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CFPB releases new No-Action Letter policy and new product sandbox
On December 10, the CFPB released a new proposed policy on No-Action Letters (NAL) and a new federal product sandbox. The new NAL proposal, which would replace the 2016 NAL policy, is “designed to increase the utilization of the Policy and bring certain elements more in line with similar no-action letter programs offered by other agencies.” The proposal consists of six sections. Highlights include:
- Description of No-Action Letters. The letter would indicate to the applicant, that subject to good faith, substantial compliance with the terms of the letter, the Bureau would not bring a supervisory or enforcement action against the recipient for offering or providing the described aspects of the product or service covered by the letter.
- Submitting Applications. The proposal includes a description of the items an application should contain and invites applications from trade associations on behalf of their members, and from service providers and other third parties on behalf of their existing or prospective clients.
- Assessment of Applications. The Bureau intends to grant or deny an application within 60 days of notifying the applicant that the application is deemed complete.
- Issuing No-Action Letters. NALs will be signed by the Assistant Director of the Office of Innovation or other members in the office, and will be duly authorized by the Bureau. The Bureau may revoke a NAL in whole or in part, but before the Bureau revokes a NAL, recipients will have an opportunity to cure a compliance failure within a reasonable period.
- Regulatory Coordination. In order to satisfy the coordination requirements under Dodd-Frank, the Bureau notes it is interested in partnering with state authorities that issue similar forms of no-action relief in order to provide state applicants an alternative means of also receiving a letter from the Bureau.
- Disclosure of Information. The Bureau intends to publish NALs on its website and in some cases, a version or summary of the application. The Bureau may also publish denials and an explanation of why the application was denied. The policy notes that disclosure of information is governed by the Dodd-Frank Act, FOIA and the Bureau’s rule on Disclosure of Records and Information, which generally would prohibit the Bureau from disclosing confidential information.
Notable changes from the 2016 NAL policy include, (i) NALs no longer have a temporal duration—under the new proposal, there is no temporal limitation except in instances of revocation; (ii) applicants are no longer are required to commit to sharing data about the product or service covered by the application; and (iii) the letters are no longer staff recommendations, but issued by authorized officials in the Bureau to provide recipients greater assurance of the relief.
The proposal also introduces the Bureau’s “Product Sandbox,” which offers substantially the same relief as the NAL proposal but also includes: (i) approvals under one or more of three statutory safe harbor provisions of TILA, ECOA, or the EFTA; and (ii) exemptions by order from statutory provisions of ECOA, HOEPA, and FDIA, or regulatory provisions that do not mirror statutory provisions under rulemaking authority. The proposal notes that two years is the expected duration for participation in the Sandbox, but similar to the no-action relief above, the no-action relief from the Sandbox program can be of unlimited duration—if approved under the sandbox program, “the recipient would be immune from enforcement actions by any Federal or State authorities, as well as from lawsuits brought by private parties.”
Comments on the proposals are due within 60 days of publication in the Federal Register.
Upcoming Events
- Jeffrey S. Hydrick to discuss "State legislative update" at the NMLS Annual Conference & Training
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- Daniel P. Stipano to discuss "Dynamic customer due diligence and beneficial ownership from KYC to ongoing CDD and the new rule implementation" at the Puerto Rican Symposium of Anti-Money Laundering
- Jon David D. Langlois to discuss "Regulatory risks of convenience fees" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
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- APPROVED Webcast: NMLS Annual Conference & Ombudsman Meeting: Review and recap
- Brandy A. Hood to discuss "Keeping your head above water in flood insurance compliance" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
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- Daniel P. Stipano to discuss "Lessons learned from recent high profile enforcement actions" at the Florida International Bankers Association AML Compliance Conference
- Moorari K. Shah to provide "Regulatory update – California and beyond" at the National Equipment Finance Association Summit
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Aaron C. Mahler to discuss "Regulation B/fair lending" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Heidi M. Bauer to discuss "'So you want to form a joint venture' — Licensing strategies for successful JVs" at RESPRO26
- Jonice Gray Tucker to to discuss "DC policy: Everything but the kitchen sink" at CBA Live
- Jonice Gray Tucker to discuss "Small business & regulation: How fair lending has evolved & where are we heading?" at CBA Live
- Daniel P. Stipano to discuss "Lessons learned from ABLV and other major cases involving inadequate compliance oversight" at the ACAMS International AML & Financial Crime Conference
- Daniel P. Stipano to discuss "A year in the life of the CDD final rule: A first anniversary assessment" at the ACAMS International AML & Financial Crime Conference
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program