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CBA Comment Letter re Proposed Policy on No-Action Letters and Product Sandbox
Mr. Paul Watkins
Assistant Director, Office of Innovation
Bureau of Consumer Financial Protection
1700 G Street, N.W.
Washington, D.C. 20552
Re: Proposed Policy on No-Action Letters and Product Sandbox;
Docket No. CFPB-2018-0042
Dear Mr. Watkins:
The American Bankers Association U. S. Chamber of Commerce, Consumer Bankers Association, and Housing Policy Council (collectively, the Associations) appreciate the opportunity to comment on the proposal (the Proposal) of the Bureau of Consumer Financial Protection (Bureau) to revise its 2016 No-action Letter policy (2016 Policy) and establish a product sandbox (Sandbox).
We believe it is critical to maintain an effective Office of Innovation within the Office of the Director and create a robust No-action Letter (NAL) process and Sandbox to ensure consumers have access to the innovative financial products, services, and delivery mechanisms they expect. While we support the Proposal, we urge the Bureau to refine further its policy and more closely align it with the well-established and effective programs of other federal regulators including the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). To achieve that outcome, we recommend that the Bureau:
- Strengthen liability protections for companies that comply in good faith with the terms of a NAL or Sandbox approval;
- Coordinate proactively and fully with other regulators;
- Ensure the confidentiality of data and information;
- Strengthen and formalize process controls to enhance the transparency, fairness, and predictability of the NAL and Sandbox process; and
- Commit to amending relevant regulations when program experience demonstrates it is warranted.
- Innovation is Essential to Meet Consumers’ Needs and Promote Financial Well-Being.
Financial services innovation has historically benefitted consumers and continues to have tremendous potential to do so. As the history of banking amply demonstrates, innovation promotes financial inclusion, expands access to credit, and improves access to information, which in turn, supports informed decision-making and financial well-being. Simply put, innovation and consumer protection mutually reinforce each other. Congress clearly recognized this reciprocal relationship in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) when it charged the Bureau to ensure “markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation” and to ensure that “outdated, unnecessary, and unduly burdensome regulations are regularly identified and addressed.”
The development and market viability of innovative products require a flexible and receptive environment, which the Bureau plays a key role in fostering. If financial regulators, including the Bureau, fail to create such an environment, innovative companies will likely forego investments that would benefit U.S. consumers or invest abroad. Ultimately, talent and investment in financial services innovation will flow to countries where regulators support innovation through reducing regulatory uncertainty, exercising enforcement discretion, and ultimately, amending outdated and unduly burdensome rules. To combat these detrimental consequences, it is imperative that the United States encourage responsible innovation in the financial sector, whether by a new entrant, traditional financial institution, or by a joint initiative of the two. It is also critical that the Bureau support policies that promote access to affordable and accessible credit and other financial services for households and small businesses in underserved communities.
The 2016 Policy does not fulfill this mission and, ultimately, does not allow consumers access to all the products and services they want and that could improve their financial well-being. While the 2016 Policy asserts it “was intended to facilitate consumer access to innovative financial services,” it also states that no-action letters would be provided “rarely” and “only on the basis of exceptional circumstances and a thorough and persuasive demonstration of the appropriateness of such treatment.