[Federal Register Volume 84, Number 178 (Friday, September 13, 2019)]
[Rules and Regulations]
[Pages 48246-48260]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19762]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Chapter X

[Docket No. CFPB-2018-0042]


Policy on the Compliance Assistance Sandbox

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Policy guidance and procedural rule.

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[[Page 48247]]

SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing its final Policy on the Compliance Assistance Sandbox (Policy), 
which is intended to carry out certain of the Bureau's authorities 
under Federal consumer financial law.

DATES: The Policy is applicable on September 10, 2019.

FOR FURTHER INFORMATION CONTACT: For additional information about the 
Policy, contact Paul Watkins, Assistant Director; Edward Blatnik, 
Deputy Counsel; Albert Chang, Counsel; Thomas L. Devlin, Senior 
Counsel; Will Wade-Gery, Senior Advisor; Office of Innovation, at 
[email protected] or 202-435-7000. If you require this 
document in an alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

    On December 13, 2018, the Bureau proposed a Policy on No-Action 
Letters and the BCFP Product Sandbox (Proposed Policy).\1\ The Proposed 
Policy had two parts. The first concerned No-Action Letters 
exclusively. The resulting No-Action Letter Policy (NAL Policy) has 
been finalized and published elsewhere in this issue of the Federal 
Register. The second part concerned the Sandbox (Proposed Sandbox 
Policy). This document finalizes the Proposed Sandbox Policy as the 
Compliance Assistance Sandbox Policy (CAS Policy or Policy). It 
reflects adjustments to the Proposed Sandbox Policy that the Bureau is 
making in response to comments on that proposal. The differences 
between the Proposed Sandbox Policy and the CAS Policy are discussed in 
detail in section IV below, which reviews the Bureau's consideration of 
comments received on the Proposed Sandbox Policy.
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    \1\ 83 FR 64036 (Dec. 13, 2018).
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    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.\2\ Relatedly, the Bureau's objectives 
include exercising its authorities under Federal consumer financial law 
for the purposes of ensuring that markets for consumer financial 
products and services operate transparently and efficiently to 
facilitate access and innovation, and that outdated, unnecessary, or 
unduly burdensome regulations are regularly identified and addressed in 
order to reduce unwarranted regulatory burdens.\3\
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    \2\ See 12 U.S.C. 5511(a).
    \3\ See 12 U.S.C. 5511(b)(3), (5). Facilitating innovation has a 
number of important benefits for consumers, which are described 
further in the NAL Policy. The NAL Policy also explains why reducing 
regulatory uncertainty is particularly important to the facilitation 
of innovation. That analysis is incorporated herein by reference.
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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 that it can 
exercise to promote this purpose and these objectives.\4\ These 
authorities include the authority to implement the Federal consumer 
financial laws through rules, orders, guidance, and interpretations, 
and to establish general policies with respect to such functions.\5\ As 
discussed in the Proposed Sandbox Policy and explained further below, 
three of the enumerated consumer laws describe the safe harbor effect 
of Bureau approvals \6\ issued to a particular entity or entities.\7\
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    \4\ The enumerated consumer laws are listed at 12 U.S.C. 
5481(12).
    \5\ See 12 U.S.C. 5492(a)(10); see also 12 U.S.C. 5512(b)(4)(B).
    \6\ These are the Truth in Lending Act (TILA), the Electronic 
Fund Transfer Act (EFTA), and the Equal Credit Opportunity Act 
(ECOA). See 15 U.S.C. 1640(f); 15 U.S.C. 1691e(e); 15 U.S.C. 
1693m(d).
    \7\ In this preamble and the final Policy, the Bureau uses the 
term ``entity'' to include ``entities,'' as appropriate and unless 
explicitly noted otherwise.
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II. Summary of the Compliance Assistance Sandbox Policy

    The primary purpose of the CAS Policy is to provide a mechanism 
through which the Bureau may more effectively carry out its statutory 
purpose and objectives by better enabling compliance in the face of 
regulatory uncertainty. One of the Bureau's core statutory functions is 
to issue guidance implementing Federal consumer financial law,\8\ and 
the Director is authorized to issue such guidance as may be necessary 
or appropriate to carry out that law and to prevent regulated entities 
from evading it.\9\ To that end, Congress has instructed courts to 
treat Bureau determinations on the meaning and interpretation of such 
law as those of an agency with exclusive authority to interpret it.\10\
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    \8\ See 12 U.S.C. 5511(c)(5).
    \9\ See 12 U.S.C. 5512(b)(1).
    \10\ 12 U.S.C. 5512(b)(4)(B).
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    The Bureau uses the Official Interpretations (Commentary) as its 
primary means of fulfilling its interpretive mission. Like other forms 
of guidance that the Bureau uses, the CAS Policy is intended to 
supplement the Commentary. The Policy does this by helping regulated 
entities better understand, in conditions of regulatory uncertainty, 
how Federal consumer financial law applies to specific aspects of 
particular products and services. It is for this reason that the Bureau 
is finalizing the Policy as the Compliance Assistance Sandbox Policy. 
The Policy, as finalized, provides for the issuance of approvals. 
Approvals offer a regulated entity that confronts regulatory 
uncertainty the binding assurance that specific aspects of a product or 
service are compliant with specified legal provisions. (Applicants to 
the Sandbox can also apply for a No-Action Letter under the Bureau's 
NAL Policy.\11\ As discussed in the Bureau's NAL Policy published in 
this issue of the Federal Register, No-Action Letters provide an entity 
with the Bureau's discretionary determination not to exercise 
supervisory or enforcement activity against specific aspects of a 
product or service.)
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    \11\ The Bureau will accept a single application seeking both 
compliance assistance under the CAS Policy and a No-Action Letter 
under the No-Action Policy. If an applicant only seeks a No-Action 
Letter, it should proceed under the No-Action Policy.
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    The Bureau expects that approvals will usually be time limited, 
typically to two years, but recipients may apply for extensions under 
specified procedures.\12\ A given approval may ultimately be used to 
help support an amendment to a regulation or Commentary, negating the 
need for further extensions of one-off assistance.\13\ The Policy 
commits approval recipients to specified forms of data sharing with the 
Bureau.
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    \12\ See section E.1 of the final Policy.
    \13\ See section E.1 of the final Policy.
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    Applicants for compliance assistance under the Policy follow a 
streamlined application and review process.\14\ The Bureau expects to 
grant or deny an application within 60 days of notifying the applicant 
that its application is deemed complete.\15\ The Policy also lays out 
mechanisms for Bureau coordination with other regulators that maintain 
similar programs designed to facilitate innovation.\16\
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    \14\ See sections B and C of the final Policy.
    \15\ Section D of the final Policy describes Bureau procedures 
for providing compliance assistance in particular cases.
    \16\ See section G of the final Policy.
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    The Bureau plans to propose further forms of assistance that may be 
of value to innovators. The Proposed Sandbox Policy would have provided 
for the issuance of exemptions by order from regulatory and certain 
statutory requirements. As explained further below, the final CAS 
Policy does not include such exemptions, but the

[[Page 48248]]

Bureau does intend to propose a legislative rule providing for the 
issuance, by order, of exemptions from regulatory requirements, as well 
as other categories of exemptions, as an additional form of assistance. 
The Bureau also intends to issue a proposal regarding the issuance of 
interpretive letters, and other forms of interpretive guidance. These 
developments have been informed by comments received in response to the 
Proposed Sandbox Policy.

