Notice2025-00377
Policy Statement on Compliance Assistance Sandbox Approvals
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 10, 2025
Issuing agencies
Consumer Financial Protection Bureau
Abstract
The Consumer Financial Protection Bureau (CFPB) is issuing this policy statement on Compliance Assistance Sandbox (Policy), which is intended to further objectives under Section 1021 of the Consumer Financial Protection Act.
Full Text
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<title>Federal Register, Volume 90 Issue 6 (Friday, January 10, 2025)</title>
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[Federal Register Volume 90, Number 6 (Friday, January 10, 2025)]
[Notices]
[Pages 1974-1979]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-00377]
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CONSUMER FINANCIAL PROTECTION BUREAU
Policy Statement on Compliance Assistance Sandbox Approvals
AGENCY: Consumer Financial Protection Bureau.
ACTION: Policy statement.
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SUMMARY: The Consumer Financial Protection Bureau (CFPB) is issuing
this policy statement on Compliance Assistance Sandbox (Policy), which
is intended to further objectives under Section 1021 of the Consumer
Financial Protection Act.
DATES: This policy statement is applicable on January 10, 2025.
FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory
Implementation & Guidance Program Analyst, Office of Regulations, at
202-435-7700 or at: <a href="https://reginquiries.consumerfinance.gov/">https://reginquiries.consumerfinance.gov/</a>. If you
require this document in an alternative electronic format, please
contact <a href="/cdn-cgi/l/email-protection#581b1e081a07193b3b3d2b2b313a3134312c21183b3e283a763f372e"><span class="__cf_email__" data-cfemail="86c5c0d6c4d9c7e5e5e3f5f5efe4efeaeff2ffc6e5e0f6e4a8e1e9f0">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Overview
The CFPB is accepting applications for Compliance Assistance
Sandbox Approvals (``Approvals''), as set forth in the policy statement
below and subject to Conditions to Promote Innovation, Competition,
Ethics and Transparency (``the Conditions''). The Conditions would be
incorporated into individual Approvals and serve several purposes.
To summarize the Conditions, they are first designed to ensure that
Approvals promote innovations that solve unmet needs in markets for
consumer financial products and services. Minor adjustments to existing
products, or products that are designed to take advantage of gaps in
laws rather than bringing new offerings to market, do not confer
significant enough benefit on consumers to warrant the expenditure of
government resources necessary to issue and monitor Approvals. Granting
Approvals in such circumstances misallocates government resources
towards advantaging slight variations of what is essentially the same
product that is currently available in the market. The Conditions
therefore
[[Page 1975]]
aim to enable innovations that solve real problems that consumers face
in financial markets.
Second, the Conditions ensure that Approvals do not compromise the
competitive process. Innovation is maximized by competitive, open
markets and robust rivalry among firms. In seeking to promote
innovation, the Approvals program must not tilt the competitive playing
field by picking winners and losers in markets, or appearing to do so.
For this reason, the CFPB will affirmatively reach out to program
applicants' competitors and invite them to apply for the same Approval
topic. The CFPB will not grant an Approval on a topic for a single
firm, to avoid granting a first-mover advantage in the market. The
Conditions also prevent firms from advertising the receipt of an
Approval, which can create the false appearance of endorsement or
favored regulatory status and can distort competition.
Third, the Conditions promote transparency and rigorous ethical
standards. The CFPB will post applications for Approvals to an open
docket on the <a href="http://regulations.gov">regulations.gov</a> website and will accept comment for 60
days. To avoid ethical conflicts, the CFPB will not consider
applications from former CFPB attorneys representing firms as outside
counsel. The CFPB is concerned that former CFPB employees will use
their relationships to obtain special treatment for specific firms in
procuring Approvals, or that there is a risk of the appearance of
special treatment by the public or specific firms seeking outside
counsel. Because applicants' integrity is also critical for the
programs' success, Approvals will not be granted to firms that have
been the subject of an enforcement action involving prior violations of
federal consumer financial law in the last five years. And to prevent
bait-and-switch negotiation tactics experience under the prior Sandbox
policy, where firms negotiated terms of Approvals with the CFPB and
thereafter materially change the underlying products or services,
Approvals will automatically be rescinded when recipients change their
product or service so that it no longer fits the description provided
in the application and described in the Approval, unless the Approval
recipient applies for and receives an amended Approval. These
safeguards ensure that the programs are facilitating stakeholder
participation, government accountability, and integrity on the part of
Approval applicants.\1\
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\1\ See, e.g., Letter to Dave Girouard, CEO, Upstart Network,
Inc. (Feb. 13, 2023) (expressing ``concern about a recent report
that found lenders' use of educational data to make credit
determinations could have a disparate impact on borrowers of
color''), <a href="https://www.brown.senate.gov/imo/media/doc/2020-02-13%20Senate%20letter%20to%20Upstart.pdf">https://www.brown.senate.gov/imo/media/doc/2020-02-13%20Senate%20letter%20to%20Upstart.pdf</a>; Fair Lending Monitorship of
Upstart Network's Lending Model (Mar. 27, 2023) (identifying
``approval disparities for Black applicants''), available at <a href="https://www.relmanlaw.com/assets/htmldocuments/Upstart%20Final%20Report.pdf">https://www.relmanlaw.com/assets/htmldocuments/Upstart%20Final%20Report.pdf</a>.
