The CFPB has issued a proposal for a limited Policy on No-Action Letters that would establish a process to reduce regulatory uncertainty that may exist for certain emerging products or services by allowing CFPB staff to advise financial institutions about the permissibility of a new product or service in the planning stage. Specifically, the proposed program announced on October 10 would allow CFPB staff to send a No-Action Letter to a financial institution that advises the institution that the staff does not plan to recommend “the initiation of supervisory or enforcement action with respect to specific aspects of a particular legal requirement in connection with [the institution]’s offering or provision of a new product,” as it has been described to the CFPB staff. Under the proposed program, the CFPB could modify or revoke a No-Action Letter, and limit such a letter by time, volume or in other ways. Under the proposed policy, the No-Action Letter would not be available unless the financial institution shows that the new product or service promises substantial consumer benefits. The CFPB would require a No-Action Letter applicant to demonstrate the characteristics of the proposed product or service, how it will work, and what consumer risks are involved. The applicant would need to explain the regulatory uncertainty that exists and how that uncertainty interferes with the development of the product or service. The applicant also would be required to demonstrate consumer safeguards and how consumer interests and safety will be monitored. Comments on the proposed No-Action Letter policy must be submitted to the CFPB by December 15.
Nutter Notes: According to the CFPB, a No-Action Letter would not be a waiver of any law or regulation, and it would not give the applicant financial institution an exemption from complying with any statutory or regulatory requirement. A No-Action Letter also would not describe the CFPB’s official interpretation of a statutory or regulatory requirement. A No-Action Letter would provide assurance to the applicant financial institution that, subject to certain limitations, the CFPB staff would not recommend enforcement action against the institution with respect to the statutory or regulatory requirements specified in the letter. A No-Action letter would not provide any assurance that another federal or state regulator, or another person, could not claim that the product or service has violated statutory or regulatory requirements. The CFPB’s proposal describes certain circumstances under which it may specifically refuse to grant or deny a No-Action Letter application, either with or without an explanation. Such circumstances include the applicant or its principals being the subject of ongoing governmental law enforcement investigation, supervisory review, or enforcement action with respect to the new product or service or a related or similar product or service. The CFPB said that it expects that No-Action Letters would be provided rarely and on the basis of exceptional circumstances. Under the proposal, applicants would not have a legal entitlement to no-action treatment of regulatory uncertainties.