III. Overview of Sandbox-Related Comments

    The Bureau received 29 unique comments covering the Proposed 
Sandbox Policy. Industry associations and individual financial services 
providers together submitted 17 of these. Consumer and civil rights 
organizations submitted five comments covering the Proposed Sandbox 
Policy. Government actors submitted three such comments. The remaining 
Proposed Sandbox Policy comments were provided by law firms (one), 
research centers (two), and members of the public (one).
    Industry commenters uniformly supported the Proposed Sandbox 
Policy. One of two groups of State Attorneys General also did so. These 
supporters generally agree that legal and regulatory uncertainties pose 
a barrier to innovations being developed in the marketplace. In their 
view, the Proposed Sandbox Policy, along with other Office of 
Innovation policies and programs, can help lower that barrier. Industry 
stakeholders made a number of comments intended to improve the 
functioning of the Proposed Sandbox Policy in that respect.
    Some of the most significant such comments, in the Bureau's view, 
requested that the Bureau add interpretive guidance to the available 
forms of compliance assistance. For example, one industry think tank 
called for the Bureau to further compliance by issuing interpretive 
legal opinions in circumstances warranting further legal clarity on a 
particular practice or activity. The commenter noted that other 
regulatory agencies--including the Office of the Comptroller of the 
Currency, the FTC, the Securities and Exchange Commission, and the 
Commodity Futures Trading Commission--provide for opinions of this 
kind. Another group of industry commenters requested that, to bring the 
proposal closer into line with similar programs offered by other 
regulators, issuance of compliance assistance under the Policy should 
represent the Bureau's conclusion that the proposed product or service 
does not violate applicable Federal consumer financial law.\17\ A trade 
association commenter suggested that the Bureau should use its 
authority to issue advisory opinions under the Fair Debt Collection 
Practices Act (FDCPA) to clarify regulatory expectations by providing 
clear legal interpretations for debt collectors that want to use newer 
technologies.\18\ Another commenter called for the Bureau to clarify 
the interpretive activity associated with approvals, in part so that 
third parties would better understand what reliance they could place on 
Bureau action under the Sandbox. These kinds of comments on the 
importance of interpretive guidance build on earlier comments submitted 
in response to the Bureau's 2018 Request for Information on Guidance 
and Implementation Support (Guidance RFI).\19\
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    \17\ This group of commenters supported the Proposed Sandbox 
Policy's indication that assistance would not disclaim any intention 
to be an interpretation of statutes or rules identified in an 
application.
    \18\ The FDCPA provides a safe harbor for acts done or omitted 
in good faith in conformity with a Bureau advisory opinion. See 15 
U.S.C. 1692k(e).
    \19\ The Guidance RFI was published in the Federal Register on 
April 2, 2018. See 83 FR 13959 (Apr. 2, 2018). It asked, among other 
things, whether the Bureau should consider an advisory opinion 
program to provide interpretations on which regulated entities could 
rely. In response, numerous stakeholders urged the Bureau to issue 
advisory opinions.
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    This feedback is informing the Bureau's present consideration of a 
proposal to implement an interpretive letter program that could benefit 
innovators and other regulated entities confronting regulatory 
uncertainty. The Bureau agrees with these commenters that the present 
lack of an interpretive letter or advisory opinion policy represents a 
gap in the Bureau's plans for providing compliance assistance to 
stakeholders under the Federal consumer financial laws. Because the 
Bureau did not propose an interpretive letter or advisory opinion 
program in the Proposed Sandbox Policy, and because of the significant 
public interest in how such a program might be structured, the Bureau 
believes it would be appropriate to provide an opportunity for public 
comment before establishing an interpretive letter or advisory opinion 
program. Accordingly, the Bureau intends to separately propose an 
interpretive letter program as soon as practicable.\20\
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    \20\ This proposal would not limit the Bureau's existing 
authority to issue interpretive rules.
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    With one exception, consumer and civil rights organizations--
together with a second group of State Attorneys General, and a group of 
State financial regulators--opposed the Proposed Sandbox Policy.\21\ 
Their predominant objection was that it would permit regulated entities 
to evade their legal responsibilities. The Bureau believes this 
objection is ultimately misplaced, but acknowledges that the proposal 
may not have been sufficiently clear on this point. Approvals are 
intended to facilitate compliance in the face of regulatory 
uncertainty. The relief they provide is from regulatory uncertainty, 
not from regulatory obligation. This central purpose is why the 
Proposed Sandbox Policy is being finalized as the Compliance Assistance 
Sandbox Policy. It is also why the Policy refers to assistance rather 
than relief. Plainly, Congress gave the Bureau authority to issue 
orders to advance this compliance goal.\22\
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    \21\ Some of these commenters acknowledged the importance of the 
Proposed Sandbox Policy's goals. For example, one State Attorneys 
General group agreed on the importance of encouraging responsible 
innovation in the consumer financial marketplace because of its 
potential to provide consumers with more choice, lower costs, and 
expanded access to credit.
    \22\ See 12 U.S.C. 5512(b)(1), 5492(a)(10); see also 12 U.S.C. 
5512(b)(4)(B).
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    To the extent that some stakeholders continue to disagree with the 
Policy, the Bureau believes that their differences will primarily be 
about the practical importance of resolving specific regulatory 
uncertainties for regulated entities that seek to innovate and improve 
access to financial services, consistent with the requirements of 
Federal consumer financial law.\23\ Other agencies show steady demand 
for their interpretive and No-Action Letter programs and there is no 
reason to believe the Bureau's experience will be any different.\24\
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    \23\ Only one commenter expressed the view that innovation in 
consumer financial markets rarely confronts regulatory uncertainty. 
According to this commenter, most such innovations are within 
established product categories to which the application of existing 
law is manifestly clear. The Bureau respectfully disagrees with this 
view.
    \24\ Commenters appear not to cite any instances in which these 
programs harmed consumers.
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IV. Summary of Comments, Bureau Responses, and Resulting Policy Changes

    This section provides a summary of significant comments received on 
the Proposed Sandbox Policy. It covers the Bureau's assessment of such 
comments by subject matter and, where applicable, describes the 
resulting changes that the Bureau is making in the Compliance 
Assistance Sandbox Policy.\25\ Comments addressed to the Bureau's 
proposed issuance of No-Action Letters have been

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addressed in the process of finalizing the NAL Policy published 
elsewhere in today's issue of the Federal Register. That review is 
incorporated herein by reference.
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    \25\ The Bureau has also made a number of technical changes to 
the Policy to accommodate the revisions described below and to 
increase clarity.
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A. Liability Protection

    Section II.A of the Proposed Policy provided a high-level 
description of the types of compliance assistance available under the 
Proposed Sandbox Policy. Section II.A.1 explained that an approval 
issued under the Proposed Sandbox Policy would be based on one or more 
of three statutory safe harbor provisions, and would include a 
statement that, subject to good faith compliance with specified terms 
and conditions, the Bureau approves the recipient's offering or 
providing the described aspects of the product or service in question. 
It further explained that, by operation of the applicable statutory 
provision, the recipient would have a safe harbor from liability under 
the applicable statute to the fullest extent permitted by the 
applicable provision as to any act done or omitted in good faith in 
conformity with the approval.
    Section II.A.2 of the Proposed Policy explained that an exemption 
issued under the Proposed Sandbox Policy would include a statement 
that, subject to good faith compliance with specified terms and 
conditions, the Bureau exempts the recipient 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 in question. The exemption would be 
based on 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); or (ii) from regulatory provisions that do not 
mirror statutory provisions under rulemaking authority or other general 
authority (regulatory exemptions). Section II.A.2 further explained 
that, where the Bureau provides such an exemption, the recipient 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 
offering or providing the described aspects of the product or service.
    The Bureau received a number of comments about State-level effects 
of these two sections. They fall into two categories: (1) Comments 
regarding the effect of an approval or exemption on the ability of 
States to enforce Federal consumer financial law under section 1042(a) 
of the Dodd-Frank Act; and (2) comments about the effect of an approval 
or exemption on State law. The CAS Policy, as finalized, no longer 
includes statutory or regulatory exemptions by order. As a result, 
comments on exemptions are addressed further below rather than in this 
section.\26\
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    \26\ See infra sections IV.C.1 & 2.
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1. Dodd-Frank Act Section 1042(a)
    A group of State financial regulators, a group of State Attorneys 
General, and a group of consumer advocates asserted that the approvals 
available under the Proposed Sandbox Policy would exceed the Bureau's 
authority under title X of the Dodd-Frank Act. Specifically, they 
argued that the Bureau cannot provide this degree of liability 
protection because section 1042(a) of the Dodd-Frank Act gives the 
States authority to enforce Federal consumer financial law.\27\ The 
Bureau disagrees.
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    \27\ 12 U.S.C. 5552(a).
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    The basic operation of the statutory provisions that describe a 
safe harbor for Bureau approvals and Bureau interpretations is 
straightforward. For example, section 130(f) of TILA provides that 
various liability provisions of TILA do not apply to any act done or 
omitted in good faith in conformity with any approval or interpretation 
by an official or employee of the Bureau duly authorized by the Bureau 
to issue such interpretations or approvals under such procedures as the 
Bureau may prescribe. The CAS Policy prescribes such procedures for 
approvals (and the Bureau's planned interpretive letter proposal will 
propose to prescribe them for interpretations). Under those procedures, 
the Assistant Director, Office of Innovation, is authorized to issue 
approvals with respect to specific provisions of--for example--TILA and 
Regulation Z. At that point, no party, including a State, can override 
the statutorily conferred safe harbor.\28\
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    \28\ A consortium of consumer groups claimed that approvals 
issued under the Proposed Sandbox Policy would be in severe tension 
with section 1042(a), thereby apparently acknowledging that the 
latter does not actually override Sandbox approvals. In any event, 
for the reasons set forth above, the Bureau does not see any tension 
between approvals and section 1042.
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    State authority to enforce Federal consumer financial law does not 
invalidate the Bureau's exclusive authority to give meaning to that 
same law. The Dodd-Frank Act is clear that the Bureau has such 
authority.\29\ Thus, the Commentaries for Regulations Z, E, and B 
inform regulated entities that they can be relied upon for safe harbor 
effect. They do not observe any exception for State enforcement actions 
that purport to rely on contrary interpretations of TILA, EFTA, and 
ECOA, and no State has ever suggested that they should. Similarly, the 
Bureau has also used its authority to grant exemptions by rule from 
various statutory or regulatory provisions. For example, section 
1026.41 of Regulation Z requires mortgage servicers to provide periodic 
statements.\30\ Using its authority under TILA to grant exemptions by 
rule,\31\ the Bureau exempted small servicers from the periodic 
statement requirement.\32\ No one would suggest, however, that States 
could now state a claim under TILA against exempted small servicers for 
failing to provide periodic statements.
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    \29\ See 12 U.S.C. 5512(b)(4)(B); see also 12 U.S.C. 5512(b)(1), 
5492(a)(10).
    \30\ 12 CFR 1026.41.
    \31\ See 15 U.S.C. 1604(a), (f); 78 FR 10901, 10977 (Feb. 14, 
2013).
    \32\ 12 CFR 1026.41(e)(4).
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2. State Law
    A group of State Attorneys General observed that the Proposed 
Sandbox Policy appears not to contemplate the preemption of State 
law.\33\ One consumer group urged the Bureau not to preempt state 
regulators until sufficient time has passed for states to establish 
their own financial services regulatory sandboxes. A research 
organization stated that the Bureau has a strong case for preemption 
under the Proposed Sandbox Policy. The compliance assistance available 
under the Policy, however, concerns Federal consumer financial law, not 
State law, and the Bureau does not foresee that such assistance would 
preempt State law.
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    \33\ Some commenters used preemption terminology to cover the 
impact of the Proposed Sandbox Policy on State enforcement of 
Federal consumer financial law. Those comments concern the impact of 
section 1042(a) of the Dodd-Frank Act, and are covered in the 
previous subsection. The present subsection only covers the issue of 
preemption of State law.
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B. Approvals

