CFPB Issues Approval Order Under Compliance Assistance Sandbox Policy

The order addresses innovative opportunities for financial services companies while ensuring compliance, which ACA International has advocated for while asking for inclusion of debt collection companies in the bureau’s policies.

1/26/2021 8:00 AM

NewsCFPB
CFPB Issues Approval Order Under Compliance Assistance Sandbox Policy

On Dec. 30, 2020, the Consumer Financial Protection Bureau issued an approval order under the Compliance Assistance Sandbox (CAS) policy and procedural rule that it issued last September to promote innovation in the financial services industry, reduce unwarranted regulatory burdens, and facilitate compliance for regulated entities.

ACA International filed s comments in February 2019 supporting the CAS as then proposed and recommending a safe harbor provision for a bona fide error defense under CAS for alleged violations of the Fair Debt Collection Practices Act committed in conformity with CAS approval, ACA previously reported. In response, the CFPB noted in its final policy on the CAS that “[t]he FDCPA provides a safe harbor for acts done or omitted in good faith in conformity with a bureau advisory opinion. See 15 U.S.C. 1692k(e).”

According to a news release from the CFPB, the CAS approval issued on Dec. 30  permits Synchrony Bank, a federal savings bank and subsidiary of ACA member company Synchrony Financial Inc., to offer and provide to consumers a “dual-feature credit card” program subject to the bureau’s “particularized compliance determinations” set forth in the approval order.

The dual-feature card would provide consumers with lower credit scores due to, e.g., limited or damaged credit history, a tool to establish or re-establish a favorable credit history. Synchrony intends to offer a below-market rate on secured use with the opportunity for eligible accountholders to graduate to unsecured use at a higher APR after 12 months, according to the news release.

The “innovative product structure” of the dual-feature card, however, raised compliance concerns at Synchrony—specifically, concerns about disclosures related to the two modes of use (the initial secured use and rate and the “graduated” unsecured use and rate), as well as about the substance of the proposed graduation mechanism. Without a bureau determination, Synchrony had significant compliance reservations about offering the dual-feature card as proposed.

In response to Synchrony’s application for an approval determination, the bureau’s 13-page approval order provides seven compliance determinations that will apply to all “graduations” from the secured to the unsecured use of the dual-feature card. The order will remain in place for 36 months, unless earlier terminated by the bureau for one of three enumerated reasons.

Under the approval order, then, “Synchrony has a safe harbor from liability under TILA [the federal Truth in Lending Act] and Regulation Z . . . as to any act done or omitted in good faith in conformity with [the] approval order.”

Continued Advocacy for Inclusion for Debt Collectors

In its comments on the CAS policy, Leah Dempsey, ACA’s vice president and senior counsel, federal advocacy, said, “ACA International believes the industry will benefit from the No-Action Letter and Product Sandbox initiatives, however we will continue to seek additional clarity on debt-collection-specific issues.”

Companies may test financial products or services where there is regulatory uncertainty under the CAS policy, according to the CFPB, but it only provides a safe harbor from liability during the testing period under the Truth in Lending Act, EFTA or ECOA. The current policy lacks relief under many relevant laws for the accounts receivable management industry.

The commentary in the CAS policy notes, “A trade association commenter suggested that the bureau should use its authority to issue advisory opinions under the Fair Debt Collection Practices Act (FDCPA) to clarify regulatory expectations by providing clear legal interpretations for debt collectors that want to use newer technologies…These kinds of comments on the importance of interpretive guidance build on earlier comments submitted in response to the bureau’s 2018 Request for Information on Guidance and Implementation Support (Guidance RFI). This feedback is informing the bureau’s present consideration of a proposal to implement an interpretive letter program that could benefit innovators and other regulated entities confronting regulatory uncertainty.”

The commentary also adds that, “The bureau agrees with these commenters that the present lack of an interpretive letter or advisory opinion policy represents a gap in the bureau’s plans for providing compliance assistance to stakeholders under the federal consumer financial laws. Because the bureau did not propose an interpretive letter or advisory opinion program in the Proposed Sandbox Policy, and because of the significant public interest in how such a program might be structured, the bureau believes it would be appropriate to provide an opportunity for public comment before establishing an interpretive letter or advisory opinion program. Accordingly, the bureau intends to separately propose an interpretive letter program as soon as practicable.”