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II. Background
On September 10, 2019, the CFPB issued the ``Policy on the
Compliance Assistance Sandbox.'' \2\ The Policy on the Compliance
Assistance Sandbox sets forth how the CFPB would grant a company
immunity from liability under one or more of three safe harbor
provisions and provide an Approval concluding that the offering or
providing of certain aspects of an individual company's product or
service complies with the relevant Federal consumer financial law.
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\2\ 84 FR 48229 (Sept. 13, 2019).
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After conducting a review in 2022, the CFPB determined that the
Policies failed to advance their stated objective of facilitating
consumer-beneficial innovation.\3\ The CFPB also determined that the
existing Policies failed to meet appropriate standards for transparency
and stakeholder participation. The CFPB rescinded the policies, and the
CFPB continued to develop new protocols to ensure that such tools were
consistent with the objectives of the Consumer Financial Protection Act
and did not raise ethical concerns.
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\3\ Statement on Competition and Innovation, 87 FR 58439 (Sept.
27, 2022).
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As noted above, the CFPB experienced a number of potential abuses
and challenges with the CAS policy, and with the NAL policy that is
being reissued simultaneously with this policy, that led to the
decision to allow the prior policies to expire. For example, the CFPB
granted Upstart Network a NAL in 2017,\4\ committing to not enforce the
Equal Credit Opportunity Act (ECOA) against the company for their use
of ``artificial intelligence'' in credit underwriting on behalf of bank
partners. Despite the fact that other companies had similar models,
Upstart became a leader in this market after receiving the NAL, and
outside observers appear to have interpreted the NAL as an endorsement
that Upstart's model did not violate the ECOA.\5\ The CFPB extended
that NAL in November 2020.\6\ Immediately after the extension, Upstart
closed its initial public offering and began trading its stock on the
Nasdaq Global Select Market on December 16, 2020,\7\ with an initial
market capitalization of $1.88 billion.\8\ In 2021, Upstart originated
1.3 million loans, totaling $11.8 billion, on behalf of bank partners.
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\4\ Id.
\5\ MARCO DI MAGGIO, DIMUTHU RATNADIWAKARA, & DON CARMICHAEL,
INVISIBLE PRIMES: FINTECH LENDING WITH ALTERNATIVE DATA, 3 (HARVARD
BUSINESS SCHOOL, 2021), <a href="https://www.hbs.edu/ris/Publication%20Files/22-024_80dc9115-69cc-4564-99c6-3a937f275d31.pdf">https://www.hbs.edu/ris/Publication%20Files/22-024_80dc9115-69cc-4564-99c6-3a937f275d31.pdf</a>.
\6\ <a href="https://www.consumerfinance.gov/rules-policy/competition-innovation/granted-applications/">https://www.consumerfinance.gov/rules-policy/competition-innovation/granted-applications/</a>.
\7\ <a href="https://ir.upstart.com/news-releases/news-release-details/upstart-announces-closing-initial-public-offering-and-full">https://ir.upstart.com/news-releases/news-release-details/upstart-announces-closing-initial-public-offering-and-full</a>.
\8\ <a href="https://www.reuters.com/technology/lending-platform-upstarts-shares-jump-nasdaq-debut-2020-12-16/">https://www.reuters.com/technology/lending-platform-upstarts-shares-jump-nasdaq-debut-2020-12-16/</a>.
