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Fintech in Brief: The CFPB’s Proposed Policy on No-Action Letters and Product Sandbox

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| Legal Update

The comment period for the Consumer Financial Protection Bureau’s (“CFPB”) proposed Policy on No-Action Letters and the CFPB Product Sandbox concluded on February 11. As anticipated, the proposal received extensive comments—both in favor of and against—from state officials, consumer groups, the industry, and the general public.

In particular, 22 Democratic state attorneys general questioned whether the CFPB has the legal authority to issue the type of no-action letters contemplated and argued the CFPB lacks the legal authority to create a product sandbox that grants immunity from liability. The comment letter also urged the CFPB to reconsider and rescind the proposed policies and reissue them as formal rulemakings subject to a notice and comment period. The comment letter dovetails with Chairwoman Maxine Waters’ (D-CA) previously outlined Financial Services Committee agenda that includes, among other things, a priority to reverse many of the recent changes at the CFPB and may become an area of inquiry at any future Financial Services Committee hearing on financial technology, a stated area of interest of both Chairwoman Waters and Ranking Member Patrick McHenry (R-NC).

Comments in support generally promoted further refinements to the proposed policies to, among other things, more closely align the proposed no-action letter process with those of the Securities and Exchange Commission and the Commodity Futures Trading Commission, promote more proactive coordination among regulators, and achieve a greater balance between regulatory clarity and regulatory relief, on the one hand, and appropriate consumer protection, on the other hand.

The proposed policies were issued at the end of Acting Director Mulvaney’s term and, to date, it appears Director Kathy Kraninger has not yet taken a public position on the proposed policies. As a result, it is unclear what direction the CFPB will take with respect to the proposed policies and whether or not it will issue a final policy statement with or without revisions.

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