The federal government has launched a regulatory sandbox program, the first of its kind in the U.S.
The Consumer Financial Protection Bureau announced a compliance assistance sandbox policy, which will enable testing of a financial product or service amid regulatory uncertainty. The regulator first proposed this regulation-free development environment in late 2018, months after several regulators called for such a program. The U.S. is years behind regulatory initiatives intended to spur innovation seen in other countries.
In March 2018, Arizona became the first state to launch a sandbox program aimed at promoting innovation and development in emerging technologies within the financial system. Earlier in 2019, the Office of the Comptroller of the Currency proposed an innovation pilot program that would allow national banks and their third-party vendors to receive early feedback on pilot programs. The OCC's policy, however, does not propose to offer a statutory "safe harbor" from existing consumer protection liability or other bank regulations.
The new CFPB program will provide approved applicants protection from liability under the Truth in Lending Act, the Electronic Fund Transfer Act and the Equal Credit Opportunity Act.
In conjunction with announcing the sandbox program, the CFPB also updated its no-action letter program and unveiled its new trial disclosure program policy.
The bureau's 2016 no-action letter program has been updated to include a more streamlined review process. Companies can still submit for review an innovative product or service where there is uncertainty about whether or how specific provisions of the law would be applied. Upon review, a CFPB no-action letter would indicate that the bureau has no present intent to recommend enforcement or supervisory action.
The regulator issued its first no-action letter under the new policy to a request by the Department of Housing and Urban Development on behalf of more than 1,600 housing counseling agencies that participate in HUD's housing counseling program.
The no-action letter says the CFPB will not take supervisory or enforcement action under the Real Estate Settlement Procedures Act against those HUD-certified housing counseling agencies that have entered into certain arrangements with lenders that would fund counseling services. Issuing the no-action letter should better enable housing counseling agencies to obtain funding from additional sources, the CFPB said.
Under the new trial disclosure policy, the bureau will allow companies seeking to improve consumer disclosures to conduct in-market testing of alternative disclosures for a limited time. The new policy streamlines the application and review process.
"The three policies we are announcing today are common-sense policies that will foster innovation that ultimately benefits consumers," said CFPB Director Kathleen Kraninger.
