BPI Recommends Changes to No Action Letter and Product Sandbox Policies Aimed at Encouraging Innovation and Improving Legal Certainty

BPI Recommends Changes to No Action Letter and Product Sandbox Policies Aimed at Encouraging Innovation and Improving Legal Certainty

Washington, D.C. — Late yesterday, the Bank Policy Institute submitted a comment letter to the Consumer Financial Protection Bureau (“CFPB”) in response to the agency’s request for comments on its December 2018 proposed No Action Letter (“NAL”) and Product Sandbox policy. The letter recommends four key changes to the proposal that would help improve legal certainty for institutions applying for a determination from the CFPB and would result in banks testing more innovative products and services.

“The No Action Letter and Product Sandbox processes would provide greater regulatory clarity and certainty to financial institutions assessing innovative new products and services,” said Naeha Prakash, Senior Vice President & Associate General Counsel for Consumer Regulatory Affairs at BPI. “With the appropriate changes to the CFPB’s policy, banks will be able to better meet their consumers’ needs and provide them with a better customer experience. The recommendations outlined in our comment letter would further the proposal’s intended goal of enhancing regulatory certainty and compliance, while making it easier for responsible innovative consumer products to enter and flourish in the marketplace.”

The letter recommends:

  • The CFPB take affirmative and concrete steps to coordinate its determinations with federal and state regulators.
  • The creation of a separate legal opinion process that includes the rationale for substantive analysis of the NAL determination to offer additional clarity to firms engaged in similar marketplace activities.
  • The CFPB provide clear guideposts for the conditions for and requisite compliance needed to ensure NAL and Product Sandbox determination.
  • Harmonization of the revocation procedures between the NAL and the Product Sandbox processes.

The letter stresses that although the NAL and Product Sandbox processes are useful tools to reduce regulatory uncertainty, they should not become the default avenue for institutions to engage in new or innovative consumer products or services. Rather, in instances where the law is clear, banks should continue to assess these developments using their own internal compliance management systems without having to first seek a NAL or Product Sandbox determination.


About the Bank Policy Institute. The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

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