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Around the same time as the IPO, several nonprofit organizations
raised concerns about Upstart's use of educational criteria (e.g.,
educational history, which university the applicant attended) in its
lending model. Upstart agreed to appoint an independent monitor to
determine whether Upstart's model complied with the ECOA.\9\
Ultimately, the independent monitor ended the relationship after coming
to an impasse with Upstart about how to assess compliance with
ECOA.\10\ Notably, the monitor detected that the model caused
```statistically and practically significant' adverse approval/denial
disparities for Black applicants.'' \11\
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\9\ Relman Colfax PLLC, Fair Lending Monitorship of Upstart
Network's Lending Model: Initial Report of the Independent Monitor,
April 14, 2021, <a href="https://www.relmanlaw.com/media/cases/1088_Upstart%20Initial%20Report%20-%20Final.pdf">https://www.relmanlaw.com/media/cases/1088_Upstart%20Initial%20Report%20-%20Final.pdf</a>.
\10\ Relman Colfax PLLC, Fair Lending Monitorship of Upstart
Network's Lending Model: Fourth and Final Report of the Independent
Monitor, March 27, 2024, <a href="https://www.relmanlaw.com/assets/htmldocuments/Upstart%20Final%20Report.pdf">https://www.relmanlaw.com/assets/htmldocuments/Upstart%20Final%20Report.pdf</a>.
\11\ Id.
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When Upstart wanted to substantially change its model, under the
terms of the NAL, Upstart was supposed to apply for a modification of
the NAL. Upstart applied for a modification, but the CFPB did not have
enough time to review the implications of the significant changes.
Upstart thus requested a termination of the NAL in order to be able to
make the changes more quickly. The request was granted.\12\
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\12\ In re November 30, 2020 No-Action Letter, Order to
Terminate No-Action Letter (June 8, 2022), available at <a href="https://files.consumerfinance.gov/f/documents/cfpb_upstart-no-action-letter-termination_order_2022-06.pdf">https://files.consumerfinance.gov/f/documents/cfpb_upstart-no-action-letter-termination_order_2022-06.pdf</a>.
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The CFPB experienced similar challenges with its Sandbox Approval
policy. For example, the CFPB issued a Sandbox Approval Order for
Payactiv, Inc., a paycheck advance lender. It did not grant an Approval
to any other paycheck advance lender. The CFPB discovered evidence
suggesting that Payactiv was using the approval in marketing materials
to misrepresent that
[[Page 1976]]
the CFPB endorsed Payactiv's product. On June 3, 2022, the CFPB
informed Payactiv that, for this reason, it was considering terminating
the approval order.\13\ Payactiv requested termination of the order,
and the CFPB approved that termination request.\14\
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\13\ In re December 30, 2020 Sandbox Approval Order, Order to
Terminate Sandbox Approval Order (June 30, 2022), available at
<a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-rescinds-special-regulatory-treatment-for-payactiv/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-rescinds-special-regulatory-treatment-for-payactiv/</a>.
\14\ Id.
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To correct these shortcomings, the CFPB developed the Conditions to
Promote Innovation, Competition, Ethics, and Transparency that must be
met for a Letter or Approval to be issued. They are incorporated in
Part B of the Policy on Sandbox Compliance Assistance Sandbox that
follows.
III. Regulatory Requirements
This Policy on the Compliance Assistance Sandbox constitutes an
agency general statement of policy and/or a rule of agency
organization, procedure, or practice exempt from the notice and comment
rulemaking requirements under the Administrative Procedure Act,
pursuant to 5 U.S.C. 553(b). Because no notice of proposed rulemaking
is required, the Regulatory Flexibility Act does not require an initial
or final regulatory flexibility analysis.\15\ The CFPB has also
determined that the issuance of the Bulletin does not impose any new or
revise any existing recordkeeping, reporting, or disclosure
requirements on covered entities or members of the public that would be
collections of information requiring approval by the Office of
Management and Budget under the Paperwork Reduction Act.
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\15\ 5 U.S.C. 603(a), 604(a).
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IV. Policy Statement
The text of the Policy is as follows:
Policy on the Compliance Assistance Sandbox
In section 1021(a) of the Consumer Financial Protection Act (CFPA),
Congress established the Consumer Financial Protection Bureau's
(CFPB's) statutory purpose as ensuring that all consumers have access
to markets for consumer financial products and services and that
markets for consumer financial products and services are fair,
transparent, and competitive.\16\ Relatedly, the CFPB's objectives
include exercising its authorities under Federal consumer financial law
for the purposes of ensuring that markets for consumer financial
products and services operate transparently and facilitate
innovation.\17\
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\16\ 12 U.S.C. 5511(a).
