It’s no longer just a hunch emanating from dealerships and finance companies that the Consumer Financial Protection Bureau and state attorneys general are working together. The CFPB made an official announcement to the fact on Tuesday.
The bureau, working in partnership with multiple state regulators, launched the American Consumer Financial Innovation Network (ACFIN). It’s an organization that officials explained is designed to enhance coordination among federal and state regulators to facilitate financial innovation.
The CFPB said it invited all state regulators to join ACFIN, and the initial members of ACFIN are the attorneys general of:
— South Carolina
The CFPB insisted ACFIN will enhance shared objectives such as competition, consumer access and financial inclusion. Additionally, the regulator said the ACFIN will promote regulatory certainty for innovators, benefiting the U.S. economy and consumers alike.
Officials went on to say the network also will seek to keep pace with market innovations and help ensure they are free from fraud, discrimination and deceptive practices.
As a result of this partnership, the CFPB added ACFIN members will share information to facilitate coordination among the members and coordinate on innovation-related policies and programs.
“Federal and state coordination promotes consistency in the regulation of consumer financial products and services while facilitating consumer-beneficial innovation,” CFPB director Kathleen Kraninger said. “ACFIN will provide a platform for federal and state regulators to coordinate with each other as they develop new rules of the road and apply existing ones. This coordination can provide greater regulatory certainty across jurisdictions and allow regulators to keep pace with market developments.
“I will continue to work to encourage other state regulators to join this important new initiative that will foster collaboration among federal and state regulators,” Kraninger continued.
CFPB policies to facilitate compliance and promote innovation
The launch of the American Consumer Financial Innovation Network wasn’t the only development surfacing out of the CFPB on Tuesday.
The bureau also issued three new policies to promote innovation and facilitate compliance:
— The No-Action Letter (NAL) Policy
— Trial Disclosure Program (TDP) Policy
— Compliance Assistance Sandbox (CAS) Policy.
The CFPB recapped that it proposed the policies in 2018 and received public comments on each from a diverse array of stakeholders.
The bureau acknowledged that regulatory uncertainty can hinder the development of innovative products and services that benefit consumers. Officials explained that NALs can provide increased regulatory certainty through a statement that the bureau will not bring a supervisory or enforcement action against a company for providing a product or service under certain facts and circumstances.
The CFPB said the new NAL Policy is meant to improve on the bureau’s 2016 NAL Policy by having, among other things, a more streamlined review process focusing on the consumer benefits and risks of the product or service in question.
On Tuesday, the bureau also issued its first NAL under the new NAL Policy in response to a request by the Department of Housing and Urban Development (HUD) on behalf of more than 1,600 housing counseling agencies (HCAs) that participate in HUD’s housing counseling program.
In 2018, officials noted that HUD brought concerns to the bureau about HCAs and lenders not entering into agreements that would fund counseling services due to uncertainty about the application of the Real Estate Settlement Procedures Act (RESPA). Expressing similar concerns, the Coalition of HUD Intermediaries filed a comment letter in February noting the insufficiency of the Bureau’s old NAL Policy and supporting the new NAL proposed policy.
Officials indicated the no-action letter essentially states that the bureau will not take supervisory or enforcement action under RESPA against HUD-certified HCAs that have entered into certain fee-for-service arrangements with lenders for pre-purchase housing counseling services.
“The NAL, which is an exercise of the bureau’s supervisory and enforcement discretion, is intended to facilitate HCAs entering into such agreements with lenders and will enhance the ability of housing counseling agencies to obtain funding from additional sources,” officials said.
The bureau went on to mention that under the new TDP Policy, entities seeking to improve consumer disclosures may conduct in-market testing of alternative disclosures for a limited time upon permission by the Bureau. The Dodd-Frank Act gives the bureau the authority to provide certain legal protections for entities to conduct trial disclosure programs, as outlined in the TDP Policy.
The new policy streamlines the application and review process, according to the bureau.
The CFPB also pointed out the CAS Policy can enable testing of a financial product or service where there is regulatory uncertainty.
After the bureau evaluates the product or service for compliance with relevant law, officials explained an approved applicant that complies in “good faith” with the terms of the approval will have a “safe harbor” from liability for specified conduct during the testing period.
Approvals under the CAS Policy will provide protection from liability under the Truth in Lending Act, the Electronic Fund Transfer Act or the Equal Credit Opportunity Act.
Kraninger emphasized why the CFPB took these actions.
“Innovation drives competition, which can lower prices and offer consumers more and better products and services. New products and services can expand financial options, especially to unbanked and underbanked households, giving more consumers access to the benefits of the financial system,” she said.
“The three policies we are announcing today are common-sense policies that will foster innovation that ultimately benefits consumers,” Kraninger went on to say.