On February 18, 2016, the Consumer Financial Protection Bureau (CFPB) finalized a policy that establishes a process for companies developing financial products to apply for a statement from the CFPB, known as a “no-action letter,” regarding the regulatory impact of the proposed product.
According to the CFPB, [t]he new policy was created as part of CFPB’s Project Catalyst initiative and is intended to enhance regulatory compliance in specific circumstances where a product holds the promise for significant consumer benefit and where there may be uncertainty around how the product fits within an existing regulatory scheme.” Pursuant to the policy, once a company submits an application to the CFPB, and the proposed product passes a review, the CFPB will issue a letter indicating that the CFPB reviewed the application and has no present intention to recommend enforcement or supervisory action with respect to the proposed product.
However, the no-action letters may have more bark than bite. The policy expressly states that no-action letters “would be non-binding on the Bureau, and would not bind courts or other actors who might challenge a [no-action letter] recipient’s product or service, such as other regulators or parties in litigation.” Further, although the policy contemplates that company submissions for a no-action letter may contain proprietary or confidential information, there is no guaranty that such information can or will be protected. In short, the CFPB no-action letter policy falls short of protecting innovative companies seeking regulatory approval of new products.
You can view the CFPB’s no-action letter policy here: http://files.consumerfinance.gov/f/201602_cfpb_no-action-letter-policy.pdf.
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Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 100 largest firms in the U.S., Stinson Leonard Street has offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.
Zane Gilmer is a member of the firm’s litigation practice group. His practice focuses on business litigation and compliance and he is a member of the firm’s CFPB taskforce. Zane works out of the firm’s Denver office and he can be reached at firstname.lastname@example.org or 303.376.8416.
The views expressed herein are the views of the blogger and not those of Stinson Leonard Street or any client.