    The Bureau received a number of comments specific to approvals. A 
consortium of consumer groups made several points. Their main concern 
was that the Bureau might issue de facto exemptions as approvals. This 
concern appears to derive from the Bureau's description of an approval 
as a form of ``relief'' from statutory and regulatory provisions. The 
Proposed Sandbox Policy used the term ``relief'' as a generic term that 
encompasses exemptions, but also other actions that are designed to 
reduce regulatory

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uncertainty and facilitate compliance. The Bureau did not--and does 
not--intend to issue approvals that are de facto exemptions. The Bureau 
intends to provide approvals with respect to products, services, and 
practices that are compliant with identified statutory and regulatory 
provisions.\34\ To avoid further confusion on this point, the Bureau is 
finalizing the proposal as the Compliance Assistance Sandbox Policy, 
which now refers to compliance assistance rather than relief.
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    \34\ The finalized Policy describes one procedure through which 
the Bureau may issue approvals, but, as the Policy notes, the Bureau 
retains discretion to issue approvals outside that procedure as 
well.
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    Second, the consumer groups pointed out that the Commentary 
applicable to regulations implementing TILA, EFTA, and ECOA include 
statements indicating that, except in unusual circumstances, Bureau 
interpretations that trigger the safe harbor provisions of the 
respective statutes will be included in the Commentary.\35\ The 
commenters stated that the Proposed Sandbox Policy did not mention 
these statements or purport to change them. The main reason it did not 
do so is that these statements concern interpretations, not approvals 
that apply to specific entities. In addition, the Bureau has already 
issued several standalone interpretations that offer safe harbor 
protection even though they did not follow the general practice of 
being issued after notice-and-comment as part of the Commentary.\36\
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    \35\ See, e.g., 12 CFR part 1026, appendix C.
    \36\ See, e.g., 79 FR 41631, 41632 (July 17, 2014) (``A creditor 
may rely on this interpretation as a safe harbor under section 
130(f) of TILA.''); 81 FR 71977, 71978 (Oct. 19, 2016) (Bureau 
advisory opinion provides safe harbor protection under section 
813(e) of the FDCPA).
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    Third, the consumer groups took issue with the Bureau's description 
of the safe harbor effect of an approval. They objected, in particular, 
to the term ``immunity'' as overstating the impact of an approval 
because: (i) An entity must have relied on the approval in good faith; 
(ii) a court must find that the approval was issued prior to the time 
of the entity's action; (iii) the entity is not protected from 
liability for future acts in conformance with the approval after a 
court invalidates the approval; and (iv) an approval only protects a 
recipient from liability, and does not prevent a plaintiff from 
obtaining declaratory or injunctive relief. Similarly, a group of State 
Attorneys General objected that the safe harbor provisions do not 
confer ``absolute immunity,'' but instead provide entities an 
affirmative defense to liability when entities can demonstrate they 
acted in good faith and in conformity with the approval in question.
    This objection reflects a semantic difference. The legislative 
history of the TILA safe harbor provision uses the term ``immunity'' 
from civil liability.\37\ In addition, the Bureau's statements on the 
safe harbor made clear that the liability protection provided by an 
approval depends on the recipient's good faith conformity with its 
terms. As a result, the Bureau believes that immunity from liability is 
a reasonable description for the protection against liability that 
Congress provided under section 130(f) of TILA, section 706(e) of ECOA, 
and section 916(d) of EFTA. By the same token, however, the Bureau has 
no objection to referring to safe harbors from liability rather than 
immunity from liability, and the CAS Policy has been adjusted 
accordingly.
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    \37\ See S. Rep. 93-278 at 13-14.
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C. Exemptions

    Section II.A.2 of the Proposed Policy indicated that exemptions by 
order would be available in two forms: (1) Exemptions from statutory 
provisions (as well as provisions of regulations necessitated by the 
statute in question) under statutory exemption-by-order provisions 
(statutory exemptions); \38\ or (2) exemptions from regulatory 
provisions that are not specifically necessitated by statutory 
provisions under rulemaking authority or other general authority 
(regulatory exemptions).\39\ The Bureau received comments about both 
types.
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    \38\ 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).
    \39\ 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 Reg. Comm'n, 783 F. Supp. 
2d 448, 455-56 (S.D.N.Y. 2011) (same), vacated in part, 704 F.3d 113 
(2d Cir. 2013); see also 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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1. Statutory Exemptions
    Consumer groups and one group of State Attorneys General observed 
that the Bureau has limited authority to provide statutory exemptions 
by order. In light of the comments received, the Bureau has concluded 
that the purposes of the specific statutory exemption by order 
provisions described in the Proposed Sandbox Policy are sufficiently 
distinct from the purposes of the Compliance Assistance Sandbox Policy 
that they do not need to be included in it. The exclusion of statutory 
exemptions from the Policy does not affect the Bureau's authority to 
issue such exemptions pursuant to these specific statutory provisions.
2. Regulatory Exemptions
    A number of industry and trade association commenters, among 
others, supported the Bureau's proposal to provide regulatory 
exemptions, generally arguing that regulatory exemptions would allow 
companies and service providers to test innovative products and 
services in a controlled environment, without incurring the risk of a 
lawsuit or enforcement action.
    Consumer groups and a group of State Attorneys General asserted 
that the Bureau lacks authority to provide regulatory exemptions. In 
their view, apart from the very limited authority to grant statutory 
exemptions by order, the Bureau only has authority to grant exemptions 
by rule. These commenters contend that such exemption-by-rule 
provisions typically include standards that the Bureau must satisfy 
when prescribing such exemptions, and that the Proposed Sandbox Policy 
impermissibly sought to circumvent what they asserted was the Bureau's 
obligation to grant regulatory exemptions only through a rulemaking 
process.
    The Bureau believes that regulatory exemptions--i.e., exemptions 
from regulatory provisions that are not specifically necessitated by 
statute--would be an important component of the CAS Policy. Regulatory 
exemptions would enable the Bureau to learn, from real-world 
experience, whether technological or other developments since current 
rules were issued warrant a change in discretionary aspects of Bureau 
rules. As contemplated in the Proposed Sandbox Policy, regulatory 
exemptions would allow the Bureau, in a controlled environment, to 
learn whether a new aspect of a product or service that was not fully 
contemplated when existing rules were promulgated nonetheless advances 
the purposes and objectives of the underlying statute.
    The Bureau appreciates the comments emphasizing the value of 
additional public feedback before proceeding with an exemption program. 
Thus, the Bureau will at a later date issue a proposal to establish a 
program for exemptions by order through a separate notice-and-comment 
rulemaking.

D. Administrative Procedure Act Requirements

    Consumer groups and one of the State Attorneys General groups 
contended

[[Page 48251]]