\17\ 12 U.S.C. 5511(b)(3), (5).
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Congress has given the CFPB a variety of authorities under the CFPA
and the enumerated consumer laws \18\ that it can exercise to promote
this purpose and these objectives. These authorities include
supervision and enforcement authority, and the authority to issue
orders and guidance. These authorities provide the basis for the Policy
on the Compliance Assistance Sandbox (CAS Policy or Policy) and the
Approvals issued pursuant to the Policy.
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\18\ See 12 U.S.C. 5481(12) (listing the enumerated consumer
laws).
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The primary purposes of the Policy are to provide a mechanism
through which the CFPB may more effectively carry out its statutory
purpose and objectives and to facilitate compliance with applicable
Federal consumer financial laws.
The Policy is not intended to, nor should it be construed to:
a. restrict or limit in any way the CFPB's discretion in exercising
its authorities, including the provision of compliance assistance other
than pursuant to the Policy;
b. constitute an interpretation of law,
c. create or confer upon any covered person, consumer, or other
external party any substantive or procedural rights, obligations, or
defenses that are enforceable in any manner.
In contrast, a particular Approval involves the CFPB's exercise of
its supervision and enforcement discretion in a particular manner. It
cannot bind, and never could bind, state plaintiffs or plaintiffs in
private actions, including but not limited to states enforcing
violations of federal consumer financial law under Section 1042 of the
CFPA.
The Policy consists of seven sections:
<bullet> Section A describes the compliance assistance available
under the Policy;
<bullet> Section B describes the Conditions to Promote Innovation,
Competition, Ethics, and Transparency;
<bullet> Section C describes factors the CFPB intends to consider
in deciding whether to grant an application for compliance assistance;
<bullet> Section D describes the standard procedures the CFPB
intends to use in providing compliance assistance;
<bullet> Section E describes procedures the CFPB intends to use for
granting extensions of, modifying, and terminating compliance
assistance;
<bullet> Section F describes how the CFPB intends to coordinate
with other regulators with respect to compliance assistance; and
<bullet> Section G describes the CFPB's intentions regarding
disclosure of information relating to approvals.
A. Compliance Assistance Approvals
An Approval is provided by the CFPB to a particular entity under
one or more of three statutory safe harbor provisions, based on the
application of existing law to particular facts and circumstances.\19\
An Approval issued to a particular entity will state that, subject to
good faith compliance with specified terms and conditions, the CFPB
concludes for the reasons stated therein that offering or providing the
described aspects of the product or service complies with the Federal
consumer financial law identified therein.\20\ By operation of the
applicable statutory provision, the recipient has a safe harbor from
liability under the relevant statute, to the fullest extent permitted
by these provisions, as to any act done or omitted in good faith in
conformity with the Approval.\21\
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\19\ 15 U.S.C. 1640(f) (TILA); 15 U.S.C. 1691e(e) (ECOA); 15
U.S.C. 1693m(d) (EFTA).
\20\ For convenience, the Policy uses the term ``described
aspects of the product or service'' to refer to the subject matter
scope of a particular form of compliance assistance, including both
the particular aspects of the product or service in question and the
particular manner in which it is offered or provided. If a Sandbox
applicant seeks more than one form of assistance under the Policy
(for example, an approval under one statute and an approval under
another statute), it is possible that these different forms may
relate to different described aspects of the same product or
service. If so, in order to enable the CFPB to respond expeditiously
to the application, the applicant should make its best efforts to
specify the described aspects that relate to each form sought. The
CFPB recognizes that in some cases it may be difficult to determine
precisely which aspects of a product or service implicate different
legal provisions, particularly for applicants that lack the legal
resources for a fully precise determination. In such circumstances,
the applicant should provide the maximum specification practicable
under the circumstances and explain the limits on further
specification.
\21\ See 15 U.S.C. 1640(f); 15 U.S.C. 1691e(e); 15 U.S.C.
1693m(d).
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B. Conditions To Promote Innovation, Competition, Ethics, and
Transparency
The following conditions apply to the Compliance Assistance Sandbox
program:
1. Applicants for CAS Approvals must establish a market problem, in
the form of an unmet consumer need, that the new financial product or
service solves.
