Looking to launch a new financial product? On October 8, the Consumer Financial Protection Bureau proposed a new policy to allow banks to request a “no-action letter” or “NAL.” The letters are intended to help clear up uncertainty about a new product’s compliance with the law. “A No-Action Letter would be a statement that the bureau’s staff has no present intention to recommend initiation of an enforcement or supervisory action,” the bureau said in the proposal.
Under the Dodd-Frank Act, the CFPB’s objectives include facilitating access and innovation in markets for consumer financial products. “The Bureau recognizes that, in certain circumstances, some may perceive that the current regulatory framework may hinder the development of innovative financial products that promise substantial consumer benefit,” the CFPB said. This can happen because “existing laws and rules did not contemplate such products.”
The bureau does not expect NALs to be issued frequently, the CFPB said in a blog post. An NAL would not be available to a bank unless the applicant thoroughly demonstrates the characteristics of the proposed product and the consumer risks that are involved, the CFPB said.
An NAL’s scope can be limited in any way by the CFPB’s staff. “Such a letter may be limited as to time, volume of transactions, or otherwise, and may be subject to potential renewal,” the bureau said. “Whether and how to provide a No-Action Letter or otherwise respond to such requests, including any limitations or conditions on acceptance, will be within the sole discretion of the CFPB staff.”
An NAL would not be a waiver of any law or regulation. “It doesn’t give the requesting entity an exemption from complying with any statutory or regulatory rules. It also would not spell out our official interpretation of a statutory or regulatory requirement,” the CFPB said. “It would not…prevent any other regulator or person from asserting that the product violated legal requirements.”
Still, the bureau said “the goal is simple: create a process to reduce the regulatory uncertainty that may exist for certain emerging products or services which stand to benefit consumers.”
The bureau suggested banks that are looking to apply for an NAL should contact the CFPB’s Project Catalyst team to initiate a preliminary discussion about their ideas. Bankers looking to provide feedback on NALs can do so here. The comment period ends December 15.