WASHINGTON—CUNA and NAFCU have each submitted letters in response to the Consumer Financial Protection Bureau’s proposal to amend its No-Action Letter (NAL) Policy and create a “Product Sandbox” to facilitate innovation, urging the Bureau avoid creating an uneven playing field.
“CUNA highly recommends the Bureau refrain from taking an overzealous approach to innovation that places traditional depository institutions at an unjustified disadvantage,” CUNA’s letter reads. “Innovation, through technology and other creative solutions, has the potential to enhance the delivery and quality of financial products and services to consumers…CUNA supports the CFPB’s effort to use its authority to encourage innovation through mechanisms like the NAL Policy and Product Sandbox so long as credit unions are given equal access to such programs and any approved programs are limited in number and narrow in scope.”
Other Recommendations
Other recommendations in the letter include:
- The Bureau should give a firm, clear and reasonable timeframe for its responses to a NAL request
- CUNA supports a proposed provision that the Bureau may revoke a NAL, and recommends the CFPB permit the entity “reasonable latitude” to cure any potential failure prior to revocation
- CUNA strongly supports the Bureau permitting group applications for an NAL, believing it increases the likelihood that credit unions can participate, as they often pool resources with other credit unions or other entities to attain access to programs or services a single credit union may not be able to
- CUNA supports a provision allowing for a reasonable “wind-down” period after an NAL has been revoked
- CUNA urges the Bureau to make protections for NAL participating entities “as clear and binding as possible”
Regarding the Product Sandbox, CUNA said it also urges the CFPB to adopt a group application process.
NAFCU’s Response
NAFCU Senior Counsel for Research and Policy Andrew Morris said the CFPB's proposed policy guidance to streamline and revise certain aspects of its no-action letter policy and Product Sandbox "might serve as vehicles for improving traditional products and services, whose full potential may be held back by outdated or ineffective regulations."
"More generally, the dual policies advanced in the proposal could support more permanent changes to the existing regulatory landscape, with successful participation in the Product Sandbox or No-Action Letter environment opening the door to broader industry relief," said Morris.
The proposal introduces the Bureau's Product Sandbox, another mechanism similar to the NAL that affords limited exemptions or safe harbors for financial institutions so they can test innovative products and services.
‘Unduly Burdensome’
"NAFCU supports the Bureau's decision to introduce a formal program to grant safe harbor approvals and exemptions under specific statutory or regulatory provisions," Morris wrote. However, Morris added it should not be the only mechanism for advancing reform efforts and encouraged the Bureau "to broadly utilize its approval and exemption authorities through general rulemakings … as it identifies outdated, ineffective or unduly burdensome regulations, without waiting for Sandbox participants to prove the case for regulatory relief."
Morris also offered comments on the proposal's unfair, deceptive, or abusive acts or practices (UDAAP) relief, disclosure of application information and potential risks to consumers.