ACA appreciates the bureau is continuing to evaluate solutions to regulatory uncertainty for the ARM industry and debt collectors. 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.


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

CFPB Issues Approval Order Under Compliance Assistance Sandbox Policy

On Dec. 30, 2020, the Consumer Financial Protection Bureau issued an approval order under the Compliance Assistance Sandbox (CAS) policy and procedural rule that it issued last September to promote innovation in the financial services industry, reduce unwarranted regulatory burdens, and facilitate compliance for regulated entities.

ACA International filed s comments in February 2019 supporting the CAS as then proposed and recommending a safe harbor provision for a bona fide error defense under CAS for alleged violations of the Fair Debt Collection Practices Act committed in conformity with CAS approval, ACA previously reported. In response, the CFPB noted in its final policy on the CAS that “[t]he FDCPA provides a safe harbor for acts done or omitted in good faith in conformity with a bureau advisory opinion. See 15 U.S.C. 1692k(e).”

According to a news release from the CFPB, the CAS approval issued on Dec. 30  permits Synchrony Bank, a federal savings bank and subsidiary of ACA member company Synchrony Financial Inc., to offer and provide to consumers a “dual-feature credit card” program subject to the bureau’s “particularized compliance determinations” set forth in the approval order.

The dual-feature card would provide consumers with lower credit scores due to, e.g., limited or damaged credit history, a tool to establish or re-establish a favorable credit history. Synchrony intends to offer a below-market rate on secured use with the opportunity for eligible accountholders to graduate to unsecured use at a higher APR after 12 months, according to the news release.

The “innovative product structure” of the dual-feature card, however, raised compliance concerns at Synchrony—specifically, concerns about disclosures related to the two modes of use (the initial secured use and rate and the “graduated” unsecured use and rate), as well as about the substance of the proposed graduation mechanism. Without a bureau determination, Synchrony had significant compliance reservations about offering the dual-feature card as proposed.

In response to Synchrony’s application for an approval determination, the bureau’s 13-page approval order provides seven compliance determinations that will apply to all “graduations” from the secured to the unsecured use of the dual-feature card. The order will remain in place for 36 months, unless earlier terminated by the bureau for one of three enumerated reasons.

Under the approval order, then, “Synchrony has a safe harbor from liability under TILA [the federal Truth in Lending Act] and Regulation Z . . . as to any act done or omitted in good faith in conformity with [the] approval order.”

Continued Advocacy for Inclusion for Debt Collectors

In its comments on the CAS policy, Leah Dempsey, ACA’s vice president and senior counsel, federal advocacy, said, “ACA International believes the industry will benefit from the No-Action Letter and Product Sandbox initiatives, however we will continue to seek additional clarity on debt-collection-specific issues.”

Companies may test financial products or services where there is regulatory uncertainty under the CAS policy, according to the CFPB, but it only provides a safe harbor from liability during the testing period under the Truth in Lending Act, EFTA or ECOA. The current policy lacks relief under many relevant laws for the accounts receivable management industry.

The commentary in the CAS policy notes, “A trade association commenter suggested that the bureau should use its authority to issue advisory opinions under the Fair Debt Collection Practices Act (FDCPA) to clarify regulatory expectations by providing clear legal interpretations for debt collectors that want to use newer technologies…These kinds of comments on the importance of interpretive guidance build on earlier comments submitted in response to the bureau’s 2018 Request for Information on Guidance and Implementation Support (Guidance RFI). This feedback is informing the bureau’s present consideration of a proposal to implement an interpretive letter program that could benefit innovators and other regulated entities confronting regulatory uncertainty.”

The commentary also adds that, “The bureau agrees with these commenters that the present lack of an interpretive letter or advisory opinion policy represents a gap in the bureau’s plans for providing compliance assistance to stakeholders under the federal consumer financial laws. Because the bureau did not propose an interpretive letter or advisory opinion program in the Proposed Sandbox Policy, and because of the significant public interest in how such a program might be structured, the bureau believes it would be appropriate to provide an opportunity for public comment before establishing an interpretive letter or advisory opinion program. Accordingly, the bureau intends to separately propose an interpretive letter program as soon as practicable.”

ACA appreciates the bureau is continuing to evaluate solutions to regulatory uncertainty for the ARM industry and debt collectors. 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.


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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