[Federal Register Volume 83, Number 239 (Thursday, December 13, 2018)]
[Proposed Rules]
[Pages 64036-64045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26873]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 83, No. 239 / Thursday, December 13, 2018 / 
Proposed Rules  

[[Page 64036]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Chapter X

[Docket No. CFPB-2018-0042]


Policy on No-Action Letters and the BCFP Product Sandbox

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Proposed policy guidance and procedural rule; proposed 
information collection; request for comment.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau or BCFP) 
invites the public to take this opportunity to comment on its proposed 
Policy on No-Action Letters and the BCFP Product Sandbox, which is 
intended to carry out certain of the Bureau's authorities under Federal 
consumer financial law; and a proposed information collection 
associated with applications submitted by applicants requesting 
admission to the BCFP Product Sandbox under the proposed Policy as 
required by the Paperwork Reduction Act of 1995.

DATES: Written comments are encouraged and must be received on or 
before February 11, 2019.

ADDRESSES: You may submit comments, identified by Docket No. [CFPB-
2018-0042], by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include Docket 
No. [CFPB-2018-0042] in the subject line of the email.
     Mail/Hand Delivery/Courier: Comment Intake, Bureau of 
Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552.
    Instructions: All submissions should include the agency name and 
docket number. Because paper mail in the Washington, DC area and at the 
Bureau is subject to delay, commenters are encouraged to submit 
comments electronically. In general, all comments received will be 
posted without change to http://www.regulations.gov. In addition, 
comments will be available for public inspection and copying at 1700 G 
Street NW, Washington, DC 20552, on official business days between the 
hours of 10 a.m. and 5 p.m. Eastern Standard Time. You can make an 
appointment to inspect the documents by telephoning (202) 435-7275. All 
comments, including attachments and other supporting materials, will 
become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or Social 
Security numbers, should not be included. Comments generally will not 
be edited to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: For additional information about the 
proposed Policy, contact Paul Watkins, Assistant Director; Edward 
Blatnik, Senior Counsel; Albert Chang, Counsel; Office of Innovation, 
at [email protected] or 202-435-7000. If you require this 
document in an alternative electronic format, please contact 
[email protected].
    Documentation prepared in support of the information collection 
request is available at www.regulations.gov. Requests for additional 
information on the proposed information collection should be directed 
to the Bureau of Consumer Financial Protection, Attention: PRA Office, 
1700 G Street NW, Washington, DC 20552, (202) 435-9575, or email: 
[email protected]. Please do not submit comments to this mailbox.

SUPPLEMENTARY INFORMATION:

I. Background

    In section 1021(a) of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act), Congress established the 
Bureau's statutory purpose as ensuring that all consumers have access 
to markets for consumer financial products and services and that 
markets for consumer financial products and services are fair, 
transparent, and competitive.\1\ Relatedly, the Bureau's objectives 
include exercising its authorities under Federal consumer financial law 
for the purposes of ensuring that outdated, unnecessary, or unduly 
burdensome regulations are regularly identified and addressed in order 
to reduce unwarranted regulatory burdens, and that markets for consumer 
financial products and services operate transparently and efficiently 
to facilitate access and innovation.\2\
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    \1\ 12 U.S.C. 5511(a).
    \2\ 12 U.S.C. 5511(b)(3), (5).
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    Congress has given the Bureau a variety of authorities under Title 
X of the Dodd-Frank Act and the enumerated consumer laws \3\ that it 
can exercise to promote this purpose and these objectives. These 
authorities include the authority to permit certain activity by a 
particular entity (or entities) by order (including approvals and 
exemptions), and discretionary supervision and enforcement 
authority.\4\
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    \3\ 12 U.S.C. 5481(12).
    \4\ See notes 61, 64-65, infra.
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    Pursuant to the purpose, objectives, and certain of the authorities 
listed above, the Bureau proposed its Policy on No-Action Letters in 
October 2014 \5\ and finalized it in February 2016 (2016 Policy).\6\ 
The 2016 Policy provides for the issuance of No-Action Letters 
consisting of non-binding staff-level no-action recommendations. The 
Bureau has issued only one such No-Action Letter to date.\7\
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    \5\ 79 FR 62118 (Oct. 16, 2014).
    \6\ 81 FR 8686 (Feb. 22, 2016).
    \7\ See Bureau of Consumer Financial Protection, CFPB Announces 
First No-Action Letter to Upstart Network (Sept. 14, 2017), 
available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-announces-first-no-action-letter-upstart-network/.
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II. Summary of the Proposed Policy

    In line with the above authority, the Bureau is proposing to revise 
the 2016 Policy and proposing the BCFP Product Sandbox through its 
proposed Policy on No-Action Letters and the BCFP Product Sandbox 
(Policy) in order to more effectively carry out its statutory purpose 
and objectives. As noted, the Bureau has provided only one No-Action 
Letter under the 2016 Policy. The Bureau believes this strongly 
suggests that both the process required to obtain a No-Action Letter 
and the relief available under the 2016 Policy have not provided firms 
with sufficient incentives to seek No-Action Letters from Bureau staff. 
Accordingly, the Bureau is seeking comment on a number of changes to 
the 2016 Policy that would address these issues and bring certain 
aspects of the Bureau's policy more into alignment with no-action 
letter

[[Page 64037]]

