WASHINGTON—Saying it doesn’t want to stymie innovation The Consumer Financial Protection Bureau is putting out for comment a new proposal that calls f for a limited No-Action Letter policy. “The goal is simple: create a process to reduce the regulatory uncertainty that may exist for certain emerging product or services which stand to benefit consumers,” said the CFPB in introducing the proposal.
CFPB said the proposed policy is suited for new financial products or services where there may be uncertainty about how they fit in the existing statutes and regulations. “Of course, such products or services must hold the promise for significant consumer benefit,” CFPB said. The proposed policy would allow our staff to send a No-Action Letter to a company that tells them the staff isn’t planning to recommend initiation of supervisory or enforcement action with respect to specific aspects of a particular legal requirement in connection with a firm’s offering or provision of a new product as described to the Bureau.
According to the CFPB, a No-Action Letter can be revoked, and it may be limited by time, volume, or in other ways. The agency said the proposed policy would not be a waiver of any law or regulation, and it doesn’t give a requesting entity an exemption from complying with any statutory or regulatory rules. It also would not spell out our official interpretation of a statutory or regulatory requirement. What it would mean is that, subject to some limitations, our staff would not recommend initiating supervisory or enforcement action against the requester with respect to the provisions specified in the letter. It would not, however, prevent any other regulator or person from asserting that the product violated legal requirements.
The CFPB further said that under the proposed policy, the No-Action Letter would not be an available tool “unless the applicant shows the product holds the promise of substantial consumer benefit. As part of the application process, we would require an applicant to thoroughly demonstrate the characteristics of the proposed product, how it will work, and what consumer risks are involved. An applicant will need to explain exactly what regulatory uncertainty exists and how that uncertainty interferes with the development of the product. In addition, the applicant will need to demonstrate what consumer safeguards are in place and how consumer interests and safety will be monitored.”
CFPB said that there will be a formal application process as laid out in the proposed policy, but interested stakeholders would also be advised to reach out to its Project Catalyst team to “initiate” preliminary discussions. “We anticipate that No-Action Letters would be issued infrequently and they would be issued at our sole discretion only after the applicant makes a thorough and persuasive demonstration that all the policy’s criteria, including the likely provision of consumer benefit, are met,” CFPB said.
A notice is to be published in the Federal Register next week.