Last month, the Consumer Financial Protection Bureau (CFPB) proposed revisions to the agency’s no-action letter (NAL) policy and floated the idea of a federal regulatory sandbox. The proposed NAL policy would simplify and clarify the agency’s existing procedures for obtaining a NAL, while the sandbox would streamline the process for firms that seek regulatory relief when they roll out innovative products or services.
The CFPB’s proposed NAL policy would supplant the agency’s existing policy, which was implemented in 2016. Under the current policy, the CFPB has only provided one NAL; in order to encourage more applications for NALs, the CFPB is proposing to streamline the NAL application and review processes by eliminating several redundant or overly burdensome requirements, such as data-sharing requirements. The updated NAL policy would also eliminate assumed time-period limitations on NALs and place an emphasis on coordination with other regulators that offer NALs or similar forms of relief.
The relief provided to firms under the proposed sandbox would be generally consistent with the relief provided through NALs under the proposed NAL policy. However, participants would also be granted additional relief under three statutory safe harbor provisions, and the CFPB would be able to exercise its authority to exempt firms from certain statutory or regulatory provisions.
Contrary to the NAL policy, participants in the sandbox would be required to agree to share data with the CFPB that will allow the agency to determine if the product or service is causing “material, tangible harm to consumers.” Participants would also be required to agree to compensate consumers for any material economic harm caused by the participant’s offering while in the sandbox.
The sandbox would implement a streamlined application and review process through which the CFPB would intend to grant or deny an application within 60 days of notifying the applicant that its application has been deemed complete. Through the application process, applicants would be required to, among other things, describe the product or service that will be offered through the sandbox, explain the potential benefits and risks of the product or service and identify the statutory and regulatory provisions from which the applicant seeks relief.
The relief provided through the sandbox would be time-limited, which would likely be for a period of two years in most cases. However, a firm would be able to apply for an extension of a specified period of time following the expiration of its participation in the sandbox.
Comments on the proposals must be received on or before February 11, 2019.
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