programs offered by other Federal regulators. The proposed Policy has 
two parts. Part I is a revision of the 2016 Policy designed to increase 
the utilization of the Policy and bring certain elements more in line 
with similar no-action letter programs offered by other agencies. Part 
II is a description of the BCFP Product Sandbox.\8\
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    \8\ The Bureau believes it is necessary and appropriate, and in 
the public interest, to include both parts in a single Policy in 
order to establish uniform procedures to encourage focused 
presentation of issues, ensure expeditious consideration of 
applications, and minimize the expenditure of Bureau resources.
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    The proposed Policy has the following overarching goals: (1) 
Streamlining the application process; (2) streamlining the Bureau's 
processing of applications; (3) expanding the types of statutory and/or 
regulatory relief available; \9\ (4) specifying procedures for an 
extension where the relief initially provided is of limited duration; 
and (5) providing for coordination with existing or future programs 
offered by other regulators designed to facilitate innovation.
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    \9\ For convenience, the term ``relief'' will be used 
hereinafter to cover relief from statutory and/or regulatory 
provisions.
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    Part I: No-Action Letters. In Part I, the Bureau is proposing to 
streamline the process of applying for a No-Action Letter by 
eliminating several elements it believes to be redundant or unduly 
burdensome, such as a commitment to data-sharing.\10\ Similarly, the 
Bureau's review of applications for a No-Action Letter would be 
streamlined to focus on the quality and persuasiveness of the 
application, with particular emphasis on the potential benefits of the 
product or service in question for consumers, the extent to which the 
applicant identifies and controls for potential risks to consumers, and 
the extent to which no-action relief is needed. Because these measures 
would be likely to expedite the application and review process, the 
Bureau would expect to grant or deny an application within 60 days of 
notifying the applicant that the Bureau has deemed the application to 
be complete.\11\
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    \10\ Commenters on the proposed 2016 Policy stated that it would 
require applicants to submit an unduly burdensome volume of 
information. 81 FR 8686, 8689 (Feb. 22, 2016). Stakeholders have 
expressed similar concerns subsequent to the finalization of the 
2016 Policy.
    \11\ In comments on the proposed 2016 Policy, several 
stakeholders urged the Bureau to adopt a specific timetable for 
granting or denying an application for a No-Action Letter--ranging 
from 45 to 90 days--in order to accommodate the rapid development 
processes of innovative products and services. 81 FR 6686, 8689 
(Feb. 22, 2016).
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    To more closely align Part I with certain aspects of no-action 
letter programs offered by other Federal agencies, the Bureau is re-
assessing data-sharing requirements and time-period limitations for No-
Action Letters available under Part I.\12\ In contrast to the 2016 
Policy, which requires applicants to commit to sharing data about the 
product or service in question, no such data sharing would be expected 
under Part I of the proposed Policy. Similarly, whereas one of the 
factors Bureau staff will consider in deciding whether to grant an 
application for a No-Action Letter under the 2016 Policy is the extent 
to which the letter would be limited in duration, the default 
assumption under Part I of the proposed Policy would be that No-Action 
Letters would have no such temporal limitation.
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    \12\ Many of the proposed revisions are designed to more closely 
align Part I with no-action letter programs offered by other Federal 
agencies. See, e.g., Securities and Exchange Commission, Procedures 
Applicable to Requests for No-Action and Interpretive Letters, 
Securities Act Release No. 6269 (Dec. 5, 1980) (available at: http://www.sec.gov/rules/other/33-6269.pdf) (limited application elements; 
no temporal limitation; no data-sharing requirements); Commodity 
Futures Trading Commission, Requests for Exemptive, No-Action and 
Interpretative Letters, 17 CFR 140.99 (same); Federal Housing 
Finance Agency, 12 CFR 1211.1, 1211.4, 1211.6 (same); Federal Energy 
Regulatory Commission, Informal Staff Advice on Regulatory 
Requirements; Interpretive Order Regarding No-Action Letter Process, 
70 FR 71487 (Nov. 29, 2005) (same).
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    Under the 2016 Policy, a No-Action letter is a staff recommendation 
of no-action relief. Under Part I of the proposed Policy, in contrast, 
No-Action Letters would be issued by duly authorized officials of the 
Bureau to provide recipients greater assurance that the Bureau itself 
stands behind the no-action relief provided by the letters. Whereas 
UDAAP-focused No-Action Letters were expected to be particularly 
uncommon under the 2016 Policy, there would be no such expectation 
under Part I of the proposed Policy.\13\
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    \13\ Several commenters on the proposed 2016 Policy urged the 
Bureau not to exclude UDAAP-focused No-Action Letters on the grounds 
that no-action relief is particularly valuable for UDAAP matters. 81 
FR 6686, 8688 (Feb. 22, 2016). Stakeholders have reiterated this 
view subsequent to the finalization of the 2016 Policy, including in 
comments submitted in response to the Bureau's Request for 
Information Regarding Bureau Guidance and Implementation Support. 83 
FR 13959 (Apr. 20, 2018).
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    Finally, Part I would include a new section concerning Bureau 
coordination with other regulators that offer no-action letters or 
similar forms of relief.\14\
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    \14\ The Bureau has also made a number of technical changes to 
accommodate the above-described substantive revisions and to 
increase clarity.
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    Part II: BCFP Product Sandbox. The 2016 Policy is limited to a 
single type of relief: Non-binding staff-level no-action 
recommendations. In comments on the proposed 2016 Policy, the Bureau 
was urged to provide types of relief that are legally binding on the 
Bureau as well as other parties. In its response to such comments, the 
Bureau stated that ``experience with the NAL process will assist the 
Bureau in evaluating other potential'' forms of relief.\15\ As noted, 
the Bureau has provided only one No-Action Letter under the 2016 Policy 
since it was finalized in February 2016, which strongly suggests that 
the relief available under the 2016 Policy has not provided firms with 
a sufficient incentive to seek No-Action Letters from Bureau staff. In 
view of this experience, the Bureau is proposing to create the BCFP 
Product Sandbox. The BCFP Product Sandbox would include no-action 
relief substantially the same as that available under Part I, as well 
as two forms of additional relief: (a) Approvals by order under three 
statutory safe harbor provisions \16\ (approval relief); and (b) 
exemptions by order (i) from statutory provisions (as well as 
provisions of regulations implementing the statute in question) under 
statutory exemption-by-order provisions (statutory exemptions); \17\ or 
(ii) from regulatory provisions that do not mirror statutory provisions 
under rulemaking authority or other general authority (regulatory 
exemptions).\18\
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    \15\ 81 FR 8686, 8688 (Feb. 22, 2016).
    \16\ See note 61, infra.
    \17\ See note 64, infra.
    \18\ See note 65, infra. Collectively, statutory exemptions and 
regulatory exemptions are referred to in the Policy as exemption 
relief.
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    In keeping with the ``sandbox'' concept, approval relief and 
exemption relief would be provided for a limited period of time. The 
Bureau expects that two years would be appropriate in most cases.\19\ 
Part II of the proposed Policy also includes a section regarding 
extensions for participation in the BCFP Product Sandbox, which would 
specify the procedures for applying for such an extension and clarify 
the Bureau's intention to grant such applications where there is 
evidence of consumer benefit and an absence of consumer harm. 
Similarly, in contrast to Part I, Part II would require applicants to 
commit to sharing data with the Bureau concerning the products or 
services offered or provided in the BCFP Product Sandbox.
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    \19\ Like the no-action relief available under Part II, the no-
action relief available under Part II would not have a limited 
duration.
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    Finally, like Part I, Part II would have a streamlined application 
and review process, and the Bureau would expect to grant or deny an 
application within 60 days of notifying the applicant that the Bureau 
has deemed the application to

[[Page 64038]]

be complete. It would also include a similar provision concerning 
Bureau coordination with other regulators that offer similar programs 
designed to facilitate innovation.
    The Bureau invites comments with respect to any aspect of the 
proposed Policy. The Bureau is particularly interested in comment on 
the scope of the grounds for revocation, including whether there are 
additional changes in law that should be included as grounds for 
revocation.

III. Regulatory Requirements

    The Bureau has concluded that, if finalized, this Policy Guidance 
would constitute an agency general statement of policy and a rule of 
agency organization, procedure, or practice exempt from the notice and 
comment rulemaking requirements under the Administrative Procedure Act, 
pursuant to 5 U.S.C. 553(b). The Policy is intended to provide 
information regarding the Bureau's plans to exercise its discretion to 
provide no-action, approval, and exemption relief, and to describe the 
procedural components of such discretion. The Policy does not impose 
any legal requirements on third parties, nor does it create or confer 
any substantive rights on third parties that could be enforceable in 
any administrative or civil proceeding. Because no notice of proposed 
rulemaking is required, the Regulatory Flexibility Act does not require 
an initial or final regulatory flexibility analysis.\20\
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    \20\ 5 U.S.C. 603(a), 604(a).
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IV. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), Federal agencies are generally required to seek the Office of 
Management and Budget (OMB) approval for information collection 
requirements prior to implementation. Further, the Bureau may not 
conduct or sponsor a collection of information unless OMB approves the 
collection under the PRA and it displays a currently valid OMB control 
number. Notwithstanding any other provision of law, no person is 
required to comply with, or is subject to penalty for failure to comply 
with, a collection of information if the collection instrument does not 
display a currently valid OMB control number. OMB has previously 
approved the collections of information contained in the Bureau's 
current Policy on No-Action Letters. The OMB Number is 3170-0059 
(Expiration Date: 02/28/2019). The Bureau has determined that certain 
proposed revisions to the Policy would result in material changes from 
what has been previously approved by OMB; therefore, the Bureau plans 
to submit a request to OMB seeking approval for the revised information 
collections as contained in this proposed revised Policy.
    As part of its continuing effort to reduce paperwork and respondent 
burden, the Bureau conducts a preclearance consultation program to 
provide the general public and Federal agencies with an opportunity to 
comment on the new information collection requirements in accordance 
with the PRA (See 44 U.S.C. 3506(c)(2)(A)). This helps ensure that: The 
public understands the Bureau's requirements or instructions, 
respondents can provide the requested data in the desired format, 
reporting burden (time and financial resources) is minimized, 
collection instruments are clearly understood, and the Bureau can 
properly assess the impact of collection requirements on respondents.
    The Proposed Policy contains revised information collection 
requirements which consist of the information that should be submitted 
in applications for admission to the BCFP Product Sandbox as described 
below in Section II.B. Documentation prepared in support of this 
information collection request is available at www.regulations.gov. 
Requests for additional information and comments regarding the proposed 
revised collection of information should be submitted as described in 
the ADDRESSES section of this document.
    Comments are invited on: (a) Whether the collection of information 
is necessary for the proper performance of the functions of the Bureau, 
including whether the information will have practical utility; (b) The 
accuracy of the Bureau's estimate of the burden of the collection of 
information, including the validity of the methods and the assumptions 
used; (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected; and (d) Ways to minimize the burden of the 
collection of information on respondents, including through the use of 
automated collection techniques or other forms of information 
technology. Comments submitted in response to this document will be 
summarized and/or included in the request for Office of Management and 
Budget (OMB) approval. All comments will become a matter of public 
record.

