The American Bankers Association, American Bankers Insurance Association and Consumers Banking Association have submitted a joint comment letter on the CFPB’s proposed policy on issuing “no-action” letters for innovative financial products or services.

The trade groups expressed the overall concern that the proposal will not “serve as a viable approach to alleviating regulatory uncertainty” because it is “limited in its applicability and yet fraught with perils for the requester.”  The specific concerns raised in their comment letter included the following:

  • The information required by the process for requesting a no-action letter puts the requester “at the risk of providing a roadmap for inventive legal attack against the proposed product” by asking the requester to describe any creative liability that might attach to the new product.  The trade groups believe the process should be re-cast to emphasize how the new product’s features vary from products described by the existing rules and why its features achieve the consumer protections pursued by existing rules.
  • In its proposal, the CFPB stated that it plans to issue no-action letters “only rarely and on the basis of exceptional circumstances.”  The trade groups are concerned that this approach will discourage requests and believe the CFPB’s staff should instead pledge to provide a timely response to all requests, giving reasons for their action to grant or deny the request.
  • As proposed by the CFPB, a no-action letter would not provide an interpretation of a statute or regulation nor a safe harbor from the CFPB’s supervisory and enforcement authority.  It also could be modified or revoked by the CFPB at any time.  In the trade groups’ view, the extremely limited scope of a no-action letter “creates virtually no incentive for innovators to undertake the request process.”  The changes they recommend include an expansion of a letter’s scope “to assure against not only Bureau enforcement or supervisory criticism, but to preclude enforcement or supervisory criticism by any agency authorized to conduct such activities under the DFA with respect to institutions in its respective jurisdiction.”
  •  The CFPB indicated in the proposal that its disclosure of a no-action letter request and any data received from the requester in connection with a request is governed by the CFPB’s rule regarding disclosure of records and information.  As the CFPB observed, that rule generally requires the CFPB to disclose records unless they are subject to a FOIA exemption or exclusion.  The trade groups seek improved assurance of confidentiality for information submitted by requesters, commenting that the CFPB’s disclosure of the detailed information and legal analysis that the proposal would require requesters to provide could enable competitors to exploit the idea or add compliance or litigation risk.