WASHINGTON—The CFPB has issued three new policies it said are aimed at promoting innovation and facilitate compliance: the No-Action Letter (NAL) Policy, Trial Disclosure Program (TDP) Policy, and a new Compliance Assistance Sandbox (CAS) Policy. As CUToday.info reports separately, the Sandbox proposal is being panned by consumer groups.
Separately, the CFPB, working withstate regulators, has launched the American Consumer Financial Innovation Network (ACFIN), a network to enhance coordination among federal and state regulators to facilitate financial innovation, the Bureau said.
According to the CFPB, the CAS Policy enables testing of a financial product or service where there is regulatory uncertainty. The Bureau said that after it evaluates the product or service for compliance with relevant law, an approved applicant that complies in good faith with the terms of the approval will have a “safe harbor” from liability for specified conduct during the testing period. Approvals under the CAS Policy will provide protection from liability under the Truth in Lending Act, the Electronic Fund Transfer Act, or the Equal Credit Opportunity Act, according to the agency.
“Innovation drives competition, which can lower prices and offer consumers more and better products and services. New products and services can expand financial options, especially to unbanked and underbanked households, giving more consumers access to the benefits of the financial system. The three policies we are announcing today are common-sense policies that will foster innovation that ultimately benefits consumers,” said Kraninger.
In terms of No Action Letters, the bureau said, “Regulatory uncertainty can hinder the development of innovative products and services that benefit consumers. NALs provide increased regulatory certainty through a statement that the Bureau will not bring a supervisory or enforcement action against a company for providing a product or service under certain facts and circumstances. The new NAL Policy improves on the Bureau’s 2016 NAL Policy by having, among other things, a more streamlined review process focusing on the consumer benefits and risks of the product or service in question.”
The Bureau Tuesday issued its first NAL under the new NAL Policy in response to a request by the Department of Housing and Urban Development (HUD) on behalf of more than 1,600 housing counseling agencies (HCAs) that participate in HUD’s housing counseling program. In 2018, the CFPB said HUD brought concerns to the Bureau about HCAs and lenders not entering into agreements that would fund counseling services due to uncertainty about the application of the Real Estate Settlement Procedures Act (RESPA). Expressing similar concerns, the Coalition of HUD Intermediaries filed a comment letter in February 2019 noting the insufficiency of the Bureau’s old NAL Policy and supporting the new NAL proposed policy.
The no-action letter essentially states that the Bureau will not take supervisory or enforcement action under RESPA against HUD-certified HCAs that have entered into certain fee-for-service arrangements with lenders for pre-purchase housing counseling services, the agency said. “ The NAL, which is an exercise of the Bureau’s supervisory and enforcement discretion, is intended to facilitate HCAs entering into such agreements with lenders and will enhance the ability of housing counseling agencies to obtain funding from additional sources,” the agency stated.
Under the new TDP Policy, entities seeking to improve consumer disclosures may conduct in-market testing of alternative disclosures for a limited time upon permission by the Bureau. The Dodd-Frank Act gives the Bureau the authority to provide certain legal protections for entities to conduct trial disclosure programs, as outlined in the TDP Policy. The new policy streamlines the application and review process, the agency said.
- The NAL policy can be found here
- The CAS policy can be found here
- The TDP policy can be found here
- The HUD NAL may be found here
- The associated HUD NAL template may be found here
Separately, the CFPB, working in partnership with multiple state regulators, has launched the American Consumer Financial Innovation Network (ACFIN), a network to enhance coordination among federal and state regulators to facilitate financial innovation, the Bureau said.
Separately, the CFPB has issued three new policies it said promote innovation and facilitate compliance
The Bureau invited all state regulators to join ACFIN, and initial members include the attorneys general in Alabama, Arizona, Georgia, Indiana, South Carolina, Tennessee, and Utah.
“ACFIN enhances shared objectives such as competition, consumer access, and financial inclusion. Additionally, ACFIN promotes regulatory certainty for innovators, benefiting the U.S. economy and consumers alike. The network also seeks to keep pace with market innovations and help ensure they are free from fraud, discrimination, and deceptive practices,” the agency said.
‘Consistency’ in Regulation
As a result of this partnership, ACFIN members will share information to facilitate coordination among the members, and coordinate on innovation-related policies and programs, according to the CFPB.
“Federal and state coordination promotes consistency in the regulation of consumer financial products and services while facilitating consumer-beneficial innovation,” said Kraninger. “ACFIN will provide a platform for Federal and State regulators to coordinate with each other as they develop new rules of the road and apply existing ones. This coordination can provide greater regulatory certainty across jurisdictions and allow regulators to keep pace with market developments. I will continue to work to encourage other state regulators to join this important new initiative that will foster collaboration among Federal and State regulators.”