(a) Applicants must articulate the benefit to consumers that flows
from the CFPB permitting the product or service to be sold at market
with a safe harbor from liability under the law at issue.
(b) A claim that a CAS Approval would increase access to the
applicant's product or service is insufficient to establish a market
problem. To satisfy
[[Page 1977]]
this requirement, the applicant must prove that their product or
service is meeting an untapped consumer need.
2. The CFPB will not grant a CAS Approval on a topic for a single
firm.
3. The CFPB will reach out to the applicant's competitors and
invite them to apply for a CAS Approval on the same topic, to ensure
that the CFPB does not select a single firm that gains a first-mover
advantage in the market as a result.
4. CAS Approvals will state that recipients may not market or
promote the fact that their product or service received an Approval.
Such marketing is inherently deceptive to consumers, creating the false
impression that the CFPB endorses the product.
5. The CFPB will post applications for a CAS Approval to an open
docket on the <a href="http://regulations.gov">regulations.gov</a> website and will accept comment for 60
days. In so doing, the CFPB will adhere to the confidentiality
protections set forth in section G, below.
6. The CFPB will generally not consider applications from companies
that are represented by former CFPB attorneys as outside counsel, to
avoid ethical conflict and to maintain the highest integrity in the CAS
Approval program.
7. The CFPB will not consider applications from companies that have
been the subject of an enforcement action involving violations of
federal consumer financial law in the last 5 years, or who are subject
to a pending enforcement investigation by federal or state authorities.
8. CAS Approvals will automatically be rescinded when recipients
materially change their product or service so that it no longer fits
the description provided in the application and described in the
Approval, unless a modification is approved under Subpart E.
9. Submitting CAS Approval applications under false pretenses, or
with misleading or incomplete information, may be a violation of law
and may be referred for potential prosecution.\22\
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\22\ 18 U.S.C. 1001.
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C. Assessment of Applications for Compliance Assistance
The CFPB may grant or deny a compliance assistance application in
its sole discretion. If it chooses to grant an application, the CFPB
also has discretion to grant the application in whole or only in part.
In deciding whether to grant an application for compliance assistance,
the CFPB intends to balance a variety of factors in considering the
quality and persuasiveness of the application, as well as information
about the applicant and the product or service in question derived
through CFPB due diligence processes.
D. Procedures for Providing Compliance Assistance <SUP>23</SUP>
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\23\ These procedures may be modified based on coordination
efforts with other regulators, as specified in section F.
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When the CFPB decides to grant an application for compliance
assistance, it intends to provide the recipient with a Compliance
Assistance Statement of Terms (CAST) setting forth the terms under
which compliance assistance is provided, including the types and scope
of assistance provided to the recipient. The CAST will be signed by the
Director, and by an officer of the recipient.\24\ The CFPB expects that
the CAST will:
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\24\ If the CFPB decides to deny an application, it will inform
the applicant of its decision. The CFPB intends to respond to
reasonable requests to reconsider its denial of an application
within 60 days of such requests. Applicants may withdraw, modify,
and re-submit applications at any time.
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1. Identify the recipient;
2. Specify the subject matter scope of the CAST, i.e., the
described aspects of the product or service; \25\
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\25\ If these vary by the form of assistance sought, the
document will specify the relevant aspects separately.
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3. State that the CAST and the compliance assistance provided:
(a) Is limited to the recipient's offering or providing the
described aspects of the product or service, and does not apply to the
recipient's offering or providing different aspects of the product or
service;
(b) Is based on the factual representations made by the recipient,
which may be incorporated by reference;
(c) Does not constitute the CFPB's endorsement of the product or
service that is the subject of the CAST, or any other product or
service offered or provided by the recipient; and
(d) Expires in 2 years.
4. Require the recipient to consent to the CFPB's supervisory
examination authority, if the recipient is not already subject to this
authority;
5. Require the recipient to inform the CFPB of: (a) material
changes to information included in the application; and (b) material
information indicating that the described aspects of the product or
service are not performing as anticipated in the application; \26\
Pursuant to B.7, unless an applicant applies for an amendment pursuant
to section E, CAS Approvals will automatically be rescinded when
recipients change their product or service so that it no longer fits
the description provided in the application and described in the
Approval;
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\26\ ``Not performing as anticipated'' includes the
materialization of consumer risks identified in the application, and
the materialization of other consumer risks not identified in the
application.