V. Proposed Policy

    The text of the proposed Policy is as follows:

Policy on No-Action Letters and the BCFP Product Sandbox

    In section 1021(a) of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act), Congress established the 
Bureau of Consumer Financial Protection's (Bureau's) statutory purpose 
as ensuring that all consumers have access to markets for consumer 
financial products and services and that markets for consumer financial 
products and services are fair, transparent, and competitive.\21\ 
Relatedly, the Bureau's objectives include exercising its authorities 
under Federal consumer financial law for the purposes of ensuring that 
outdated, unnecessary, or unduly burdensome regulations are regularly 
identified and addressed in order to reduce unwarranted regulatory 
burdens, and that markets for consumer financial products and services 
operate transparently and efficiently to facilitate access and 
innovation.\22\
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    \21\ 12 U.S.C. 5511(a).
    \22\ 12 U.S.C. 5511(b)(3), (5).
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    Congress has given the Bureau a variety of authorities under Title 
X of the Dodd-Frank Act and the enumerated consumer laws \23\ that it 
can exercise to promote this purpose and these objectives. These 
authorities include the authority to permit certain activity by a 
particular entity (or entities) by order (including approvals and 
exemptions), and discretionary supervision and enforcement 
authority.\24\ Providing such types of relief may not only benefit 
consumers and entities that offer or provide consumer financial 
products or services; it may also inform the Bureau's exercise of other 
authorities with respect to such products or services, such as market 
monitoring and rulemaking.
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    \23\ 12 U.S.C. 5481(12).
    \24\ See notes 26, 61, 64-65, infra.
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    The Policy on No-Action Letters and the BCFP Product Sandbox 
(Policy) sets forth the Bureau's policy and procedures regarding (i) 
issuance of No-Action Letters; and (ii) admission to the BCFP Product 
Sandbox, which involves issuance of (a) approvals by order and/or 
exemptions by order, and (b) no-action relief. The Policy's main 
purpose is to provide a mechanism through which the Bureau may more 
effectively carry out its statutory purpose and objectives.\25\
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    \25\ The Policy is not intended to, nor should it be construed 
to: (1) Restrict or limit in any way the Bureau's discretion in 
exercising its authorities; (2) constitute an interpretation of law; 
or (3) create or confer upon any covered person or consumer, any 
substantive or procedural rights or defenses that are enforceable in 
any manner. In contrast, a particular No-Action Letter involves the 
Bureau's exercise of its supervision and enforcement discretion in a 
particular manner, and a particular approval or exemption gives the 
recipient certain legal rights.

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[[Page 64039]]

    The Policy has two parts: (I) No-Action Letters; (II) the BCFP 
Product Sandbox. The Bureau considers Part I and Part II to be mutually 
exclusive.

Part I. No-Action Letters

    This part consists of six sections:
     Section A describes No-Action Letters.
     Section B describes information that should be included in 
applications for a No-Action Letter.
     Section C lists factors the Bureau intends to consider in 
deciding whether to grant an application for a No-Action Letter.
     Section D describes the Bureau's procedures for issuing 
No-Action Letters.
     Section E describes how the Bureau intends to coordinate 
with other regulators with respect to No-Action Letters.
     Section F describes Bureau disclosure of information about 
No-Action Letters.

A. Description of No-Action Letters

    A No-Action Letter under Part I is a document provided to a 
particular entity or entities, based on particular facts and 
circumstances, through which the Bureau exercises its discretionary 
supervision and enforcement authority by providing no-action 
relief.\26\ The Bureau intends that a No-Action Letter will include a 
statement that, subject to good faith, substantial compliance with the 
terms and conditions of the letter, and in the exercise of its 
discretion, the Bureau will not make supervisory findings or bring a 
supervisory or enforcement action against the recipient predicated on 
the recipient's offering or providing the described aspects of the 
product or service \27\ under (a) its authority to prevent unfair, 
deceptive, or abusive acts or practices; \28\ or (b) any other 
identified statutory or regulatory authority within the Bureau's 
jurisdiction.\29\ The Bureau intends that a No-Action Letter will also 
include a statement that the letter is limited to the recipient's (or 
recipients') offering or providing the described aspects of the product 
or service, and that it does not apply to the recipient's (or 
recipients') offering or providing different aspects of the product or 
service.\30\ \31\
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    \26\ See 12 U.S.C. 5561 et seq. (enforcement authority); 12 
U.S.C. 5531(a) (UDAAP enforcement authority); 12 U.S.C. 5514, 5515 
(supervision authority); 12 U.S.C. 5511(a) (``The Bureau shall seek 
to implement and, where applicable, enforce Federal consumer 
financial law . . .'') (emphasis added); Heckler v. Chaney, 470 U.S. 
821, 832 (1985); see also 12 U.S.C. 5512(b)(1) (authorizing the 
Director of the Bureau to ``issue . . . guidance as may be necessary 
or appropriate to enable the Bureau to administer and carry out the 
purposes and objectives of the Federal consumer financial laws, and 
to prevent evasions thereof'').
    \27\ For convenience, ``described aspects of the product or 
service'' is used in Part I to capture the subject matter scope of a 
No-Action Letter, including both the particular aspects of the 
product or service in question, and the particular manner in which 
it is offered or provided.
    \28\ Implicit in the statement under part (a) is that the Bureau 
has not determined that the acts or practices in question are 
unfair, deceptive, or abusive.
    \29\ The Bureau maintains the right to obtain information 
relating to the consumer financial product or service subject to a 
No-Action Letter under its applicable supervision and enforcement 
authorities.
    \30\ For example, if only written disclosures were included 
within the scope of a No-Action Letter, marketing representations 
made orally by call center representatives could nevertheless be 
subject to supervisory or enforcement action.
    \31\ Additional content the Bureau expects to be included in No-
Action Letters is specified in Section I.D.
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B. Submitting Applications for No-Action Letters

    Applications for a No-Action Letter should include the following:
    1. The identity of the entity or entities applying for a No-Action 
Letter;
    2. A description of the consumer financial product or service in 
question, including (a) how the product or service functions, and the 
terms on which it will be offered; and (b) the manner in which it is 
offered or provided, including any consumer disclosures;
    3. An explanation of the potential consumer benefits of the product 
or service and/or the manner in which it is offered or provided;
    4. An explanation of the potential consumer risks posed by the 
product or service and/or the manner in which it is offered or 
provided, and how the applicant(s) intends to mitigate such risks;
    5. An identification of the statutory and/or regulatory provisions 
from which the applicant(s) seeks no-action relief and an 
identification of the potential uncertainty, ambiguity, or barrier that 
such relief would address; \32\
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    \32\ Applicants should describe the relevant provisions with as 
much specificity as practicable, in part to enable the Bureau to 
respond expeditiously to the application. The Bureau recognizes that 
in some cases it may be difficult to determine precisely which 
provisions would apply, in the normal course, to the product or 
service in question. In other cases, the applicant may lack the 
legal resources to make a fully precise determination. In such 
circumstances, the applicant should provide the maximum 
specification practicable under the circumstances and explain the 
limits on further specification.
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    6. If an applicant(s) wishes to request confidential treatment 
under the Freedom of Information Act,\33\ the Bureau's rule on 
Disclosure of Records and Information,\34\ or other applicable law, 
this request and the basis therefor should be included in a separate 
letter and submitted with the application.\35\ Applicants are advised 
to specifically identify the information for which confidential 
treatment is requested, and may reference the Bureau's intentions 
regarding confidentiality under Section I.F; and
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    \33\ 5 U.S.C. 552.
    \34\ 12 CFR part 1070.
    \35\ Applicants should describe the relevant legal bases for 
confidentiality with as much specificity as practicable. The Bureau 
recognizes that some applicants may lack the legal resources to 
provide a detailed and complete showing. In such circumstances, the 
applicant should provide the maximum specification practicable under 
the circumstances and explain the limits on further specification.
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    7. If an applicant(s) wishes the Bureau to coordinate with other 
regulators, the applicant(s) should identify those regulators, 
including but not limited to those that have been contacted about 
offering or providing the product or service in question.\36\
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    \36\ Depending on the extent of coordination requested, the 
Bureau many not be able to respond to the application within the 
time frame specified in Section I.C.
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    The Bureau invites applications from trade associations, service 
providers,\37\ and other third-parties. A trade association may wish to 
apply for a No-Action Letter on behalf of one or more of its members. 
Similarly, a service provider may wish to apply for a No-Action Letter 
covering business relationships with existing or prospective clients. 
In either case, the third-party applicant may be unable to describe all 
entities interested in a No-Action Letter. The third-party applicant 
may also have difficulty submitting a complete application without 
specific knowledge of the business practices of every entity interested 
in a No-Action Letter.
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    \37\ The term ``service provider'' is generally defined in 
section 1002(26) of the Dodd-Frank Act as ``any person that provides 
a material service to a covered person in connection with the 
offering or provision by such covered person of a consumer financial 
product or service.'' 12 U.S.C. 5481(26). Some potential service 
providers may be unable to submit an application for a No-Action 
Letter without entering into a business relationship that enables 
them to provide a material service to a covered person. At the same 
time, a service provider may be unable to enter into such a business 
relationship absent appropriate relief.
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    A trade association, service provider, or other third-party 
applicant should endeavor to submit a complete application. However, if 
a third-party applicant is unable to submit a complete application,\38\ 
the Bureau may issue a