that the Proposed Sandbox Policy fails to comply with the 
Administrative Procedure Act (APA) in various respects. The Bureau 
disagrees.\40\
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    \40\ The analysis in this section addresses comments about 
approvals because the Bureau now intends to propose exemption 
procedures by legislative rule, and not through the CAS Policy as 
finalized today. See supra section IV.C.2. Comments concerning the 
APA-sufficiency of the NAL Policy and of No-Action Letters issued 
under it are addressed in section III.A.3 of the NAL Policy 
published separately in today's Federal Register. Because comments 
concerning these APA points were not always readily separable into 
those directed at No-Action Letters and those directed at the 
Proposed Sandbox Policy, the analysis in section III.A.3 of the NAL 
Policy should be considered incorporated herein.
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1. The Policy Is Not a Legislative Rule
    A number of commenters asserted that the Proposed Sandbox Policy, 
if finalized, would be a legislative rule and accordingly subject to 
notice-and-comment (and other) requirements under the APA. The Policy 
is intended as a policy statement and procedural rule that provides the 
public with information regarding the Bureau's plans to exercise its 
discretion to issue approvals under the Policy, and to describe the 
procedural components of such discretion. It does not purport to impose 
on any regulated entity any legally-binding obligations or 
prohibitions. It does not create substantive rights in any party, but 
rather describes procedures for how compliance assistance can be sought 
under the Policy and how the Bureau intends to resolve such 
applications. Whether an individual approval impacts substantive legal 
rights is a separate question that is addressed in subsection D.3 
below. But the fact that such compliance assistance may change 
substantive rights does not convert into a substantive legislative rule 
the procedures that describe how the Bureau intends to exercise its 
discretion to provide compliance assistance.
2. The Policy Is Not Arbitrary and Capricious
    Consumer groups claimed that the Proposed Sandbox Policy, if 
finalized, would be arbitrary and capricious for several reasons. The 
Bureau notes that a determination of whether the Policy is arbitrary or 
capricious would be based on the content of the final Policy, not the 
proposed Policy. Accordingly, the discussion below references the final 
Policy as well as the proposed Policy.
    First, consumer groups characterized the Proposed Sandbox Policy as 
arbitrary and capricious for not considering impacts on consumers. The 
Bureau believes this characterization is incorrect. The proposed Policy 
advised applicants for compliance assistance to describe consumer 
benefits and risks associated with the product or service. It also 
stated that the Bureau intends to place particular reliance on those 
elements of an application when assessing the merits of any application 
for assistance. The final Policy confirms the point. Moreover, under 
the Proposed Sandbox Policy, regulated entities granted an approval 
were to: (i) Report information about the effects of the described 
aspects of the product or service on complaint patterns, default rates, 
or similar metrics that will enable the Bureau to determine if such 
aspects are causing material, tangible harm to consumers; and (ii) 
compensate consumers for any material, quantifiable, economic harm 
caused by the described aspects of the product or service. As described 
further below, these provisions have been adjusted in the final Policy 
to track more established standards of consumer injury, but their core 
focus on detecting and mitigating consumer risks remains.\41\
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    \41\ See sections D.5 & D.6 of the final Policy. Section D.4 
also requires recipients of compliance assistance to report on 
materialization of consumer risk.
---------------------------------------------------------------------------

    Second, consumer groups claimed that the Bureau failed to give 
adequate reasons for developing the Proposed Sandbox Policy. As 
explained further above, the Bureau's immediate aim here is to better 
enable compliance in circumstances of regulatory uncertainty--and 
thereby serve a number of the Bureau's statutory objectives. Building 
new mechanisms to improve adherence to consumer protection laws 
benefits consumers directly--by improving compliance--and indirectly--
by lowering compliance costs and helping innovators to provide new 
products and services to compete for consumer demand. In addition, the 
Bureau explained in the Proposed Sandbox Policy how it expected 
information obtained thereunder to inform the Bureau's exercise of 
related authorities, such as market monitoring and rulemaking.
3. Approvals Are Not Legislative Rules
    Commenters opposed to the Proposed Sandbox Policy made two broad 
arguments that approvals would amount to legislative rules. One group 
of State Attorneys General suggested that the Bureau lacks authority to 
issue approvals absent notice-and-comment rule-making. However, the 
case they cite to support this proposition discusses whether a 
generally applicable policy document is a legislative rule that 
requires notice-and-comment rulemaking.\42\ It does not address 
particularized determinations like the approvals contemplated by the 
Policy.
---------------------------------------------------------------------------

    \42\ See Gen. Elec. Co. v. E.P.A., 290 F.3d 377, 382 (D.C. Cir. 
2002).
---------------------------------------------------------------------------

    Some consumer groups asserted that particular approvals could be 
legislative rules requiring notice-and-comment rulemaking--even as the 
procedures specified in the Proposed Sandbox Policy for providing 
approvals do not contemplate such rulemaking. Particular approvals 
could be legislative rules, they contend, because they could change, in 
a binding manner, and broadly, whether or how consumer protection laws 
apply in the future, and affect the future action and future rights of 
consumers and other State and Federal agencies, as well as the Bureau.
    Approvals issued under the Policy will be based on one or more of 
three statutory safe harbor provisions. These state that approvals will 
be issued by duly authorized Bureau officials or employees. The 
provisions do not indicate that such personnel must do so by rule or 
regulation.\43\ The Bureau acknowledges that simply labeling a Bureau 
action as an approval does not render it immune from challenge as a de 
facto legislative rule; the question is one of substance, not form.\44\ 
But the Bureau's intention under the Policy is that approvals will be 
particularized determinations based on the application of existing law 
to specific factual scenarios. Approvals will issue only when they are 
a rational product of existing law, and they will be expressly limited 
to the particularized facts and circumstances of the described aspects 
of the product or service identified by the applicant. As such, they 
are not subject to notice and comment requirements under the APA.
---------------------------------------------------------------------------

    \43\ See 15 U.S.C. 1640(f); 15 U.S.C. 1691e(e); 15 U.S.C. 
1693m(d).
    \44\ See, e.g., Truckers United for Safety v. Fed. Highway 
Admin., 139 F.3d 934 (D.C. Cir. 1998).
---------------------------------------------------------------------------

E. Application Elements and Bureau Assessment of Applications

    Section II.B of the Proposed Policy listed nine items that should 
be included in an application under the Proposed Sandbox Policy, as 
appropriate, including: (1) The identity of the applicant; (2) a 
description of the product or service at issue; (3) the requested 
duration of participation; (4) any other limits on participation; (5) 
explanations of the potential consumer benefits and risks of the 
application; (6) an identification of the relevant statutory and 
regulatory provisions; (7) a description of data that would be shared 
with the Bureau; (8) any request

[[Page 48252]]

for confidential treatment of information; and (9) an identification of 
any regulators the applicant wished the Bureau to coordinate with. 
Section II.C of the Proposed Policy stated that the Bureau would 
consider the quality and persuasiveness of the application in deciding 
whether to grant the application, with a particular emphasis on the 
potential risks and benefits, as well as an analysis of the relevant 
statutory and regulatory provisions. Section II.C also stated that the 
Bureau intended to grant or deny an application within 60 days of 
notifying the applicant that the Bureau deemed the application to be 
complete.
    A coalition of consumer groups argued that the application and 
assessment procedures described in the Proposed Sandbox Policy were 
inadequate, for a variety of reasons. Specifically, these commenters 
argued that: The information to be included in an application was 
insufficient for the Bureau to properly evaluate applications; certain 
specific items (such as a showing of the product or service's 
compliance with existing State and Federal law) proposed to be deleted 
from the application requirements were necessary for the Bureau to 
provide an adequate review; and that the Bureau should add certain 
evaluation criteria from the prior NAL policy to the Proposed Sandbox 
Policy.
    The Policy finalizes the application requirements largely as 
proposed.\45\ The Bureau appreciates these commenters' concern about 
the importance of adequately reviewing applications for compliance 
assistance. The Bureau intends in many cases for the issues raised by 
these commenters to be addressed as part of the Bureau's assessment of 
applications. However, as discussed in the preamble to the Proposed 
Policy, the Bureau's experience with the initial 2016 version of its 
NAL policy suggests that those application criteria were so burdensome 
as to deter potentially meritorious applications. By replacing the 
previous prescriptive application requirements with more flexible 
mechanisms (which can be tailored based on pre-application discussions 
between an applicant and relevant Bureau staff), applicants will be 
able to provide the Bureau with information necessary to evaluate an 
application without unduly burdening potential applicants. Ultimately, 
the Bureau believes that the most effective and efficient means of 
handling the concerns raised by consumer groups is to clarify that the 
Bureau expects its assessment of applications to include due diligence 
regarding the applicant, its principals, and the product or service in 
question.
---------------------------------------------------------------------------

    \45\ As with APA-focused comments, comments concerning 
application elements and assessment procedures were not easily 
separable into those directed at No-Action Letters and those 
directed at the Proposed Sandbox Policy. As a result, the analyses 
in sections III.C and III.D of the preamble to the NAL Policy are 
incorporated herein.
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    With specific respect to concerns about removing requirements to 
show compliance with State and Federal law more generally, and to 
certify that all information in the application is true and accurate, 
the Bureau believes that these requirements are either unnecessary or 
redundant. As stated in the final Policy, compliance assistance 
provided under the Policy will be limited to specific applications of 
Federal law, as well as limited to the facts stated in the application. 
To the extent that a product or service violates a provision of law 
outside the scope of the Bureau's compliance assistance, it will be 
unaffected by the Bureau's compliance assistance. Similarly, if an 
applicant misstates or misrepresents to the Bureau material facts about 
the product or service at issue, it will not obtain the benefit of the 
Bureau's compliance assistance.\46\ The final CAS Policy reflects 
revisions intended to make clear that each form of compliance 
assistance attaches only to specifically described aspects of a given 
product or service and only to the legal provisions encompassed under 
that form of assistance.
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    \46\ A coalition of consumer groups expressed concern that the 
Bureau would not be able to monitor compliance with the terms of 
compliance assistance if applicants do not precisely specify the 
regulatory or statutory provisions with respect to which the 
applicant is seeking compliance assistance. The Bureau notes that 
while the Policy states that an applicant may not be able to 
precisely identify the appropriate statutory or regulatory 
provisions for which it seeks compliance assistance, any compliance 
assistance provided by the Bureau will be limited to specified 
statutory and regulatory provisions.
---------------------------------------------------------------------------

