowers from prohibited notice, waiver, arbitration, or other terms that would otherwise be applicable to non-covered borrowers?
A: Yes. Section 232.8 makes it unlawful for any creditor to extend consumer credit in which the credit agreement imposes on a covered borrower a proscribed term or provision listed in § 232.8. However, nothing in the MLA regulation restricts the ability of creditors to impose on non-covered borrowers those provisions proscribed under § 232.8 for covered borrowers.
Along these lines, the supplementary information in the July 2015 Final Rule explains that the Department ‘‘recognizes that many creditors likely would adopt disclosures and contract documents that would be designed to be provided to both consumers who are not entitled to the protections under the MLA and to covered borrowers.’’ Under the MLA, a creditor may include a proscribed term under § 232.8, such as a mandatory arbitration clause, within a standard written credit agreement with a covered borrower, provided that the agreement includes a contractual ‘‘savings’’ clause limiting the application of the proscribed term to only non-covered borrowers, consistent with any other applicable law.