The Consumer Financial Protection Bureau recently announced it finalized a policy to facilitate consumer access to innovative financial products, technology and services that benefit consumers.
The new policy establishes a process for companies to apply for a statement from bureau staff that would reduce regulatory uncertainty for a new product or service that offers the potential for significant consumer-friendly innovation. The policy was proposed in October 2014.
“This new policy is designed to improve access to consumer financial products and services that promise substantial consumer benefits,” CFPB Director Richard Cordray said in a news release. “We want to foster a consumer financial marketplace where companies develop safe, innovative products and approaches that can help make people’s lives better.”
The new policy, which is part of the CFPB’s Project Catalyst initiative, is intended to enhance regulatory compliance in specific circumstances where a product holds the promise for significant consumer benefit and where there may be uncertainty around how the product fits within an existing regulatory scheme. For example, the policy could be appropriate in a case where an innovative product is being developed that involves technology that did not exist or may not have been contemplated at the time existing regulations were adopted, according to the release.
In 2013, the CFPB issued a trial disclosure waiver policy, which allows financial services providers to take advantage of new technologies in designing and testing improved alternative federal consumer disclosures.
The new policy creates a process for companies to apply for a statement from bureau staff, known as a no-action letter. The letter would indicate that bureau staff reviewed the company’s application and has no present intention of recommending enforcement or supervisory action with respect to the particular aspects of the company’s product.
The policy specifies the information that would be required in any company’s application and makes clear bureau staff also may require additional information if necessary. The policy would not be a waiver of any law or regulation, and would not give a requesting entity an exemption from complying with any statutory or regulatory rules. Under the policy, both start-ups and established firms may apply for no-action letters.
However, banking industry officials have expressed skepticism about the new policy. According to a post in the American Bankers Association’s magazine, ABA Banking Journal, the CFPB’s policy does “virtually nothing” to reduce regulatory uncertainty. “The letters would have limited scope and would not be able to be relied upon for compliance; moreover, the bureau envisions granting them only ‘rarely’ and it does not guarantee the confidentiality of proprietary information included in the request,” according to the ABA post.
When assessing applicants, the CFPB said bureau staff will take into account the factors laid out in the policy, including the company’s relevant government supervision and enforcement history. Under the policy, the letters are not binding and also are revocable at any time. If a no-action letter is issued, it will be posted on the CFPB’s website along with a version or summary of the company’s request.
The policy is available at: http://files.consumerfinance.gov/f/201602_cfpb_no-action-letter-policy.pdf.
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