    As described in the Policy, in assessing applications the Bureau 
will place a particular emphasis on the potential consumer benefits and 
risks of the product or service at issue. The Policy makes clear that 
the Bureau will focus on the nature of the ambiguity or uncertainty 
identified in the application, and the manner in which the requested 
approval would resolve that ambiguity or uncertainty. The final Policy 
indicates that an approval granted under the Policy will include a 
statement of the Bureau's basis for providing the compliance assistance 
at issue.\47\
---------------------------------------------------------------------------

    \47\ No-Action Letters granted with approvals will have the same 
content as those granted under the NAL Policy.
---------------------------------------------------------------------------

    Several trade associations requested that the Bureau clarify that 
the proposal was not limited to ``emerging'' or ``fintech'' firms, but 
extend to any firm interested in testing innovative products and 
services. The Bureau agrees that compliance assistance should be 
generally available to entities offering (or contemplating offering) an 
innovative product or service that is subject to regulatory 
uncertainty, and the final Policy reflects that intent. Thus, the 
application procedures, as finalized, call for the applicant to 
describe how an intended product or service may further innovation, but 
they do not restrict the kinds of providers that may apply for 
compliance assistance.\48\
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    \48\ The Bureau is not defining innovation for purposes of the 
Policy because a rigid definition is unlikely to be helpful to 
stakeholders, and because the Bureau retains the discretion to 
decline to issue compliance assistance under the CAS Policy if it 
does not believe that doing so will further innovation in the 
markets for consumer financial products and services. Other 
regulators have similarly avoided a prescriptive definition of 
``innovation.'' For example, in considering eligibility for its own 
regulatory sandbox, the United Kingdom's Financial Conduct Authority 
(FCA) relies on ``key questions'' with positive and negative 
indicators, rather than a strict framework. See ``Applying to the 
regulatory sandbox'', available at https://www.fca.org.uk/firms/regulatory-sandbox/prepare-application (last accessed June 11, 
2019).
    The Bureau notes that some practices may remain innovative 
relative to a given regulatory framework even as they may no longer 
be innovative in a wider sense. For example, the use of mobile 
phones to communicate written information is a well-established 
practice--but the use of such devices to deliver mandatory 
disclosures remains innovative. Accordingly, applicants for 
compliance assistance may properly ask the Bureau for approvals 
about particular electronic disclosure practices. In addition, 
innovation can encompass product or service changes made in response 
to rapid changes in the market even if the product or service change 
is not otherwise innovative. For example, if regulated entities must 
suddenly end reliance on a given technology or market standard, the 
resulting need for change may create the potential for regulatory 
uncertainty even if those entities switch to established 
technologies or standards. That form of uncertainty, too, would be 
an appropriate subject for compliance assistance.
---------------------------------------------------------------------------

    Several commenters expressed concern about the Bureau's intent to 
grant or deny an application within 60 days of the application being 
deemed complete. These commenters believed that a 60-day review period 
would be insufficient for the Bureau to evaluate the application 
adequately, conduct appropriate due diligence, and coordinate with 
other regulators, among other things. Under the final Policy, potential 
applicants are strongly encouraged to discuss their application with 
the Bureau prior to filing a formal application; the Bureau understands 
that this is common practice among other Federal agencies with similar

[[Page 48253]]

programs. This pre-application period typically will allow Bureau staff 
to conduct a preliminary evaluation of an application (and the 
applicant) before its formal submission to the Bureau. Thus, the final 
Policy retains language stating that 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. The final Policy also 
notes that while the 60-day review period will be the Bureau's general 
expectation, particular circumstances--in particular the potential need 
to coordinate with other regulators--may lengthen that timeline.

F. Scope, Duration, Extension, Termination and Modification

    Sections II.A and II.B of the Proposed Sandbox Policy described the 
particularized scope of approvals to be issued under the Policy. 
Section II.D.7 noted that approvals would normally be limited to two 
years. Section II.E described extension procedures and stated that 
extensions would be based on the quality and persuasiveness of the data 
provided to the Bureau under Section II.D. Section D.10 described 
potential revocation grounds and procedures.
    Several commenters noted that compliance assistance is made more 
valuable when generally applicable. As noted above, however, approvals 
are intended to be particularized determinations based on the 
application of existing law to specific factual scenarios. The Bureau 
recognizes that there is some tension between the value of generally 
applicable assistance and the practicality of particularized 
assistance. It believes that the best way to resolve that tension is by 
reevaluating an approval after an appropriate period of time to 
determine whether: (a) It should be confirmed in the Bureau's 
regulations or incorporated in the Commentary (or other generally 
applicable interpretative guidance); \49\ (b) it is of sufficiently 
narrow applicability that maintaining it as a particularized approval 
is appropriate; or (c) data received from the recipient indicates that 
the approval should be modified or terminated. Accordingly, the Bureau 
is not changing the Policy to make approvals of broader applicability.
---------------------------------------------------------------------------

    \49\ When this occurs, the Bureau anticipates granting an 
extension for the period prior to the finalization of regulatory 
change. During the time period pending such change, the Bureau 
intends to consider alternative means of providing similar 
assistance to other covered entities that engage in the same or 
similar conduct in offering or providing comparable products.
---------------------------------------------------------------------------

    The Bureau continues to believe that two years will generally be an 
appropriate length of time to gather and analyze data to determine 
appropriate follow-on action. Several commenters objected to this time 
period as too long. They also objected to the potential for extensions, 
particularly in the context of follow-on rulemaking. The Bureau 
believes, however, that this concern does not fully take into account 
that approvals are used to provide compliance assistance to recipients. 
The Bureau is not waiving licensing requirements or taking similar 
steps to enable innovators to operate outside of the regulatory 
environment for some start-up period. Rather, it is providing 
assistance, beyond the existing Commentary and non-rule guidance 
offered, to innovators to comply with legal requirements in conditions 
of regulatory uncertainty. Any time limits would be calculated to 
enable the Bureau to make a considered decision about how to tackle 
that uncertainty over the longer term.
    Industry commenters generally supported the proposed procedures for 
revocations of assistance, although some objected that the Bureau's 
focus on material, tangible harm to consumers was an unclear standard 
for revocation and compensation. Some consumer group commenters argued 
that the proposal's revocation procedures failed to reserve to the 
Bureau sufficient discretion to modify or end assistance without notice 
or an opportunity to respond or cure any failure to comply with the 
terms under which the Bureau provided assistance. Consumer groups also 
saw the standards for revocation as too limited. In particular, they 
objected to the Bureau's focus on material, tangible harm to consumers 
as too narrow a ground for revocation and compensation.
    In response to these comments, the Bureau is revising the Policy's 
termination procedures in part. The Bureau agrees that it retains 
authority to end an approval when it deems that necessary in light of 
the purposes of the Policy. The Policy identifies the three 
circumstances in which it intends to effect termination on that basis: 
(i) The recipient fails to substantially comply in good faith with the 
specified terms and conditions of the approval; (ii) the described 
aspects of the product or service do not perform as anticipated in the 
application; \50\ or (iii) a statutory amendment or Federal judicial 
holding cause the Bureau to conclude that the recipient can no longer 
rely in good faith on the Bureau's approval as the safe harbor 
provisions require. At the same time, precisely because it retains the 
authority to end approvals, the Bureau believes that it is important to 
provide notice of an intended termination, explaining the grounds for 
that proposed action, providing an opportunity to respond, and, in 
appropriate circumstances, take corrective action to address the stated 
grounds for termination.
---------------------------------------------------------------------------

    \50\ This includes the materialization of consumer risks 
identified in the application, or the materialization of other 
consumer risks not identified in the application.
---------------------------------------------------------------------------

    The Bureau is revising the Policy to refer to termination rather 
than revocation because the effect of approvals for the period that 
they are provided by the Bureau cannot be revoked.\51\ The Bureau is 
also revising the Policy to use standards for consumer harm that come 
directly from the Dodd-Frank Act and accordingly reflect well-
understood and established legal norms. Finally, the Bureau is adding 
procedures under which recipients of compliance assistance can apply 
for modifications to an approval to address unanticipated changes in 
circumstances, such as potential changes to the described aspects of a 
product or service.
---------------------------------------------------------------------------

    \51\ Approvals apply only to the described aspects of the 
product or service. An approval has no application to conduct that 
departs from the relevant described aspects, regardless of whether 
or not that approval is terminated.
---------------------------------------------------------------------------

G. Confidentiality

    Section II.G of the Proposed Policy listed types of information 
that the Bureau intended to publicly disclose about entities receiving 
compliance assistance, including the identity of the recipient and the 
subject matter, rationale, and legal authority for the compliance 
assistance provided. It also noted that the Bureau intended to publish 
certain information about denials. Section II.G identified a number of 
legal authorities--including the Freedom of Information Act (FOIA) and 
the Bureau's rule on Disclosure of Records and Information (Disclosure 
Rule)--that would govern the disclosure of any other information about 
applications for compliance assistance, and noted that much of the 
information submitted by applicants and recipients would be protected 
from disclosure under these authorities.
    Industry commenters were broadly supportive of this approach. One 
trade association objected, however, to the proposed publication of 
denials. The Bureau is finalizing the statement about denials as 
proposed. The Bureau notes that the final Policy, as did the proposal, 
includes two related statements about

