ACA Asks for Inclusion of Debt Collection Companies in CFPB’s Proposed Innovation Policies
The bureau is reviewing policies regulating financial services companies’ ability to test new products.
2/12/2019 1:00 PM
ACA International seeks guidance on how the accounts receivable management industry can incorporate innovation into its financial services for consumers through comments on the Consumer Financial Protection Bureau’s proposed Policy on No-Action Letters (NAL) and Product Sandboxes.
Based on little activity in the last two years and feedback from the financial services industry, the CFPB is taking a second look at its 2016 Policy on No-Action Letters for companies developing innovative financial products or services for consumers. It is also proposing a Product Sandbox policy with additional no-action relief in the form of three statutory safe harbor provisions and exemptions from statutory or regulatory provisions.
Product sandboxes or “regulatory sandboxes” essentially provide the opportunity for innovative products to be tested with consumers without complete regulatory burdens while the testing process continues.
ACA International believes the industry would benefit significantly from the No-Action Letter and Product Sandbox initiatives, unfortunately, due to a lack of clarity around regulatory expectations and a clear interpretation of the law, members have been unable to take advantage of innovation for fear of liability, writes Leah Dempsey, ACA’s vice president and senior counsel, federal advocacy, in the comments.
The current Product Sandbox policy has limitations in statutory relief entities the accounts receivable management industry would receive while testing new products and ideas.
Therefore, ACA recommends a safe harbor provision for a bona fide error defense under the Fair Debt Collection Practices Act in the sandbox policy.
The policy only provides approval relief under three statutory safe harbor provisions, the Truth-in-Lending Act, Equal Credit Opportunity Act and the Electronic Funds Transfer Act (EFTA.) While there may be some remote opportunities for relief under EFTA, the current proposal lacks approval relief for civil lawsuits that often target the ARM industry.
ACA also asks the CFPB to provide exemptions-by-order under the FDCPA to encourage the industry to participate in the Product Sandbox.
ACA members would be eager to participate in the product sandbox if given this relief in the event there was approval of a relevant application that met the CFPB’s criteria. If the CFPB cannot provide this relief, it would be unlikely that ACA members would consider a Product Sandbox application.
While ACA overall supports the proposed policy and changes if they include new deadlines and a streamlined application process, ACA has concerns about the publication of denied applications and other confidentiality issues.
Overall, the bureau’s proposed policy has the following goals, supported by ACA.
- Streamlining the application process;
- Streamlining the bureau’s processing of applications;
- Expanding the types of statutory and/or regulatory relief available;
- Specifying procedures for an extension where the relief initially provided is of limited duration; and
- Providing for coordination with existing or future programs offered by other regulators designed to facilitate innovation.
“ACA appreciates the CFPB’s willingness to improve on the NAL policies as well as establish new policies around the Product Sandbox,” Dempsey said.
On Feb. 7, the bureau’s Office of Innovation also acted to further the CFPB’s statutory mandate to ensure that markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation, according to a news release. The office has proposed the creation of a Disclosure Sandbox through revisions to the bureau’s existing policy to encourage trial disclosure programs. The existing policy was established in 2013, although the bureau has not approved any trial disclosures. The revised policy is based on the same statutory authority as the existing policy, which allows the bureau to deem a covered person conducting a trial disclosure program to be in compliance with or exempt from a requirement of a Bureau rule or certain federal laws.
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