In addition to releasing a finalized No-Action Letter (NAL) Policy, the Consumer Financial Protection Bureau (CFPB) also issued a revised Trial Disclosure Policy and Compliance Assistance Sandbox Policy on September 10.

Trial Disclosure Policy

Through its revised Trial Disclosure Policy, the CFPB has created the CFPB Disclosure Sandbox. Now, entities seeking to improve consumer disclosures may conduct in-market testing of alternative disclosures for a limited time upon permission by the CFPB. The Dodd-Frank Act gives the CFPB the authority to provide certain legal protections for entities to conduct trial disclosure programs. The new policy largely streamlines the application and review process, provides greater protection from liability (which also extends to agents of the waiver recipient), and allows for a time-limited extension for successful disclosure tests.

The Consumer Financial Protection Bureau (CFPB) finalized its revised No-Action Letter (NAL) Policy and issued its first NAL under the revised policy on September 10, in response to a request by the US 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.

The Consumer Financial Protection Bureau (CFPB), working in partnership with multiple state regulators, announced on September 10 that it has launched the American Consumer Financial Innovation Network (ACFIN) to strengthen coordination among federal and state regulators in order to facilitate financial innovation. ACFIN is a network of federal and state officials and regulators with authority over markets for consumer financial products and services. The CFPB invited all state regulators to join ACFIN, and the initial members of ACFIN are the attorneys general of Alabama, Arizona, Georgia, Indiana, South Carolina, Tennessee, and Utah. The network may include state attorneys general, state financial regulators, and federal financial regulators.

According to the CFPB’s press release, ACFIN “enhances shared objectives such as competition, consumer access, and financial inclusion. Additionally, ACFIN promotes regulatory certainty for innovators, benefiting the US 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.”

Regulators on both sides of the Atlantic continue to monitor and address cryptoasset and distributed ledger technology activities. We recently posted on the guidance issued by the US Financial Crimes Enforcement Network on cryptocurrencies and in another post touched upon differences in the regulatory treatment of cryptoassets across jurisdictions. Today we report on two new developments relating to the treatment of cryptoassets by UK and US regulators.

The US Court of Appeals for the Ninth Circuit on May 6 upheld the constitutionality of the structure of the Consumer Financial Protection Bureau (CFPB). In CFPB vs. Seila Law LLC, a panel of the court determined that the limitation on the president’s authority to remove the CFPB director, other than for cause, did not impede the president’s authority under the US Constitution’s Appointments Clause. Citing longstanding US Supreme Court precedent established in Humphrey’s Executor v. United States, 295 U.S. 602 (1935) (upholding President Franklin Roosevelt’s removal of an FTC Commissioner), and Morrison v. Olson¸487 U.S. 654 (1988) (upholding the Independent Counsel Act as then constituted), the Ninth Circuit panel concluded that the CFPB’s structure is constitutionally permissible.

Kathleen Kraninger, only the second Senate-confirmed director of the Consumer Financial Protection Bureau (CFPB) in its almost eight-year existence, recently gave her first public remarks. The priorities Director Kraninger laid out will materially impact the CFPB’s direction and mission until the end of her term in December 2023. Director Kraninger, appointed by President Donald Trump, succeeds the first CFPB director, Richard Cordray, who was appointed by President Barack Obama.

The Federal Trade Commission (FTC) will hold public hearings on March 25-26 in Washington, DC, on “Competition and Consumer Protection in the 21st Century.” Titled, “The FTC’s Role in a Changing World,” the hearings pose downstream risk to the fintech community, especially to smaller enterprises that may lack the resources and knowledge to comply with any complex new regime.

When the US Court of Appeals for the Second Circuit issued its decision in Madden v. Midland Funding in 2015, it sent shockwaves through the financial community for its unexpected ruling that nonbank assignees of a national bank did not get the benefit of National Bank Act “preemption” permitting lenders to charge any interest rate provided it does not exceed the rate permitted in the bank’s home state.[1] After an unsuccessful attempt to get the US Supreme Court to review the decision, the Second Circuit’s decision remains binding precedent in federal courts sitting in New York, Connecticut, and Vermont. The case returned to the district court and has quietly been litigated over the last two years. On March 1, the final chapter began when the parties filed a motion for preliminary approval of a settlement of the action, as described below.

Recent action by the Consumer Financial Protection Bureau (CFPB) may bring some relief to fintech developers and the broader financial services industry as new products run into otherwise insurmountable regulatory hurdles that do not take into account or adapt to new technologies.

In a recent announcement by the CFPB’s Office of Innovation, its director has proposed the creation of a “Disclosure Sandbox” to encourage trial disclosure programs.

The greatest concern for many new developers and possible funding sources for those developers is that a new and innovative product may not be able to provide disclosures in the same way that traditional products have done, simply because consumer device sizes are shrinking while the amount of information regulators are requiring to be displayed without “clicking through” many screens is increasing. This poses a conundrum for the developer, which must reconcile competing issues and demands, including the size of a device screen, the limits of human eyesight—and patience!—and the demands of regulators.

The Joint Committee of the European Supervisory Authorities (the ESAs) issued a report on 7 January 2019 on the status of regulatory sandboxes and innovation hubs following consultations with national regulators across the European Union.

The report compares the innovation hubs and regulatory sandboxes established in 21 EU member states and three EEA states, flagging too that Hungary and Spain are in the process of establishing regulatory sandboxes.