[[Page 48254]]

denials: First, that the Bureau intends to publish denials only after 
the applicant is given an opportunity to request reconsideration of the 
denial; and second, that upon request, and if disclosure is not 
required by 5 U.S.C. 552(a)(2) or other applicable law, the Bureau does 
not intend to release identifying information from published denials, 
and to instead redact such information from denials published on its 
website. More generally, the Bureau expects denials to be relatively 
unusual. The Policy strongly encourages potential applicants to contact 
the Office of Innovation for informal, preliminary discussion of a 
contemplated proposal prior to submitting a formal application. If it 
appears during such discussions that an application is not likely to be 
granted, the potential applicant may choose not to submit an 
application in the first place. Applicants are free to withdraw 
applications at any time prior to denial.
    A number of consumer groups and a law firm commenter saw the 
described disclosures as too limited. However, the Bureau merely 
intends to redact or withhold information to the extent that it is 
protected from disclosure by the FOIA. While the Bureau anticipates 
that much information submitted by applicants would be exempt from 
disclosure under the FOIA, it will disclose information consistent with 
the FOIA's requirements. In light of a recent Supreme Court opinion 
concerning FOIA Exemption 4,\52\ the Bureau is adding a statement in 
the final Policy making clear that where information submitted to the 
Bureau is both customarily and actually treated as private by the 
submitter, the Bureau intends to treat it as confidential in accordance 
with the Disclosure Rule.
---------------------------------------------------------------------------

    \52\ See Food Mktg. Inst. v. Argus Leader Media, 139 S.Ct. 2356 
(June 24, 2019).
---------------------------------------------------------------------------

H. Third-Party Applications

    Section II.B of the Proposed Policy stated that the Bureau invites 
applications from trade associations, service providers, and other 
third-parties; however, the Proposed Policy noted that such third 
parties might not be able to submit a complete application. In such 
cases, the Proposed Policy stated that the Bureau may grant provisional 
assistance, subject to the submission of additional information and the 
Bureau's subsequent grant of non-provisional assistance. The Proposed 
Policy further stated that additional entities identified by the third-
party may be granted assistance at the same or later time by informing 
the Bureau that they wish to be granted admission and providing the 
necessary information.
    Trade association commenters generally supported the Bureau's 
proposal to allow third parties to apply for compliance assistance 
under the Policy. These commenters stated that allowing third parties 
to facilitate applications would increase access to compliance 
assistance, in particular for smaller entities that might otherwise 
lack the resources to obtain compliance assistance.
    Consumer groups and a group of State Attorneys General opposed the 
proposal to allow applications from third parties. These commenters 
raised concerns that the Bureau's granting of an application from a 
trade association in particular could amount to rulemaking by the 
Bureau that would require notice and comment under the APA. These 
commenters also expressed concerns that under the Proposed Policy the 
Bureau would not be able to adequately evaluate applications from 
individual applicants that might seek compliance assistance under the 
auspices of previously-granted compliance assistance.
    The Bureau continues to believe that in some cases it will be 
valuable for a third party to apply for a version of compliance 
assistance on behalf of another entity.\53\ To cite two examples: (1) A 
service provider may need preliminary compliance assistance from the 
Bureau before the service provider is able to find a partner willing to 
test an innovative product or service, and that partner could in turn 
apply for compliance assistance under the same terms; or (2), as noted 
by commenters, a trade association could facilitate participation in 
the Policy by smaller entities that otherwise would lack the resources 
to obtain compliance assistance directly from the Bureau.
---------------------------------------------------------------------------

    \53\ For the same reasons as noted earlier, see supra notes 40 & 
45, the analysis in section III.F of the preamble to the NAL Policy 
is incorporated herein.
---------------------------------------------------------------------------

    In response to concerns about the Bureau's assessment of such 
applications, however, the Bureau has revised the structure of such 
third-party applications under the Policy. The final Policy 
contemplates that a third party (such as a service provider, trade 
association, or consumer group) could apply for and receive a 
``template'' approval. The template itself is non-operative, meaning 
that no party can rely on it to trigger the statutory safe harbor, and 
the Bureau retains discretion at any time thereafter to reevaluate 
preliminary factual or legal findings reflected in the template. But as 
a statement of how the Bureau plans to interpret the law under certain 
circumstances, entities may use the template as a basis to apply for 
compliance assistance under substantially the same terms as those 
contemplated in the template. The Bureau would evaluate each 
application on an individual basis. The Bureau believes that this 
approach will still allow the benefits of third-party facilitation, 
while ensuring sufficient review of additional applicants.
    The Bureau has also made provision for a third party to apply for 
compliance assistance based on offering a consumer financial product or 
service that has substantial similarity to an aspect of another product 
or service, offered by a first-party, that is already the subject of 
Bureau compliance assistance under the CAS Policy. This procedure 
closely resembles the procedures for ``template''-based applications, 
but is adjusted to reflect the fact that the first party did not apply 
for any form of assistance on behalf of the third-party.

I. Regulatory Coordination

    Section II.F of the Proposed Policy stated that the Bureau is 
interested in entering into agreements with State authorities that 
issue similar forms of assistance that would provide for an alternative 
means of receiving assistance from the Bureau. Some consumer advocacy 
group commenters read this statement as implying that a company that 
obtained assistance from a State would ``automatically'' receive 
compliance assistance from the Bureau. That is not the Bureau's intent. 
The Bureau anticipates that such agreements would include provisions 
designed to ensure that the Bureau's provision of compliance assistance 
in such circumstances would be consistent with its legal authority and 
duty to protect consumers, as well as with other applicable law. 
Approvals issued under the Policy will conform with the Bureau's 
statutory obligations regardless of how the application is presented to 
the Bureau.\54\
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    \54\ Coordination between the Bureau and other regulators will 
generally take a different form under the CAS Policy than under the 
NAL Policy. That is because approvals generally will not rely on 
authorities shared between the Bureau and State or other Federal 
regulators. For example, an entity may seek exemption from State 
licensing requirements from a State sandbox, while simultaneously 
seeking an approval from the Bureau. By contrast, No-Action Letters 
generally concern a type of discretion--i.e., enforcement 
discretion--possessed by the Bureau and by other regulators, albeit 
under different statutory schemes.
---------------------------------------------------------------------------

    The Proposed Policy also permits applicants to request that the 
Bureau coordinate with other regulators with respect to the 
application. A group of

[[Page 48255]]

trade associations commented that the Bureau should not put the onus on 
the applicant to identify other governmental authorities with which the 
Bureau may coordinate. Rather, the Bureau should lead the coordination 
among Federal and State regulators, as it is better positioned to do so 
than the applicant. More broadly, these commenters urged the Bureau to 
ensure that other regulators understand the Policy and to request that 
other regulators defer to actions taken under its terms. These comments 
were seconded by an industry policy organization.
    As evidenced by the inclusion in the Policy of a separate section 
headed Regulatory Coordination, the Bureau fully appreciates the need 
for coordination with other regulators for purposes of administering 
the Policy. However, such coordination must be balanced against other 
considerations. For example, as the Policy notes, if an applicant 
wishes the Bureau to coordinate with other regulators, the Bureau may 
need more time to process the application, depending on the degree of 
coordination requested. Moreover, the degree of coordination needed 
likely will vary from case to case. The Bureau intends to use its best 
efforts to find the optimal balance between coordination and other 
considerations for each approval issued under the Policy. For the 
reasons discussed above, the Bureau is finalizing the section on 
regulatory coordination largely as proposed.

V. Regulatory Requirements

    The Bureau has concluded that the Policy constitutes 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 APA, pursuant to 5 U.S.C. 553(b). Because the 
Policy relates solely to agency procedure and practice, it is not 
substantive, and therefore is not subject to the 30-day delayed 
effective date for substantive rules under section 553(d) of the APA. 
Because no notice of proposed rulemaking is required, the Regulatory 
Flexibility Act does not require an initial or final regulatory 
flexibility analysis.\55\
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    \55\ 5 U.S.C. 603(a), 604(a).
---------------------------------------------------------------------------

VI. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Bureau plans to submit a report containing this Policy and other 
required information to each House of Congress and the Comptroller 
General prior to the Policy's applicability date. The Office of 
Information and Regulatory Affairs has designated this Policy as not 
being a ``major rule,'' as defined by 5 U.S.C. 804(2).

VII. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) (44 U.S.C 3501 et seq.) 
requires that Federal agencies may not conduct or sponsor, and 
notwithstanding any other provision of law, a person is not required to 
respond to a collection of information unless it displays a currently 
valid Office of Management and Budget (OMB) control number. The 
information collection requirements as contained in this final Policy 
and identified below have been approved by OMB and assigned the OMB 
control number 3170-0059. OMB's approval will expire on September 30, 
2022.
    The information collections contained in this Policy include 
Application for an Approval and Data Provided Pursuant to an Approval.
    The Bureau's Proposed Policy, published December 13, 2018, 83 FR 
64036, sought comment on these information collection requirements. 
While the Bureau received numerous comments on the Proposed Policy, 
which are addressed above, the Bureau received no comments specifically 
regarding the burden estimates for these information collections, 
utility or appropriateness. Additional details on comments received can 
be found in the Supporting Statement for the related 30-day notice 
published as required under the PRA.\56\
---------------------------------------------------------------------------

    \56\ See https://www.regulations.gov/docket?D=CFPB-2019-0043.
---------------------------------------------------------------------------

    A complete description of the information collection requirements, 
including the burden estimate methods, is provided in the information 
collection request (ICR) that the Bureau submitted to OMB under the 
requirements of the PRA. The ICR submitted to OMB requesting approval 
under the PRA for the information collection requirements contained 
herein is available at OMB's public-facing docket at www.reginfo.gov.