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6. Require the recipient to report information about the effects of
offering or providing the described aspects of the product or service,
including with respect to complaint patterns, default rates, or similar
metrics that will enable the CFPB to identify material increase in any
risk of injury to consumers;
7. Where appropriate, include a commitment by the recipient to
compensate consumers for CFPA actionable substantial injury caused by
the recipient's offering or providing the described aspects of the
product or service; \27\
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\27\ CFPA actionable substantial injury, as used in this Policy,
means substantial injury that is not reasonably avoidable by the
consumer, where such substantial injury is not outweighed by
countervailing benefits to consumers or competition. See 12 U.S.C.
5531(c); see also 12 U.S.C. 5536(a)(1)(B).
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8. Specify any other limitations or conditions, such as the
duration of the compliance assistance,\28\ the nature and extent of the
recipient's data-sharing, and the extent to which the CFPB intends to
publicly disclose information about the recipient's participation; \29\
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\28\ The CFPB expects two years to be an appropriate duration
for approvals in most cases, but recipients may apply for
extensions. See section E.1.
\29\ If an applicant objects to the disclosure of certain
information and the CFPB insists that the information must be
publicly disclosed for compliance assistance to be provided, the
applicant may withdraw the application and the CFPB intends to treat
all information related to the application as confidential to the
full extent permitted by law.
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9. With respect to any approval the CFPB is providing the
recipient: (a) state that, subject to good faith compliance with the
CAST, the CFPB approves the recipient's offering or providing the
described aspects of the product or service under the relevant law
identified therein; \30\ and (b) explain the CFPB's basis for issuing
the Approval;
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\30\ As noted in section A.1, the safe harbor associated with an
approval only applies to acts done or omitted in good faith in
conformity with the approval, and the approval will so state.
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10. State that: (a) the recipient may reasonably rely on any CFPB
commitments made in the CAST unless or until the Approval expires or is
terminated by the CFPB; and (b) the CFPB may terminate \31\ any
approval
[[Page 1978]]
described in the CAST if: (i) the recipient fails to substantially
comply in good faith with the specified terms and conditions of the
CAST; (ii) the described aspects of the product or service do not
perform as anticipated in the application; \32\ or (iii) a statutory
change or Federal judicial holding causes the CFPB to conclude that the
recipient can no longer rely in good faith on the CFPB's approval as
the safe harbor provisions require; and
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\31\ No retroactive action premised on the described aspects of
the product or service will lie under provisions covered by an
approval. Actions that are not premised on the described aspects of
the product or service associated with a particular approval are, by
definition, not subject to any such restriction.
\32\ Such ground includes the materialization of consumer risks
identified in the application, or the materialization of other
consumer risks not identified in the application.
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11. If the applicant also applied for a No-Action Letter using
their application under the CAS Policy for compliance assistance,
incorporate any No-Action Letter that the CFPB is issuing pursuant to
the terms of the NAL Policy.\33\
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\33\ If the CFPB is providing a No-Action Letter to the
recipient, any termination of the No-Action Letter will be in
accordance with the NAL Policy.
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E. Procedures for Extension, Modification, and Termination
1. Extension Procedures
Recipients of compliance assistance may apply for an extension of a
specified period of time. In considering applications for extensions,
the CFPB expects to place particular weight on the extent to which the
data provided to the CFPB under the terms of the CAST shows that the
described aspects of the product or service are benefitting consumers,
not causing unanticipated harms, and not materially increasing the risk
of substantial injury. Such applications for an extension should
include the proposed duration of the extension and should be submitted
no later than 90 days prior to the expiration of the compliance
assistance under the terms of the CAST.\34\ The recipient should
explain the reasons for the requested extension, such as whether it is
intended to last until a possible amendment to CFPB regulations or the
Commentary, or is instead intended for more particularized compliance
assistance purposes.
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\34\ Assuming the two-year period the CFPB expects to be
appropriate in most cases, the CFPB believes recipients would have
sufficient time to gather evidence supportive of an extension
request. For periods of one year or less, the CFPB may consider an
extension deadline appropriate for the period in question.
