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.