[[Page 64040]]

provisional No-Action Letter subject to submission of additional 
information and the Bureau's subsequent issuance of a non-provisional 
No-Action Letter. Based on a review of this additional information, a 
non-provisional No-Action Letter may be issued to the third-party and/
or the entity (or entities) described by the third-party. Additional 
entities described by the third-party applicant may receive the letter 
at the same or later time by informing the Bureau that they wish to 
receive the letter and providing the necessary information.
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    \38\ For example, although a third-party should endeavor to 
identify all other entities jointly interested in pursuing an 
application, it may not be able to identify all such entities by 
name at the time of the application. In such cases, the third-party 
applicant could describe the type of other entity it wishes to 
receive a No-Action Letter.
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    Applications may be submitted via email to: 
[email protected] or through other means designated by the 
Office of Innovation.\39\ Submitted applications may be withdrawn at 
any time. Potential applicants are encouraged to contact the Office of 
Innovation at the same email address for informal preliminary 
discussion of a contemplated proposal prior to submitting a formal 
application.\40\
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    \39\ Except as provided in Section I.B, applications should not 
include any PII.
    \40\ The email subject line should begin: ``No-Action Letter--
Inquiry.''
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C. Bureau Assessment of Applications for No-Action Letters

    In deciding whether to grant an application for a No-Action Letter, 
the Bureau intends to consider the quality and persuasiveness of the 
application, with particular emphasis on the information specified in 
subsections I.B.3, I.B.4, and I.B.5.\41\
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    \41\ The decision whether to grant an application for a No-
Action Letter will be within the Bureau's sole discretion.
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    The Bureau intends to grant or deny an application within 60 days 
of notifying the applicant that the Bureau has deemed the application 
to be complete.

D. Bureau Procedures for Issuing No-Action Letters

    When the Bureau decides to grant an application for a No-Action 
Letter, it intends to provide the recipient(s) with a No-Action Letter 
signed by the Assistant Director of the Office of Innovation or other 
members of the Office of Innovation, duly authorized by the Bureau, 
that sets forth the specific terms and conditions of the no-action 
relief provided.\42\ The Bureau expects the No-Action Letter will:
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    \42\ If the Bureau decides to deny an application, it will 
inform the applicant(s) of its decision. The Bureau intends to 
respond to reasonable requests to reconsider its denial of an 
application within 60 days of such requests. Applicants may also 
withdraw, modify, and re-submit applications at any time.
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    1. Identify the recipient(s);
    2. Specify the subject matter scope of the letter, i.e., the 
described aspects of the product or service;
    3. State that the letter is limited to the recipient's (or 
recipients') offering or providing the described aspects of the product 
or service, and that it does not apply to the recipient's (or 
recipients') offering or providing different aspects of the product or 
service;
    4. State that the letter is limited to the recipient(s), and that 
it does not apply to any other persons or entities;
    5. Require the recipient(s) to inform the Bureau of material 
changes to information included in the application that would 
materially increase the risk of material, tangible harm to consumers;
    6. Specify any other limitations or conditions, and the extent that 
the Bureau intends to publicly disclose information about the No-Action 
Letter; \43\
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    \43\ If an applicant(s) objects to the disclosure of certain 
information and the Bureau insists that the information must be 
publicly disclosed if a No-Action Letter is issued, the applicant(s) 
may withdraw the application and the Bureau intends to treat all 
information related to the application as confidential to the full 
extent permitted by law.
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    7. State that, subject to good faith, substantial compliance with 
the terms and conditions of the letter, and in the exercise of its 
discretion, the Bureau will not make supervisory findings or bring a 
supervisory or enforcement action against the recipient(s) predicated 
on the recipient's (or recipients') offering or providing the described 
aspects of the product or service under (a) its authority to prevent 
unfair, deceptive, or abusive acts or practices; \44\ or (b) any other 
identified statutory or regulatory authority within the Bureau's 
jurisdiction.\45\
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    \44\ Implicit in the statement under part (a) is that the Bureau 
has not determined that the acts or practices in question are 
unfair, deceptive, or abusive.
    \45\ A No-Action Letter permits the Bureau to exercise its 
supervision and enforcement authorities with respect to the 
recipient's (or recipients') conduct outside the scope of the No-
Action Letter.
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    8. State that, if the No-Action Letter is revoked for a reason 
other than the recipient's (or recipients') failure to substantially 
comply in good faith with the terms and conditions of the letter, the 
revocation is prospective only; i.e., that the Bureau would not pursue 
an action to impose retroactive liability in such circumstances.
    In certain circumstances, the Bureau may revoke the No-Action 
Letter in whole or in part. Based, in part, on its knowledge of no-
action letter programs operated by other Federal agencies, the Bureau 
anticipates revocation to be quite rare. The Bureau expects the No-
action Letter to specify the grounds of revocation, which the Bureau 
anticipates will be: (i) Failure to substantially comply in good faith 
with the terms and conditions of the letter; (ii) a determination by 
the Bureau that the recipient's (or recipients') offering or providing 
the described aspects of the product or service is causing material, 
tangible, harm to consumers; and (iii) a determination by the Bureau 
that the legal uncertainty, ambiguity, or barrier that was the basis 
for grant of a No-Action Letter has changed as a result of as statutory 
change or a Supreme Court decision.
    Before revoking a No-Action Letter, the Bureau will notify the 
recipient(s) of the grounds for revocation, and permit an opportunity 
to respond within a reasonable period of time. If the Bureau determines 
that the recipients(s) failed to substantially comply in good faith 
with the terms and conditions of the No-Action Letter, it will offer 
the recipient(s) an opportunity to cure the failure within a reasonable 
period of time before revoking the No-Action Letter. If the Bureau 
revokes or partially revokes a No-Action Letter, it will do so in 
writing and it will specify the reason(s) for its decision. The Bureau 
intends to allow the recipient(s) to wind-down the offering or 
providing of the describe aspects of the product or service during an 
appropriate period after revocation, unless the revocation was based 
upon the product or service causing material, tangible harm to 
consumers and a wind-down period would increase such harm.

E. Regulatory Coordination

    Section 1015 of the Dodd-Frank Act instructs the Bureau to 
coordinate with Federal agencies and State regulators, as appropriate, 
to promote consistent regulatory treatment of consumer financial and 
investment products and services.\46\ Similarly, section 1042(c) of the 
Dodd-Frank Act instructs the Bureau to provide guidance in order to 
further coordinate actions with the State attorneys general and other 
regulators.\47\ Such coordination includes coordinating in 
circumstances where other regulators have chosen to limit their 
enforcement or other regulatory authority. The Bureau is interested in 
entering into agreements with State authorities that issue similar 
forms of no-action relief that would provide for an alternative means 
of receiving a No-Action Letter from the Bureau, i.e.,

[[Page 64041]]

alternative to the process described in Sections I.B, I.C, and I.D.
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    \46\ 12 U.S.C. 5495.
    \47\ 12 U.S.C. 5552(c).
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    Furthermore, the Bureau wishes to coordinate with other regulators 
more generally. To this end, the Bureau intends to enter into 
agreements whenever practicable to coordinate relief under Part I with 
similar forms of relief offered by State, Federal, or international 
regulators.