VIII. Compliance Assistance Sandbox Policy

    The text of the final CAS Policy is as follows:

Compliance Assistance Sandbox Policy

    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.\57\ 
Relatedly, the Bureau's objectives include exercising its authorities 
under Federal consumer financial law for the purposes of ensuring that 
markets for consumer financial products and services operate 
transparently and efficiently to facilitate access and innovation, and 
that outdated, unnecessary, or unduly burdensome regulations are 
regularly identified and addressed in order to reduce unwarranted 
regulatory burdens.\58\
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    \57\ 12 U.S.C. 5511(a).
    \58\ [thinsp]12 U.S.C. 5511(b)(3), (5).
---------------------------------------------------------------------------

    Congress has given the Bureau a variety of authorities under title 
X of the Dodd-Frank Act and the enumerated consumer laws \59\ that it 
can exercise to promote this purpose and these objectives. These 
authorities include the authority to implement the Federal consumer 
financial laws through rules, orders, guidance, and interpretations, 
and to establish policies with respect to such functions.\60\ Three of 
the enumerated consumer laws describe the safe harbor effect of Bureau 
approvals \61\ issued to particular entities.\62\ Providing compliance 
assistance of the type described in this Policy may not only benefit 
consumers and entities that offer or provide consumer financial 
products or services, but it may also inform the Bureau's exercise of 
other authorities with respect to such products or services, such as 
market monitoring and rulemaking.\63\
---------------------------------------------------------------------------

    \59\ See 12 U.S.C. 5481(12) (listing the enumerated consumer 
laws).
    \60\ See 12 U.S.C. 5492(a)(10); see also 12 U.S.C. 
5512(b)(4)(B).
    \61\ These are the Truth in Lending Act (TILA), the Electronic 
Fund Transfer Act (EFTA), and the Equal Credit Opportunity Act 
(ECOA). See 15 U.S.C. 1640(f); 15 U.S.C. 1691e(e); 15 U.S.C. 
1693m(d).
    \62\ For convenience, ``entity'' and ``recipient'' are used in 
the Policy to cover single and multiple parties, as applicable.
    \63\ The Bureau also has supervision and enforcement authority, 
and the Bureau's Policy on No-Action Letters (NAL Policy) sets forth 
how that discretionary authority underlies the Bureau's intended 
issuance of No-Action Letters and the purposes served thereby.
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    The Compliance Assistance Sandbox Policy (CAS Policy or Policy) 
sets forth the Bureau's policy and procedures regarding compliance 
assistance. The Bureau's policy and procedures regarding No-Action 
Letters (NAL Policy) are also incorporated by reference.\64\ The 
Policy's main purpose is to provide a mechanism through

[[Page 48256]]

which the Bureau may more effectively carry out its statutory purpose 
and objectives by better enabling compliance in the face of regulatory 
uncertainty.\65\
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    \64\ With respect to No-Action Letters, the Bureau's policy and 
procedures are set forth in the NAL Policy.
    \65\ 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 any substantive or procedural rights or 
defenses that are enforceable in any manner. In contrast, the 
provision of compliance assistance in a specific instance may 
involve interpretive activity, the creation of safe harbors, and the 
exercise of discretionary authorities in a particular manner.
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    The Policy consists of eight sections:
     Section A describes the compliance assistance available 
under the Policy;
     Section B describes information to be included in an 
application for compliance assistance;
     Section C describes factors the Bureau intends to consider 
in deciding whether to grant an application for compliance assistance;
     Section D describes the standard procedures the Bureau 
intends to use in providing compliance assistance;
     Section E describes procedures the Bureau intends to use 
for granting extensions of, modifying, and terminating compliance 
assistance;
     Section F describes alternative application, assessment, 
and issuing procedures that the Bureau may use for certain 
circumstances;
     Section G describes how the Bureau intends to coordinate 
with other regulators with respect to compliance assistance; and
     Section H describes the Bureau's intentions regarding 
disclosure of information relating to approvals.

A. Types of Compliance Assistance Available

1. Approvals
    An approval is provided by the Bureau to a particular entity under 
one or more of three statutory safe harbor provisions, based on the 
application of existing law to particular facts and circumstances.\66\ 
An approval issued to a particular entity will state that, subject to 
good faith compliance with specified terms and conditions, the Bureau 
concludes for the reasons stated therein that offering or providing the 
described aspects of the product or service complies with the Federal 
consumer financial law identified therein.\67\ By operation of the 
applicable statutory provision, the recipient has a safe harbor from 
liability under the relevant statute, to the fullest extent permitted 
by these provisions, as to any act done or omitted in good faith in 
conformity with the approval.\68\
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    \66\ 15 U.S.C. 1640(f) (TILA); 15 U.S.C. 1691e(e) (ECOA); 15 
U.S.C. 1693m(d) (EFTA).
    \67\ For convenience, the Policy uses the term ``described 
aspects of the product or service'' to refer to the subject matter 
scope of a particular form of compliance assistance, including both 
the particular aspects of the product or service in question and the 
particular manner in which it is offered or provided. If a Sandbox 
applicant seeks more than one form of assistance under the Policy 
(for example, an approval under one statute and an approval under 
another statute), it is possible that these different forms may 
relate to different described aspects of the same product or 
service. If so, in order to enable the Bureau to respond 
expeditiously to the application, the applicant should make its best 
efforts to specify the described aspects that relate to each form 
sought. The Bureau recognizes that in some cases it may be difficult 
to determine precisely which aspects of a product or service 
implicate different legal provisions, particularly for applicants 
that lack the legal resources for 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.
    \68\ See 15 U.S.C. 1640(f); 15 U.S.C. 1691e(e); 15 U.S.C. 
1693m(d).
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2. No-Action Letters
    No-Action Letters available to recipients of compliance assistance 
under the Policy will be issued in accordance with the NAL Policy. 
Applicants for compliance assistance under the CAS Policy may use a 
single application to cover their request for compliance assistance and 
any accompanying request for a No-Action Letter. (If an applicant 
wishes to receive only a No-Action Letter, no application should be 
submitted under the CAS Policy.)

B. Submitting Applications for Compliance Assistance

    Potential applicants are strongly encouraged to contact the Office 
of Innovation at [email protected] for informal, preliminary 
discussion of a contemplated proposal prior to submitting a formal 
application.\69\ An application for compliance assistance under the 
Policy should include the following:
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    \69\ The email subject line should begin ``Compliance 
Assistance.''
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    1. The identity of the applicant; \70\
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    \70\ For convenience, applicant is used in the Policy to refer 
both to single applicants and joint applicants. If an application is 
submitted by multiple applicants, each applicant should provide the 
information required by section B.2 with respect to its product or 
service.
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    2. A description of the consumer financial product or service to be 
offered or provided, including (a) how the product or service 
functions; (b) the terms on which it will be offered; (c) the manner in 
which it is offered or provided, including any consumer disclosures; 
and (d) an identification of how the product or service, or the manner 
in which it is offered or provided to consumers, may further 
innovation;
    3. An explanation of the potential consumer benefits associated 
with the product or service, and suggested metrics for evaluating 
whether such benefits are realized, such as consumer utilization 
numbers;
    4. An explanation of the potential consumer risks associated with 
the product or service, and how the applicant intends to mitigate such 
risks, including plans for addressing unanticipated consumer harms;
    5. (a) An identification of the described aspects of the product or 
service as to which the applicant seeks an approval; an identification 
of the statutory and regulatory provisions as to which the applicant 
seeks that approval; \71\ an identification of the potential 
uncertainty or ambiguity that such approval would address; and an 
explanation of why the requested approval is an appropriate resolution 
of that uncertainty or ambiguity, including an explanation of why the 
described aspect of the product or service complies with the applicable 
statutory and regulatory provisions;
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    \71\ Applicants should describe relevant legal 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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    (b) If the applicant also seeks a No-Action Letter, it should 
consult the NAL Policy for information about what to include for that 
aspect of its application;
    6. The requested duration of compliance assistance,\72\ and a 
description of other limitations on the scope of such assistance, 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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    \72\ The Bureau expects two years to be appropriate for most 
approvals.
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    7. A description of data on consumer impacts associated with the 
described aspects of the product or service that the applicant 
possesses or intends to develop and that will be shared with the Bureau 
if the application is granted, and a proposed schedule for sharing this 
data with the Bureau; \73\
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    \73\ The data the applicant expects to share with the Bureau 
should be limited to aggregate data.
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    8. If the applicant wishes to request confidential treatment under 
the Freedom of Information Act (FOIA),\74\