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Upon the presentation of persuasive data, the CFPB anticipates
granting such extension applications for a period at least as long as
the period of the applicant's original receipt of assistance. The CFPB
anticipates permitting longer extensions where the CFPB is considering
amending applicable regulatory requirements or the relevant
Commentary.\35\ During the time period pending a rule or Commentary
amendment, the CFPB intends to consider means of providing similar
assistance to other covered entities that engage in the same or similar
conduct in offering or providing comparable products.
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\35\ The CFPB's plans regarding rulemaking activity are set
forth in its Semiannual Regulatory Agenda, published in full on
<a href="http://www.reginfo.gov">www.reginfo.gov</a>. If the period of an extension were tied to the
CFPB's consideration of amending relevant regulatory provisions and
the CFPB announced it was discontinuing its plans to amend the
provisions in question, the extension period would be adjusted
accordingly, e.g., to end on a specific date.
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2. Modification Procedures
A recipient of compliance assistance may apply for a modification
of the CAST. The recipient may seek modification to address an
anticipated or unanticipated change in circumstances, such as
iterations of the underlying product or service or changes to the
information included in the application for assistance. Applications
for a modification should include the following:
a. Any material changes to the information included in the original
application;
b. The specific requested modification to the CAST;
c. The grounds for modifying the CAST; and
d. Any other information the recipient wishes to provide in support
of the modification application.
In deciding whether to grant an application for modification, the
CFPB intends to balance a variety of factors, including the quality and
persuasiveness of the application. The CFPB expects to grant or deny
such applications within 30 days of notifying the applicant that the
CFPB has deemed the application to be complete. When the CFPB grants an
application for modification, it intends to provide the recipient with
a modified CAST in accordance with the procedures specified in Section
D.
3. Termination Procedures
The CFPB intends that the recipient of compliance assistance should
be able to reasonably rely on any CFPB commitments made in the
associated CAST.
The CFPB expects that a CAST will state that: (a) the recipient may
reasonably rely on any CFPB commitments made in the CAST; and (b) the
CFPB may terminate any approval described in the CAST if: (i) the
recipient fails to substantially comply in good faith with the
specified terms and conditions of the CAST; (ii) the described aspects
of the product or service do not perform as anticipated in the
application; \36\ or (iii) a statutory amendment or federal judicial
holding causes the CFPB to conclude that the recipient can no longer
rely in good faith on the CFPB's approval as the safe harbor provisions
require. By operation of law, no retroactive action premised on the
described aspects of the product or service will lie under provisions
within the scope of an approval, except where a failure to
substantially comply in good faith with the terms of the Approval
caused consumer harm or where the CFPB's initial granting of the
Approval failed to comply with the Administrative Procedure Act or
other law. If the CFPB is also providing a No-Action Letter to the
recipient, termination will be in accordance with the NAL Policy.
Before terminating any approval provided under the Policy, the CFPB
may, in the appropriate cases, notify the recipient of the possible
grounds for termination and permit an opportunity to respond within a
reasonable period of time. In its discretion, the CFPB may offer the
recipient an opportunity to modify its conduct to avoid termination.
The CFPB may allow the recipient to wind-down the offering or providing
of the described aspects of the product or service during a period of
six months before termination is effective, unless the described
aspects of the product or service are causing injury to consumers, and
a wind-down period would permit such injury to continue. If the CFPB
terminates any approval provided under this Policy, it will do so in
writing and specify the reasons for its decision. The CFPB will publish
termination decisions on its website.
F. Regulatory Coordination
Section 1015 of the CFPA instructs the CFPB to coordinate with
Federal agencies and State regulators, as appropriate, to promote
consistent regulatory treatment of consumer financial and investment
products and services.\37\ Similarly, section 1042(c) of the CFPA
instructs the CFPB to provide guidance in order to further coordinate
actions with the State attorneys general and other regulators.\38\ Such
coordination includes coordinating in circumstances where other
regulators have chosen to offer assistance to entities offering
innovative products and services. One method of providing such
assistance is through a State sandbox, or group of State sandboxes, or
other limited scope State authorization
[[Page 1979]]
program (State sandbox).\39\ The CFPB is interested in entering into
agreements with State authorities that operate or plan to operate a
State sandbox, which may include a process to receive compliance
assistance under this Policy in a coordinated manner with assistance
from the State sandbox.
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\37\ 12 U.S.C. 5495.
\38\ 12 U.S.C. 5552(c).