F. Bureau Disclosure of Information Regarding No-Action Letters

    The Bureau intends to publish No-Action Letters on its website, as 
well as, in appropriate cases, a version or summary of the application. 
The Bureau also may publish denials of applications on its website, 
including an explanation of why the application was denied, 
particularly if it determines that doing so would be in the public 
interest.\48\
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    \48\ The Bureau intends to publish denials only after the 
applicant is given an opportunity to request reconsideration of the 
denial. Upon request, and to the extent permitted by law, the Bureau 
does not intend to release identifying information from published 
denials, and intends to redact such information from the denials 
published on its website.
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    Public disclosure of any other information regarding No-Action 
Letters is governed by applicable law, including the Dodd-Frank 
Act,\49\ the Freedom of Information Act (FOIA),\50\ and the Bureau's 
rule on Disclosure of Records and Information (Disclosure Rule).\51\ 
The Disclosure Rule generally prohibits the Bureau from disclosing 
confidential information,\52\ and defines confidential information to 
include information that may be exempt from disclosure under the FOIA 
\53\--including Exemption 4 regarding trade secrets and confidential 
commercial or financial information that is privileged or 
confidential.\54\ The Disclosure Rule defines confidential supervisory 
information to include any information provided to the Bureau by a 
financial institution to enable the Bureau to monitor for risks to 
consumers in the offering or provision of consumer financial products 
or services.\55\ Relatedly, the Disclosure Rule defines business 
information as commercial or financial information obtained by the 
Bureau from a submitter that may be protected from disclosure under 
Exemption 4 of FOIA, and generally provides that such business 
information shall not be disclosed pursuant to a FOIA request except in 
accordance with section 1070.20 of the rule.\56\
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    \49\ See, e.g., 12 U.S.C. 5512(c)(8).
    \50\ 5 U.S.C. 552.
    \51\ 12 CFR part 1070.
    \52\ 12 CFR 1070.41.
    \53\ 12 CFR 1070.2(f).
    \54\ 5 U.S.C. 552(b)(4).
    \55\ 12 CFR 1070.2(i)(1)(iv).
    \56\ 12 CFR 1070.20(a), (b).
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    The Bureau anticipates that much of the information submitted by 
applicants in their applications, and by recipients during the pendency 
of the No-Action Letter, will qualify as confidential information, 
which may include confidential supervisory information and/or business 
information, under the Disclosure Rule.\57\ In particular, information 
requested from applicants under subsections I.B.3, I.B.4, and I.B.5 is 
designed to enable the Bureau to assess potential risks to consumers 
posed by a No-Action Letter. Similarly, under subsection I.D.5, the 
Bureau is requiring notification of material changes to any application 
information to enable the Bureau to monitor for risks during the 
pendency of a No-Action Letter. Therefore, the Bureau expects that much 
of the information submitted that is responsive to subsections I.B.3, 
I.B.4, I.B.5, and I.D.5 may constitute confidential supervisory 
information since it is obtained, in part, for the purpose of 
monitoring for risks to consumers. Additionally, the Bureau expects 
that much of the information submitted that is responsive to subsection 
I.B.2 will constitute business information. The Bureau expects that it 
may also constitute confidential supervisory information, since 
understanding the nature of the applicant's product or service and the 
manner in which it is offered or provided is essential for the Bureau 
to monitor for risks to consumers.\58\
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    \57\ To the extent associated communications include the same 
information, that information would have the same status. But other 
information in associated communications may be subject to 
disclosure.
    \58\ To the extent an applicant or recipient submits information 
in connection with any of the identified subsections that is not 
actually responsive to these subsections, such information may be 
subject to disclosure.
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    Disclosure of information or data provided to the Bureau under the 
Policy to other Federal and State agencies is governed by applicable 
law, including the Dodd-Frank Act \59\ and the Bureau's Disclosure 
Rule, and subject to Bureau Bulletin 12-01.\60\ This includes 
disclosure consistent with Memoranda of Understanding (MOUs) the Bureau 
has with other Federal and State agencies. For example, under certain 
MOUs with other Federal agencies, the Bureau has agreed to provide CSI 
to those agencies.
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    \59\ See, e.g., 15 U.S.C. 5512(c)(6); 5514(b)(3); 5515(b)(2); 
5516(c)(2); 5516(d)(2).
    \60\ Available at: https://files.consumerfinance.gov/f/2012/01/GC_bulletin_12-01.pdf.
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    To the extent the Bureau wishes to publicly disclose non-
confidential information regarding a No-Action Letter, the terms of 
such disclosure will be included in the letter. The Bureau intends to 
draft the No-Action Letter in a manner such that confidential 
information is not disclosed. Consistent with applicable law and its 
own rules, the Bureau will not seek to publicly disclose any 
information that would conflict with consumers' privacy interests.

Part II. BCFP Product Sandbox

    This part consists of seven sections:
     Section A describes the three types of relief available to 
participants in the BCFP Product Sandbox.
     Section B describes information that should be included in 
applications for admission to the BCFP Product Sandbox.
     Section C lists factors the Bureau intends to consider in 
deciding whether to grant an application for admission to the BCFP 
Product Sandbox.
     Section D describes procedures for granting admission to 
the BCFP Product Sandbox.
     Section E describes procedures for granting extensions of 
participation in the BCFP Product Sandbox.
     Section F describes how the Bureau intends to coordinate 
with other regulators with respect to the BCFP Product Sandbox.
     Section G describes Bureau disclosure of information about 
the BCFP Product Sandbox.

A. Types of Relief Available to Participants in the BCFP Product 
Sandbox

1. Approvals
    An approval under Part II is relief provided by the Bureau to a 
particular entity or entities, based on particular facts and 
circumstances, under one or more of three statutory safe harbor 
provisions.\61\ An approval issued to a particular entity or entities 
will include (a) a statement that, subject to good faith compliance 
with specified terms and conditions, the Bureau approves the 
recipient's (or recipients') offering or providing the described 
aspects of the product or service; \62\ and (b) a specification of the 
legal authority and

[[Page 64042]]

rational basis for the Bureau's issuance of the approval.
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    \61\ 15 U.S.C. 1640(f) (TILA); 15 U.S.C. 1691e(e) (ECOA); 15 
U.S.C. 1693m(d) (EFTA).
    \62\ For convenience, ``described aspects of the product or 
service'' is used in Part II to capture the subject matter scope of 
admission to the BCFP Product Sandbox and the attendant relief, 
including both the particular aspects of the product or service in 
question, and the particular manner in which it is offered or 
provided.
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    By operation of the applicable statutory provision(s), the 
recipient would have a ``safe harbor'' from liability under the 
applicable statute(s) to the fullest extent permitted by these 
provisions as to any act done or omitted in good faith in conformity 
with the approval; i.e., the recipient would be immune from enforcement 
actions by any Federal or State authorities, as well as from lawsuits 
brought by private parties.\63\
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    \63\ 15 U.S.C. 1640(f); 15 U.S.C. 1691e(e); 15 U.S.C. 1693m(d).
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2. Exemptions
    An exemption under Part II is relief provided to a particular 
entity or entities, based on particular facts and circumstances, 
through which the Bureau exercises its authority to grant exemptions by 
order (i) from statutory provisions (as well as provisions of 
regulations implementing the statute in question) under statutory 
exemption-by-order provisions (statutory exemptions); \64\ or (ii) from 
regulatory provisions that do not mirror statutory provisions under 
rulemaking authority or other general authority (regulatory 
exemptions).\65\ An exemption issued to a particular entity or entities 
will include (a) a statement that, subject to good faith compliance 
with specified terms and conditions, the Bureau exempts the 
recipient(s) from complying with or deems it to be in compliance with 
specified statutory or regulatory provisions in connection with its 
offering or providing the described aspects of the product or service; 
and (b) a specification of the legal authority and rational basis for 
the Bureau's issuance of the exemption.
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    \64\ See, e.g., 15 U.S.C. 1691c-2(g)(2) (ECOA); 15 U.S.C. 
1639(p)(2) (HOEPA); 12 U.S.C. 1831t(d) (FDIA). Any exemption issued 
by the Bureau pursuant to such statutory authority will satisfy any 
applicable statutory requirements.
    \65\ See, e.g., United States v. Allegheny-Ludlum Steel Corp., 
406 U.S. 742, 755 (1972) (``It is well established that an agency's 
authority to proceed in a complex area . . . by means of rules of 
general application entails a concomitant authority to provide 
exemption procedures in order to allow for special 
circumstances.''); Brodsky v. U.S. Nuclear Regulatory Comm'n, 783 F. 
Supp. 2d 448 (S.D.N.Y. 2011) (same); 15 U.S.C. 5512(b)(1) 
(authorizing the Director of the Bureau to ``prescribe rules and 
issue orders and guidance as may be necessary or appropriate to 
enable the Bureau to administer and carry out the purposes and 
objectives of the Federal consumer financial laws, and to prevent 
evasions thereof'').
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    Where the Bureau provides such an exemption to a recipient(s), the 
recipient(s) would be immune from enforcement actions by any Federal or 
State authorities, as well as from lawsuits brought by private parties, 
based on the relevant statutory or regulatory provisions and on the 
recipient's (or recipients') offering or providing the described 
aspects of the product or service.\66\
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    \66\ See, e.g., 15 U.S.C. 5532(e) (exemption from a rule or 
enumerated consumer law issued by the Bureau constitutes a safe 
harbor from liability); Williams v. Chartwell Fin. Servs., Ltd., 204 
F.3d 748, 754 (7th Cir. 2004) (exemption effectively provides a safe 
harbor from liability).
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3. No-Action Relief
    The no-action relief available under Part II is substantially the 
same as the no-action relief available under Part I, including not 
having a limited duration.\67\
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    \67\ Although the no-action relief itself is substantially the 
same under Part I and Part II, potential applicants should keep in 
mind other differences between Part I and Part II when deciding 
whether to apply for a No-Action Letter under Part I, or for 
admission to the BCFP Product Sandbox under Part II, such as 
differences in data sharing expectations.
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B. Submitting Applications for Admission to the BCFP Product Sandbox

