BCFP Proposes Changes to No-Action Letter Policy Encouraging Industry Innovation

The bureau’s proposal focuses on streamlining the policy for innovation with that of other federal regulators as well as expanding the types of available statutory and regulatory relief.

12/11/2018 12:30 PM

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BCFP Proposes Changes to No-Action Letter Policy Encouraging Industry Innovation

Based on little activity in the last two years and feedback from the financial services industry, the Bureau of Consumer Financial Protection is taking a second look at its 2016 Policy on No-Action Letters for companies developing innovative financial products or services for consumers.

ACA International members and accounts receivable management industry professionals interested in implementing new and innovative processes should take note of the proposed policy and consider submitting comments upon publication in the Federal Register.

The bureau’s focus on innovation has increased in the last year. Under the leadership of Acting Director Mick Mulvaney, who ended his one-year term following the swearing in of Director Kathy Kraninger Dec. 10, the bureau has a new Office of Innovation focused on consumer-friendly products.

The work that was being done under Project Catalyst was transitioned to this new office this year. The bureau intends to fulfill its statutory mandate to promote competition, innovation, and consumer access within financial services. To achieve this goal, the new office will focus on creating policies to facilitate innovation, engaging with entrepreneurs and regulators, and reviewing outdated or unnecessary regulations.

Mulvaney also named Paul Watkins, who led fintech initiatives at the Arizona Office of the Attorney General, as director of the bureau’s Office of Innovation this year.

According to the policy finalized in 2016, the bureau issued No-Action Letters to specific applicants in instances involving innovative financial products or services that promise substantial consumer benefit where there is substantial uncertainty whether or how specific provisions of statutes or regulations implemented by the bureau would be applied.

However, the bureau provided only one No-Action Letter since the policy was finalized in February 2016.

The bureau believes this strongly suggests that both the process required to obtain a No-Action Letter and the relief available under the 2016 Policy have not provided firms with sufficient incentives to seek No-Action Letters from Bureau staff,” the new proposed policy obtained by ACA International states. “The bureau is proposing to streamline the process of applying for a No-Action Letter by eliminating several elements it believes to be redundant or unduly burdensome, such as a commitment to data-sharing. Similarly, the bureau’s review of applications for a No-Action Letter would be streamlined to focus on the quality and persuasiveness of the application, with particular emphasis on the potential benefits of the product or service in question for consumers, the extent to which the applicant identifies and controls for potential risks to consumers, and the extent to which no-action relief is needed.”

The proposed changes would also bring the bureau’s policy more in line with No-Action Letter proposals offered by other federal regulators.

It is also proposing a BCFP 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.

“In keeping with the ‘sandbox’ concept, approval relief and exemption relief would be provided for a limited period of time. The bureau expects that two years would be appropriate in most cases,” the bureau’s proposed policy states. “Part II of the proposed policy also includes a section regarding extensions for participation in the BCFP Product Sandbox, which would specify the procedures for applying for such an extension and clarify the Bureau’s intention to grant such applications where there is evidence of consumer benefit and an absence of consumer harm.”

Overall, the bureau’s proposed policy has the following overall goals:

  • 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.
  • The comment period on the proposed policy will be open for 60 days following publication in the Federal Register.

Related Content from ACA International:

BCFP Selects Director of Newly-Created Office of Innovation

If you are interested in sharing articles and analysis on legal cases, industry laws and regulations or other relevant topics for possible publication with ACA International, email our Communications Department at comm@acainternational.org.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

BCFP Proposes Changes to No-Action Letter Policy Encouraging Industry Innovation

Based on little activity in the last two years and feedback from the financial services industry, the Bureau of Consumer Financial Protection is taking a second look at its 2016 Policy on No-Action Letters for companies developing innovative financial products or services for consumers.

ACA International members and accounts receivable management industry professionals interested in implementing new and innovative processes should take note of the proposed policy and consider submitting comments upon publication in the Federal Register.

The bureau’s focus on innovation has increased in the last year. Under the leadership of Acting Director Mick Mulvaney, who ended his one-year term following the swearing in of Director Kathy Kraninger Dec. 10, the bureau has a new Office of Innovation focused on consumer-friendly products.

The work that was being done under Project Catalyst was transitioned to this new office this year. The bureau intends to fulfill its statutory mandate to promote competition, innovation, and consumer access within financial services. To achieve this goal, the new office will focus on creating policies to facilitate innovation, engaging with entrepreneurs and regulators, and reviewing outdated or unnecessary regulations.

Mulvaney also named Paul Watkins, who led fintech initiatives at the Arizona Office of the Attorney General, as director of the bureau’s Office of Innovation this year.

According to the policy finalized in 2016, the bureau issued No-Action Letters to specific applicants in instances involving innovative financial products or services that promise substantial consumer benefit where there is substantial uncertainty whether or how specific provisions of statutes or regulations implemented by the bureau would be applied.

However, the bureau provided only one No-Action Letter since the policy was finalized in February 2016.

The bureau believes this strongly suggests that both the process required to obtain a No-Action Letter and the relief available under the 2016 Policy have not provided firms with sufficient incentives to seek No-Action Letters from Bureau staff,” the new proposed policy obtained by ACA International states. “The bureau is proposing to streamline the process of applying for a No-Action Letter by eliminating several elements it believes to be redundant or unduly burdensome, such as a commitment to data-sharing. Similarly, the bureau’s review of applications for a No-Action Letter would be streamlined to focus on the quality and persuasiveness of the application, with particular emphasis on the potential benefits of the product or service in question for consumers, the extent to which the applicant identifies and controls for potential risks to consumers, and the extent to which no-action relief is needed.”

The proposed changes would also bring the bureau’s policy more in line with No-Action Letter proposals offered by other federal regulators.

It is also proposing a BCFP 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.

“In keeping with the ‘sandbox’ concept, approval relief and exemption relief would be provided for a limited period of time. The bureau expects that two years would be appropriate in most cases,” the bureau’s proposed policy states. “Part II of the proposed policy also includes a section regarding extensions for participation in the BCFP Product Sandbox, which would specify the procedures for applying for such an extension and clarify the Bureau’s intention to grant such applications where there is evidence of consumer benefit and an absence of consumer harm.”

Overall, the bureau’s proposed policy has the following overall goals:

  • 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.
  • The comment period on the proposed policy will be open for 60 days following publication in the Federal Register.

Related Content from ACA International:

BCFP Selects Director of Newly-Created Office of Innovation

If you are interested in sharing articles and analysis on legal cases, industry laws and regulations or other relevant topics for possible publication with ACA International, email our Communications Department at comm@acainternational.org.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

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