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CFPB Gives Green Light On 'No-action' Templates to Bolster Innovation Featured

The Consumer Financial Protection Bureau (CFPB) issued two separate “No-Action Letter Templates” with the hope of sparking innovation at a time when homeowners and consumers are struggling with the prolonged financial fallout of the COVID-19 health crisis. The letters are designed to provide regulatory clarity to relevant entities by providing assurances the CFPB will not take action against them, under a certain set of circumstances, for providing a particular service or product.

traffic lights 208253 640“Regulatory uncertainty can hinder the development of innovative products and services with the potential to benefit consumers,” according to a CFPB announcement from Friday, May 22.

In order to help facilitate innovation, the CFPB last year issued new, improved no-action letter policies, according to the regulator. Newly included in those policies, among other features, is “a more streamlined review process focusing on the consumer benefits and risks of the applicant’s product or service.” The new procedures also allow service providers and trade groups to secure templates that can act as a foundation for similar no-action letter applications.


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The first template approved, initiated by Brace Software, Inc., is geared toward mortgage servicers dealing with owners struggling to make payments during the economic downturn. In this way, the template could have a deeper impact on the lending market by providing a beacon for other servicers. Per the no-action template, which the CPFB signed off on, “mortgage servicers seeking to assist struggling borrowers to avoid foreclosure and engage in loss mitigation efforts would be able to apply for their own [letter].”

Brace’s vision statement indicates the company works toward more efficient and transparent options for borrowers facing hardship and provides tech solutions geared toward innovation in the mortgage industry. According to the CFPB, the regulatory agency does not endorse any particular providers or products, but does note digitizing loss mitigation applications—Brace’s platform is in online version of the popular Fannie Mae Form 710—could improve the loss mitigation request process currently being strained during the pandemic.

Additionally, the CFPB approved a template pertaining to the “small-dollar lending space” to facilitate competition and promote access to credit. The template relates to insured depository institutions small-dollar credit products. “In March, the [CFPB] and federal financial regulators also released a statement encouraging financial institutions and credit unions to offer responsible small-dollar loans to their customers affected by the COVID-19 pandemic,” according to a statement from the regulatory group. “The statement underscored that small-dollar lending plays an important role in ‘meeting customers’ credit needs because of temporary cash-flow imbalances, unexpected expenses, or income disruptions during periods of economic stress or disaster recoveries.’”

That letter was derived from an application from the Bank Policy Institute, which, according to its website, is a nonpartisan advocacy and research group representing top banks in the U.S.

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