    An application for admission to the BCFP Product Sandbox should 
include the following:
    1. The identity of the entity or entities applying for admission to 
the BCFP Product Sandbox;
    2. A description of the consumer financial product or service to be 
offered or provided within the BCFP Product Sandbox, including (a) how 
the product or service functions, and the terms on which it will be 
offered; and (b) the manner in which it is offered or provided to 
consumers, including any consumer disclosures;
    3. The requested duration of participation in the BCFP Product 
Sandbox,\68\ and a description of any other limitations on 
participation, such as limits on the volume of transactions, the number 
of consumers to which the product or service is to be offered or 
provided, or geographic scope;
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    \68\ The Bureau expects that two years will be an appropriate 
duration in most cases. As indicated in subsection II.A.3, the no-
action relief available under Part II, like the no-action relief 
available under Part I, can be of unlimited duration. The 
``requested duration of participation in the BCFP Product Sandbox'' 
element pertains only to approval relief and exemption relief.
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    4. An explanation of the potential consumer benefits of the product 
or service and/or the manner in which it is offered or provided, and 
suggested metrics for evaluating whether such benefits are realized, 
such as consumer utilization numbers;
    5. An explanation of the potential consumer risks posed by the 
product or service and/or the manner in which it is offered or 
provided, and how the applicant(s) intends to mitigate such risks, 
including any plans for addressing unanticipated consumer harms and the 
amount of resources available to provide restitution for material, 
quantifiable, economic harm to consumers caused by the applicant's (or 
applicants') offering or providing the product or service;
    6. An identification of the statutory and regulatory provisions 
from which the applicant(s) seeks relief, the type of relief sought 
(approval, exemption, and/or no-action relief), and an identification 
of the potential uncertainty, ambiguity or barrier that such relief 
would address; 69 70
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    \69\ Applicants should describe the relevant provisions with as 
much specificity as practicable, in part to enable the Bureau to 
respond expeditiously to the application. The Bureau recognizes that 
in some cases it may be difficult to determine precisely which 
provisions would apply, in the normal course, to the product or 
service in question. In other cases, the applicant may lack the 
legal resources to make a fully precise determination. In such 
circumstances, the applicant should provide the maximum 
specification practicable under the circumstances and explain the 
limits on further specification.
    \70\ If an applicant(s) seeks an exemption under statutes that 
permit the Bureau to issue exemptions by order provided certain 
standards are satisfied, the applicant(s) should explain how the 
relevant standards are satisfied.
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    7. A description of data the applicant(s) possesses and/or intends 
to develop pertaining to the impact of the product or service on 
consumers that will be shared with the Bureau if the application is 
granted,\71\ and a proposed schedule for sharing this data with the 
Bureau;
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    \71\ The data the applicant expects to share with the Bureau 
should be limited to aggregate data.
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    8. If an applicant(s) wishes to request confidential treatment 
under the Freedom of Information Act,\72\ the Bureau's rule on 
Disclosure of Records and Information,\73\ or other applicable law, 
this request and the basis therefor should be included in a separate 
letter and submitted with the application.\74\ Applicants are advised 
to specifically identify the information for which confidential 
treatment is requested; and
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    \72\ 5 U.S.C. 552.
    \73\ 12 CFR part 1070.
    \74\ Applicants should describe the relevant legal bases for 
confidentiality with as much specificity as practicable. The Bureau 
recognizes that some applicants may lack the legal resources to 
provide a detailed and complete showing. In such circumstances, the 
applicant should provide the maximum specification practicable under 
the circumstances and explain the limits on further specification.
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    9. If an applicant(s) wishes the Bureau to coordinate with other 
regulators, the applicant(s) should identify those regulators, 
including but not limited to those that have been contacted about

[[Page 64043]]

offering or providing the product or service in question.\75\
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    \75\ Depending on the extent of coordination requested, the 
Bureau many not be able to respond to the application within the 
time frame specified in Section II.C.
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    The Bureau invites applications from trade associations, service 
providers,\76\ and other third-parties. A trade association may wish to 
apply for admission to the BCFP Product Sandbox on behalf of one or 
more of its members. Similarly, a service provider may wish to apply 
for admission to the BCFP Product Sandbox with existing or prospective 
clients. In either case, the third-party applicant may be unable to 
describe all entities interested in admission to the BCFP Product 
Sandbox. The third-party applicant may also have difficulty submitting 
a complete application for admission without specific knowledge of the 
business practices of every entity interested in admission.
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    \76\ The term ``service provider'' is generally defined in 
section 1002(26) of the Dodd-Frank Act as ``any person that provides 
a material service to a covered person in connection with the 
offering or provision by such covered person of a consumer financial 
product or service.'' 12 U.S.C. 5481(26). Some potential service 
providers may be unable to submit an application for admission to 
the BCFP Product Sandbox without entering into a business 
relationship that enables them to provide a material service to a 
covered person. At the same time, a service provider may be unable 
to enter into such a business relationship absent appropriate 
relief.
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    A trade association, service provider, or other third-party 
applicant should endeavor to submit a complete application. However, if 
a third-party applicant is unable to submit a complete application,\77\ 
the Bureau may grant provisional admission to the BCFP Product Sandbox 
subject to submission of additional information and the Bureau's 
subsequent grant of non-provisional admission. Based on a review of 
this additional information, non-provisional admission may be granted 
to the third-party and/or the entity (or entities) described by the 
third-party. Additional entities identified by the third-party may be 
granted admission at the same or later time by informing the Bureau 
that they wish to be granted admission and providing the necessary 
information.
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    \77\ For example, although a third-party should endeavor to 
identify all other entities jointly interested in pursuing an 
application, it may not be able to identify all such entities by 
name at the time of the application. In such cases, the third-party 
applicant could describe the type of other entity it wishes to be 
admitted to the BCFP Product Sandbox.
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    Applications may be submitted via email to: 
[email protected] or through other means designated by the 
Office of Innovation.\78\ Submitted applications may be withdrawn at 
any time. Potential applicants are encouraged to contact the Office of 
Innovation at the same email address for informal preliminary 
discussion of a contemplated proposal prior to submitting a formal, 
complete application.\79\
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    \78\ Except as provided in Section II.B, applications should not 
include any PII.
    \79\ The email subject line should begin ``BCFP Product 
Sandbox--Inquiry.''
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C. Bureau Assessment of Applications for Admission to the BCFP Product 
Sandbox

    In deciding whether to grant an application for admission to the 
BCFP Product Sandbox,\80\ the Bureau intends consider the quality and 
persuasiveness of the application, with particular emphasis on the 
information specified in subsections II.B.4, II.B.5, and II.B.6.
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    \80\ The decision whether to grant an application for admission 
to the BCFP Product Sandbox will be within the Bureau's sole 
discretion.
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    The Bureau intends to grant or deny an application within 60 days 
of notifying the applicant that the Bureau has deemed the application 
to be complete.