\39\ The concept of a regulatory sandbox is relatively new and
does not have a precise, generally accepted definition. The term is
used in this Policy to refer to a regulatory structure where a
participant obtains limited or temporary access to a market in
exchange for reduced regulatory uncertainty or other regulatory
barriers to entry.
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Furthermore, the CFPB is interested in coordinating with other
regulators more generally regarding this Policy. To this end, the CFPB
intends to enter into agreements whenever practicable to coordinate
compliance assistance under the Policy with assistance offered by
State, Federal, or international regulators.
G. Disclosure of Information Relating to Approvals
Public disclosure of information regarding approvals under this
Policy is governed by applicable law, including the CFPA,\40\ the
Freedom of Information Act (FOIA),\41\ and the CFPB's Rule on
Disclosure of Records and Information (Disclosure Rule).\42\ The
Disclosure Rule generally prohibits the CFPB from disclosing
confidential information,\43\ and defines confidential information to
include information that may be exempt from disclosure under the FOIA
\44\--including Exemption 4 regarding trade secrets and confidential
commercial or financial information that is privileged or
confidential.\45\ The Disclosure Rule also defines business information
as commercial or financial information obtained by the CFPB from a
submitter that may be protected from disclosure under Exemption 4 of
FOIA, and generally provides that such business information shall not
be disclosed pursuant to a FOIA request except in accordance with
section 1070.20 of the rule.\46\
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\40\ See, e.g., 12 U.S.C. 5512(c)(8).
\41\ 5 U.S.C. 552.
\42\ 12 CFR part 1070.
\43\ 12 CFR 1070.41.
\44\ 12 CFR 1070.2(f).
\45\ 5 U.S.C. 552(b)(4).
\46\ 12 CFR 1070.20(a), (b).
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Consistent with applicable law, the CFPB will publish on its
website its final disposition of applications for approvals, as well as
the application previously published on <a href="http://regulations.gov">regulations.gov</a>. If the CFPB
decides to grant an application, it intends to publish an order
regarding the decision on its website as soon as practicable. The CFPB
expects that the order will overlap with the CAST provided to the
recipient, but will contain other information and will not include
information protected from public disclosure under applicable law. The
CFPB expects the order to include: (i) the identity of the recipient;
(ii) the described aspects of the product or service to which the
approval applies; (iii) the approval's specified duration, basis, and
legal authority; and (iv) in appropriate cases, a version of the
summary of the application.\47\ The CFPB also intends to publish
denials of applications on its website, including an explanation of why
the application was denied in whole or in part.\48\
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\47\ When a regulated entity receives an approval in a
coordinated manner with assistance under a State sandbox, the CFPB
may be restricted in its discretion to further disclose information
obtained from the relevant State authority. Nonetheless, the CFPB
anticipates that all the disclosures identified above would be made
with respect to any approval provided by the CFPB under this Policy.
\48\ The CFPB intends to publish denials only after the
applicant is given an opportunity to request reconsideration of the
denial. Upon request, and if disclosure is not required by 5 U.S.C.
552(a)(2) or other applicable law, the CFPB intends to redact
identifying information from denials published on its website.
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Where information submitted to the CFPB is both customarily and
actually treated as private by the submitter, the CFPB intends to treat
it as confidential in accordance with the Disclosure Rule.\49\ The CFPB
anticipates that much of the information submitted by applicants in
their applications, and by recipients while operating pursuant to a
CAST, will qualify as confidential information under the Disclosure
Rule.\50\
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\49\ See Food Marketing Institute v. Argus Leader Media, 139
S.Ct. 2356 (June 24, 2019).
\50\ To the extent associated communications include the same
information, that information would have the same status. But other
information in associated communications may be subject to
disclosure.
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Disclosure to other Federal and State agencies of information or
data provided to the CFPB under the Policy is governed by applicable
law, including the CFPA \51\ and the Disclosure Rule.
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\51\ See, e.g., 12 U.S.C. 5512(c)(8).
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To the extent the CFPB wishes to publicly disclose non-confidential
information regarding approvals, the CFPB intends to include the terms
of such disclosure in the CAST. The CFPB intends to draft the CAST in a
manner such that confidential information is not disclosed. Consistent
with applicable law and its own rules, the CFPB does not intend to
publicly disclose any information that would conflict with consumers'
privacy interests.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2025-00377 Filed 1-8-25; 8:45 am]
BILLING CODE 4810-AM-P
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</html>Indexed from Federal Register on January 10, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.