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.”

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.

Since taking on the role in November 2017, Comptroller of the Currency Joseph Otting has been relatively circumspect regarding his views on the banking industry, bank regulation, and bank regulatory reform. In testimony on June 14 before the Senate Committee on Banking, Housing, and Urban Affairs, Comptroller Otting provided the clearest insight to date about his views on the federal banking system and the role of bank regulation.

In his testimony, Comptroller Otting first discussed risk in the banking system and the OCC’s “supervision by risk” approach, noting the following areas of heightened risk:

  • Elevated credit risk due to eased credit underwriting, increased commercial real estate concentration limits, and policy exceptions that create a higher level of concern
  • Elevated operational risk created by cybersecurity threats and third-party relationships, including risks created by consolidation in the fintech industry, which has led to a limited number of providers servicing large segments of the banking industry
  • Elevated compliance risk due to Bank Secrecy Act (BSA) requirements, the new FinCEN beneficial ownership rules, and new technologies that attempt to increase customer convenience and access to financial products and services, and the need for banks to better manage implementation of regulatory changes in consumer laws

Arizona has become the first state in the United States to enact a law to create a “Fintech Sandbox” – a safe zone for fintech startups to test new applications and financial services otherwise subject to state money transmitter, banking, and similar licensing requirements without having to obtain a state license. Although other countries, such as the United Kingdom, Singapore, and Australia, have created similar fintech sandboxes, similar legislation or regulations thus far have not been adopted in the United States at the federal or state level.

The Fintech Sandbox idea was promoted by the Arizona attorney general and will be administered by the Arizona Office of the Attorney General (AZ OAG). However, the Fintech Sandbox does not mean that fintech companies will be unregulated in Arizona. There will be a substantive application and oversight process.

At a recent meeting of state attorneys general, Consumer Financial Protection Bureau (CFPB) Acting Director Mick Mulvaney reiterated his message, previously reported here that his bureau will no longer “push the envelope” on enforcement matters.

At the conclusion of his remarks, Pennsylvania Attorney General Josh Shapiro (D) asked Mulvaney whether this change in enforcement philosophy means that the CFPB will interfere in or otherwise impede the use of state attorney general authority to enforce certain Dodd-Frank provisions, specifically those penalizing conduct which is “unfair, deceptive, or abusive” (UDAAP) in federal court. Mulvaney responded unequivocally that it would not.

Targeted bipartisan financial regulatory reform legislation announced last month has been approved by the Senate Banking Committee after a markup session on December 5. The “Economic Growth, Regulatory Relief and Consumer Protection Act” (S. 2155) is sponsored by Senate Banking Committee Chair Mike Crapo (R-ID) and has 19 co-sponsors (nine Democrats, nine Republicans, and one Independent who caucuses with the Democrats), and makes some significant changes to parts of the Dodd-Frank Act. The markup session resulted in technical and other less significant, mutually agreed-upon changes to the bill.

S. 2155 would make targeted changes to Dodd-Frank Act requirements that are applicable to banks, mortgage companies, and other providers of consumer financial services, and that are primarily intended to ease regulatory burdens on regional and community banking organizations. Some of the more notable changes include the following:

October in Washington, DC is typically busy, marking the start of a new fiscal year for the federal government, a new term of the Supreme Court, and, this year, a lot of activity by financial regulators and Congress.

Just this week:

  • There were two hearings in the Senate Banking Committee on consumer protection.
  • The Senate confirmed Randal Quarles as the newest member of the Board of Governors of the Federal Reserve System (the Federal Reserve Board) by a 65–32 vote.
  • The CFPB released its long-awaited and much discussed, including by us at All Things FinReg, final rules regulating payday loans, vehicle title loans, and certain other high-cost loans (the Payday Lending Final Rule).
  • The OCC rescinded its 2013 Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products in response to the Payday Lending Final Rule.

The Consumer Financial Protection Bureau (CFPB) has issued its first No-Action Letter under the final policy on No-Action Letters that it released in early 2016. The No-Action Letter was requested by and issued to Upstart Network, Inc., an online marketplace lending platform. Under the No-Action Letter, the CFPB states that it “has no present intention” to recommend an enforcement or supervisory action against Upstart with regard to its compliance with the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B. Like many marketplace and other new online lenders, Upstart uses alternative lending criteria in its underwriting process in order to expand access to credit for borrowers who might not otherwise qualify for loans or can only qualify for loans with higher interest rates.