D. Procedures for Granting Admission to the BCFP Product Sandbox 
81
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    \81\ The procedures specified in Section II.D may be modified 
pursuant to coordination efforts with other regulators, as specified 
in Section II.F.
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    When the Bureau decides to grant an application for admission to 
the BCFP Product Sandbox, it intends to provide the recipient(s) with a 
document entitled: BCFP Product Sandbox Participation Terms and 
Conditions (Terms and Conditions document), that sets forth the terms 
and conditions of the recipient's (or recipients') participation in the 
BCFP Product Sandbox, including the types and scope of the relief 
provided to the recipient(s) during its participation in the Sandbox. 
The Terms and Conditions document will be signed by the Assistant 
Director of the Office of Innovation or other members of the Office of 
Innovation, duly authorized by the Bureau and by an officer of each 
recipient.\82\ The Bureau expects the Terms and Conditions document 
will:
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    \82\ If the Bureau decides to deny an application, it will 
inform the applicant(s) of its decision. The Bureau intends to 
respond to reasonable requests to reconsider its denial of an 
application within 60 days of such requests. Applicants may also 
withdraw, modify, and re-submit applications at any time.
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    1. Identify the recipient entity or entities;
    2. Specify the subject matter scope of the document, i.e., the 
described aspects of the product or service;
    3. State that the document is limited to the recipient's (or 
recipients') offering or providing the described aspects of the product 
or service, and that it does not apply to the recipient's (or 
recipients') offering or providing different aspects of the product or 
service;
    4. State that the document is limited to the recipient(s), and that 
it does not apply to any other persons or entities;
    5. Require the recipient(s) to report information about the effects 
of offering or providing the described aspects of the product or 
service on complaint patterns, default rates, or similar metrics that 
will enable to the Bureau to determine if doing so is causing material, 
tangible harm to consumers.
    6. Include a commitment by the recipient(s) to compensate consumers 
for material, quantifiable, economic harm caused by the recipient's (or 
recipients') offering or providing the described aspects of the product 
or service within the BCFP Product Sandbox;
    7. Specify any other limitations or conditions, such as the 
duration of the recipient's (or recipients') participation in the BCFP 
Product Sandbox,\83\ the nature and extent of the recipient's (or 
recipients') data sharing, and the extent that the Bureau intends to 
publicly disclose information about the recipient's (or recipients') 
participation in the BCFP Product Sandbox; \84\
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    \83\ The Bureau expects two years to be an appropriate duration 
in most cases.
    \84\ If an applicant(s) objects to the disclosure of certain 
information and the Bureau insists that the information must be 
publicly disclosed if admission to the BCFP Product Sandbox is to 
granted, the applicant(s) may withdraw the application and the 
Bureau intends to treat all information related to the application 
as confidential to the full extent permitted by law.
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    8. (a) State that, subject to good faith compliance with the terms 
and conditions of the document, (i) the Bureau approves the recipient's 
(or recipients') offering or providing the described aspects of the 
product or service, and/or (ii) the Bureau exempts the recipient(s) 
from complying with or deems it to be in compliance with specified 
statutory or regulatory provisions in connection with its offering or 
providing the described aspects of the product or service; and (b) 
specify the legal authority \85\ and rational basis for the Bureau's 
issuance of the approval and/or exemption.
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    \85\ See notes 61, 64-65, supra.
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    9. State that, subject to good faith compliance with the terms and 
conditions of the document, and in the exercise of its discretion, the 
Bureau will not make supervisory findings or bring a supervisory or 
enforcement action against the recipient(s) predicated on the 
recipient's (or recipients') offering or providing the

[[Page 64044]]

described aspects of the product or service under (a) its authority to 
prevent unfair, deceptive, or abusive acts or practices; \86\ or (b) 
any other identified statutory or regulatory authority within the 
Bureau's jurisdiction.\87\
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    \86\ Implicit in the statement under part (a) is that the Bureau 
has not determined that doing so is deceptive, unfair, or abusive.
    \87\ The relief provided to a participant(s) in the BCFP Product 
Sandbox permits the Bureau to exercise its supervision and 
enforcement authorities with respect to conduct by the 
participant(s) outside the scope of that relief.
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    10. State that, if the relief provided pursuant to the document is 
revoked for a reason other than the recipient's (or recipients') 
failure to comply in good faith with the terms and conditions of the 
document, the revocation is prospective only; i.e., that the Bureau 
would not pursue an action to impose retroactive liability in such 
circumstances.
    In certain circumstances, the Bureau may revoke admission to the 
BCFP Product Sandbox in whole or in part. Based, in part, on its 
knowledge of similar relief programs operated by other Federal 
agencies, the Bureau anticipates revocation to be quite rare. The 
Bureau expects the Terms and Condition document to specify the grounds 
of revocation, which the Bureau anticipates will be: (i) Failure to 
comply in good faith with the terms and conditions of the document; 
(ii) a determination by the Bureau that the recipient's (or 
recipients') offering or providing the described aspects of the product 
or service is causing material, tangible harm to consumers; and (iii) a 
determination by the Bureau that the legal uncertainty, ambiguity, or 
barrier that was the basis for the relief provided has changed as a 
result of a statutory change or a Supreme Court decision.
    Before issuing a revocation, the Bureau will notify the 
recipient(s) of the grounds for revocation, and permit an opportunity 
to respond within a reasonable period of time. If the Bureau 
nonetheless determines that the recipient(s) failed to comply with the 
Terms and Conditions document, it will offer the recipient(s) an 
opportunity to cure the failure within a reasonable period of time 
before issuing a revocation. If the Bureau issues a revocation for 
failure to comply in good faith with the Terms and Conditions document, 
it will do so in writing and it will specify the reason(s) for its 
decision, including the reason(s) why any attempt to cure was 
inadequate. The Bureau intends to allow the recipient(s) to wind-down 
the offering or providing of the described aspects of the product or 
service during a period of six months after revocation, unless the 
revocation was based upon the product or service causing material, 
tangible harm to consumers and a wind-down period would increase such 
harm.

E. Procedures for Extension of Participation in the BCFP Product 
Sandbox

    Participants in the BCFP Product Sandbox may apply for an extension 
of a specified period of time based upon the quality and persuasiveness 
of the data provided to the Bureau under Section II.D. The Bureau 
expects to place particular weight on the extent to which the data 
shows that the described aspects of the product or service are 
benefitting consumers and/or not causing material, tangible harm to 
consumers. Such applications for an extension should include the 
proposed duration of the extension and should be submitted no later 
than 90 days prior to the expiration of the applicant's participation 
in the BCFP Product Sandbox.\88\ Alternatively, participants may 
reapply by resubmitting the entirety of the information specified in 
Section II.B.
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    \88\ Assuming the two-year period the Bureau expects to be 
appropriate in most cases, the Bureau believes recipients would have 
sufficient time to gather evidence supportive of an extension 
request. For periods of one year or less, the Bureau may consider an 
extension deadline appropriate for the period in question.
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    Upon the presentation of persuasive data, the Bureau anticipates 
granting such extension applications for a period at least as long as 
the period of the applicant's (or applicants') original participation 
in the BCFP Product Sandbox. The Bureau anticipates permitting longer 
extensions where the Bureau is considering amending applicable 
regulatory requirements.\89\ During the time period pending a rule 
amendment, the Bureau intends to consider means of providing similar 
relief to other covered entities that engage in the same or similar 
conduct in offering or providing comparable products.
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    \89\ The Bureau's plans regarding rulemaking activity are set 
forth in its Semiannual Regulatory Agenda, published in full on 
www.reginfo.gov. If the period of an extension were tied to the 
Bureau's consideration of amending relevant regulatory provisions 
and the Bureau announced it was discontinuing its plans to amend the 
provisions in question, the extension period would be adjusted 
accordingly, e.g., adjusted to end on a specific date.
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F. Regulatory Coordination

    Section 1015 of the Dodd-Frank Act instructs the Bureau to 
coordinate with Federal agencies and State regulators, as appropriate, 
to promote consistent regulatory treatment of consumer financial and 
investment products and services.\90\ Similarly, section 1042(c) of the 
Dodd-Frank Act instructs the Bureau to provide guidance in order to 
further coordinate actions with the State attorneys general and other 
regulators.\91\ Such coordination includes coordinating in 
circumstances where other regulators have chosen to limit their 
enforcement or other regulatory authority. One method of limiting such 
authority is through a State sandbox, or group of State sandboxes, or 
other limited scope State authorization program (``State 
sandbox'').\92\ The Bureau is interested in entering into agreements 
with State authorities that operate or plan to operate a State sandbox 
that would provide for an alternative means of admission to the BCFP 
Product Sandbox, i.e., alternative to the process described in Sections 
II.B, II.C, and II.D.
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    \90\ 12 U.S.C. 5495.
    \91\ 12 U.S.C. 5552(c).
    \92\ The concept of a regulatory sandbox is relatively new and 
does not have a precise, generally accepted definition. The term is 
used in this Policy to refer to a regulatory structure where a 
participant obtains limited or temporary access to a market in 
exchange for reduced regulatory barriers to entry or reduced 
regulatory uncertainty.
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    Furthermore, the Bureau wishes to coordinate with other regulators 
more generally. To this end, the Bureau intends to enter into 
agreements whenever practicable to coordinate relief under Part II with 
similar forms of relief offered by State, Federal, or international 
regulators.

G. Bureau Disclosure of Information Regarding the BCFP Product Sandbox

    The Bureau intends to publish on its website information about the 
BCFP Product Sandbox. For entities admitted to the BCFP Product Sandbox 
pursuant to the process specified in Sections II.B, II.C, and II.D, the 
information is expected to include: (i) The identity of the entity or 
entities admitted to the BCFP Product Sandbox; (ii) the subject matter 
scope of its or their participation; \93\ (iii) the duration of its or 
their participation; (iv) the types of relief provided to 
participant(s); (v) for approvals and/or exemptions, the legal 
authority and rational basis for the approval and/or exemption; and 
(vi) in appropriate cases, a version or summary of the application.\94\ 
The Bureau also intends to publish on its website information about 
denials of applications submitted pursuant to

[[Page 64045]]

Section B, including an explanation of why the application was 
denied.\95\
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    \93\ See subsection II.D.2, supra.
    \94\ The Bureau intends, at minimum, to publish the names of 
participants admitted to the BCFP Product Sandbox pursuant to 
Section II.F, but reserves the discretion to negotiate any 
additional disclosure terms with the corresponding regulator to the 
extent permitted by law.
    \95\ Upon request, and to the extent permitted by law, the 
Bureau does not intend to release identifying information from 
published denials, and intends to redact such information from the 
denials published on its website. The Bureau intends to publish 
denials only after the applicant is given an opportunity to request 
reconsideration of the denial.
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    Public disclosure of any other information regarding admission to 
the BCFP Product Sandbox is governed by applicable law, including the 
Dodd-Frank Act,\96\ the Freedom of Information Act (FOIA),\97\ and the 
Bureau's rule on Disclosure of Records and Information (Disclosure 
Rule).\98\ The Disclosure Rule generally prohibits the Bureau from 
disclosing confidential information,\99\ and defines confidential 
information to include confidential supervisory information and Bureau 
information that may be exempt from disclosure under the FOIA \100\--
including trade secrets and confidential commercial or financial 
information that is privileged or confidential.\101\ The Disclosure 
Rule defines confidential supervisory information to include any 
information provided to the Bureau by a financial institution to enable 
the Bureau to monitor for risks to consumers in the offering or 
provision of consumer financial products or services.\102\ Relatedly, 
the Disclosure Rule defines business information as commercial or 
financial information obtained by the Bureau from a submitter that may 
be protected from disclosure under Exemption 4 of FOIA, and generally 
provides that such business information shall not be disclosed pursuant 
to a FOIA request except in accordance with section 1070.20 of the 
rule.\103\
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    \96\ See, e.g., 12 U.S.C. 5512(c)(8).
    \97\ 5 U.S.C. 552.
    \98\ 12 CFR part 1070.
    \99\ 12 CFR 1070.41.
    \100\ 12 CFR 1070.2(f).
    \101\ 5 U.S.C. 552(b)(4).
    \102\ 12 CFR 1070.2(i)(1)(iv).
    \103\ 12 CFR 1070.20(a), (b).
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    The Bureau anticipates that much of the information submitted by 
applicants in their applications, and by recipients during their 
participation in the BCFP Product Sandbox pursuant to the Terms and 
Conditions document, will qualify as confidential information, which 
may include confidential supervisory information, and/or business 
information, under the Disclosure Rule.\104\ In particular, the 
information requested under subsections II.B.3, II.B.4, II.B.6, and 
II.B.8 is designed to enable the Bureau to assess potential risks to 
consumers posed by the described aspect of the product or service. 
Similarly, subsection II.D.5 requires recipients to report information 
about the effects of offering or providing the described aspects of the 
product or service on complaint patterns, default rates, or similar 
metrics that will enable to the Bureau to determine if doing so is 
causing material, tangible harm to consumers. The other data and 
information the recipient(s) will provide pursuant to subsection II.D.6 
will likewise be used by the Bureau to monitor for risks to consumers. 
Therefore, the Bureau expects that much of the information submitted 
that is responsive to subsections II.B.3, II.B.4, II.B.6, and II.B.8, 
and the referenced portions of subsection II.D, may constitute 
confidential supervisory information, since it is obtained for the 
purpose of monitoring for risks to consumers. Additionally, the Bureau 
expects that much of the information or data submitted responsive to 
subsections II.B.2, II.B.8, and II.D.6 will constitute business 
information. The Bureau expects that it may also constitute 
confidential supervisory information, since understanding the nature of 
the described aspects of the product or service is essential for the 
Bureau to monitor for risks to consumers.105 106
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    \104\ To the extent associated communications include the same 
information, that information would have the same status. But other 
information in associated communications may be subject to 
disclosure.
    \105\ To the extent an applicant or recipient submits 
information in connection with any of the identified subsections 
that is not actually responsive to these subsections, such 
information may be subject to disclosure.
    \106\ The Bureau notes that the preceding protections from 
public disclosure must be balanced against the Bureau's potential 
need to publicly disclose submitted data in some form--as permitted 
by applicable law and/or consent of recipients--if it decides to 
revise relevant regulatory provisions through notice-and-comment 
rulemaking based, in part, on such data--as provided in Section E.
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    Disclosure of information or data provided to the Bureau under the 
Policy to other Federal and State agencies is governed by applicable 
law, including the Dodd-Frank Act \107\ and the Bureau's Disclosure 
Rule, and subject to Bureau Bulletin 12-01.\108\ This includes 
disclosure consistent with Memoranda of Understanding (MOUs) the Bureau 
has with other Federal and State agencies. For example, under certain 
MOUs with other Federal agencies, the Bureau has agreed to provide CSI 
to those agencies.
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    \107\ See, e.g., 15 U.S.C. 5512(c)(6); 5514(b)(3); 5515(b)(2); 
5516(c)(2); 5516(d)(2).
    \108\ Available at: https://files.consumerfinance.gov/f/2012/01/GC_bulletin_12-01.pdf.
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    To the extent the Bureau wishes to publicly disclose non-
confidential information regarding the BCFP Product Sandbox, the terms 
of such disclosure will be included in the Terms and Conditions 
document specified in Section II.D. The Bureau intends to draft the 
document in a manner such that confidential information is not 
disclosed. Consistent with applicable law and its own rules, the Bureau 
will not seek to publicly disclose any information or data that would 
conflict with consumers' privacy interests.

    Dated: December 6, 2018.
Mick Mulvaney,
Acting Director, Bureau of Consumer Financial Protection.
[FR Doc. 2018-26873 Filed 12-12-18; 8:45 am]
BILLING CODE 4810-AM-P