[[Page 48257]]

the Bureau's rule on Disclosure of Records and Information (Disclosure 
Rule),\75\ or other applicable law, this request and the basis therefor 
should be included in a separate letter and submitted with the 
application.\76\ The applicant should specifically identify the 
information for which confidential treatment is requested, and may 
reference the Bureau's intentions regarding confidentiality under 
section H of the Policy; and
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    \74\ 5 U.S.C. 552.
    \75\ 12 CFR part 1070.
    \76\ 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 the applicant wishes the Bureau to coordinate with other 
regulators, the applicant should identify those regulators, including 
but not limited to those that the applicant has contacted about 
offering or providing the product or service in question.\77\
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    \77\ When requested by an applicant, the Bureau intends to 
coordinate with other Federal and State regulators identified by the 
applicant, as appropriate. However, depending on the extent of 
coordination requested, the Bureau may not be able to respond to the 
application within the time frame specified in section C.
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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 by 
the applicant at any time.
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    \78\ Except as provided in section B.1 and B.9, applications 
should not include any personally identifiable information (PII).
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C. Assessment of Applications for Compliance Assistance

    The Bureau may grant or deny a compliance assistance application in 
its sole discretion. If it chooses to grant an application, the Bureau 
also has discretion to grant the application in whole or only in part. 
In deciding whether to grant an application for compliance assistance, 
the Bureau intends to balance a variety of factors in considering the 
quality and persuasiveness of the application, with particular emphasis 
on the information specified in sections B.2(d) through B.5, as well as 
information about the applicant and the product or service in question 
derived through Bureau due diligence processes. The Bureau intends to 
grant or deny applications for No-Action Letters pursuant to the NAL 
Policy. The Bureau intends to grant or deny an application within 60 
days of notifying the applicant that the Bureau deems the application 
to be complete.

D. Procedures for Providing Compliance Assistance 79
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    \79\ These procedures may be modified based on coordination 
efforts with other regulators, as specified in section G.
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    When the Bureau decides to grant an application for compliance 
assistance, it intends to provide the recipient with a Compliance 
Assistance Statement of Terms (CAST) setting forth the terms under 
which compliance assistance is provided, including the types and scope 
of assistance provided to the recipient. The CAST will be signed by the 
Assistant Director of the Office of Innovation, and by an officer of 
the recipient.\80\ The Bureau expects that the CAST will:
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    \80\ If the Bureau decides to deny an application, it will 
inform the applicant 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 withdraw, modify, 
and re-submit applications at any time.
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    1. Identify the recipient;
    2. Specify the subject matter scope of the CAST, i.e., the 
described aspects of the product or service; \81\
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    \81\ If these vary by the form of assistance sought, the 
document will specify the relevant aspects separately.
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    3. State that the CAST and the compliance assistance provided:
    (a) Is limited to the recipient, and does not apply to any other 
persons or entities;
    (b) Is limited to the recipient's offering or providing the 
described aspects of the product or service, and does not apply to the 
recipient's offering or providing different aspects of the product or 
service;
    (c) Is based on the factual representations made in the 
application, which may be incorporated by reference; and
    (d) Does not constitute the Bureau's endorsement of the product or 
service that is the subject of the CAST, or any other product or 
service offered or provided by the recipient.
    4. Require the recipient to inform the Bureau of: (a) Material 
changes to information included in the application; and (b) material 
information indicating that the described aspects of the product or 
service are not performing as anticipated in the application; \82\
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    \82\ ``Not performing as anticipated'' includes the 
materialization of consumer risks identified in the application, and 
the materialization of other consumer risks not identified in the 
application.
---------------------------------------------------------------------------

    5. Require the recipient to report information about the effects of 
offering or providing the described aspects of the product or service, 
including with respect to complaint patterns, default rates, or similar 
metrics that will enable the Bureau to identify material increase in 
any risk of injury to consumers;
    6. Where appropriate, include a commitment by the recipient to 
compensate consumers for Dodd-Frank Act actionable substantial injury 
caused by the recipient's offering or providing the described aspects 
of the product or service; \83\
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    \83\ Dodd-Frank Act actionable substantial injury, as used in 
this Policy, means substantial injury that is not reasonably 
avoidable by the consumer, where such substantial injury is not 
outweighed by countervailing benefits to consumers or competition. 
See 12 U.S.C. 5531(c); see also 12 U.S.C. 5536(a)(1)(B).
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    7. Specify any other limitations or conditions, such as the 
duration of the compliance assistance,\84\ the nature and extent of the 
recipient's data-sharing, and the extent to which the Bureau intends to 
publicly disclose information about the recipient's participation; \85\
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    \84\ The Bureau expects two years to be an appropriate duration 
for approvals in most cases, but recipients may apply for 
extensions. See section E.1.
    \85\ If an applicant objects to the disclosure of certain 
information and the Bureau insists that the information must be 
publicly disclosed for compliance assistance to be provided, the 
applicant 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. With respect to any approval the Bureau is providing the 
recipient: (a) State that, subject to good faith compliance with the 
CAST, the Bureau approves the recipient's offering or providing the 
described aspects of the product or service under the relevant law 
identified therein; \86\ and (b) explain the Bureau's basis for issuing 
the approval;
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    \86\ As noted in section A.1, the safe harbor associated with an 
approval only applies to acts done or omitted in good faith in 
conformity with the approval, and the approval will so state.
---------------------------------------------------------------------------

    9. State that: (a) the recipient may reasonably rely on any Bureau 
commitments made in the CAST; and (b) the Bureau may terminate \87\ any 
approval described in the CAST if: (i) The recipient fails to 
substantially comply in good faith with the specified terms and 
conditions of the CAST; (ii) the described aspects of the product or 
service do not perform as anticipated in the application; \88\ or (iii) 
a statutory change or Federal judicial holding causes the Bureau to 
conclude that the recipient can no longer rely in good

[[Page 48258]]

faith on the Bureau's approval as the safe harbor provisions require; 
and
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    \87\ No retroactive action premised on the described aspects of 
the product or service will lie under provisions covered by an 
approval. Actions that are not premised on the described aspects of 
the product or service associated with a particular approval are, by 
definition, not subject to any such restriction.
    \88\ Such ground includes the materialization of consumer risks 
identified in the application, or the materialization of other 
consumer risks not identified in the application.
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    10. If the applicant also applied for a No-Action Letter using 
their application under the CAS Policy for compliance assistance, 
incorporate any No-Action Letter that the Bureau is issuing pursuant to 
the terms of the NAL Policy.\89\
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    \89\ If the Bureau is providing a No-Action Letter to the 
recipient, any termination of the No-Action Letter will be in 
accordance with the NAL Policy.
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E. Procedures for Extension, Modification, and Termination

1. Extension Procedures
    Recipients of compliance assistance may apply for an extension of a 
specified period of time. In considering applications for extensions, 
the Bureau expects to place particular weight on the extent to which 
the data provided to the Bureau under the terms of the CAST shows that 
the described aspects of the product or service are benefitting 
consumers, not causing unanticipated harms, and not materially 
increasing the risk of substantial injury. 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 compliance assistance under the terms of the CAST.\90\ The 
recipient should explain the reasons for the requested extension, such 
as whether it is intended to last until a possible amendment to Bureau 
regulations or the Commentary, or is instead intended for more 
particularized compliance assistance purposes.
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    \90\ 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 original receipt of assistance. The 
Bureau anticipates permitting longer extensions where the Bureau is 
considering amending applicable regulatory requirements or the relevant 
Commentary.\91\ During the time period pending a rule or Commentary 
amendment, the Bureau intends to consider means of providing similar 
assistance to other covered entities that engage in the same or similar 
conduct in offering or providing comparable products.
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    \91\ 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., to end on a specific date.
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2. Modification Procedures
    A recipient of compliance assistance may apply for a modification 
of the CAST. The recipient may seek modification to address an 
anticipated or unanticipated change in circumstances, such as 
iterations of the underlying product or service or changes to the 
information included in the application for assistance. Applications 
for a modification should include the following:
    a. Any material changes to the information included in the original 
application;
    b. The specific requested modification to the CAST;
    c. The grounds for modifying the CAST; and
    d. Any other information the recipient wishes to provide in support 
of the modification application.
    In deciding whether to grant an application for modification, the 
Bureau intends to balance a variety of factors, including the quality 
and persuasiveness of the application. The Bureau expects to grant or 
deny such applications within 30 days of notifying the applicant that 
the Bureau has deemed the application to be complete. When the Bureau 
grants an application for modification, it intends to provide the 
recipient with a modified CAST in accordance with the procedures 
specified in Section D.
3. Termination Procedures
    The Bureau intends that the recipient of compliance assistance 
should be able to reasonably rely on any Bureau commitments made in the 
associated CAST. The Bureau expects terminations prior to any pre-
determined expiration date to be quite rare based, in part, on its 
knowledge of similar programs of compliance assistance operated by 
other Federal agencies. The Bureau expects that its practice with 
respect to termination will be in line with the practices of these 
agencies.
    The Bureau expects that a CAST will state that: (a) The recipient 
may reasonably rely on any Bureau commitments made in the CAST; and (b) 
the Bureau may terminate any approval described in the CAST if: (i) The 
recipient fails to substantially comply in good faith with the 
specified terms and conditions of the CAST; (ii) the described aspects 
of the product or service do not perform as anticipated in the 
application; \92\ or (iii) a statutory amendment or federal judicial 
holding causes the Bureau to conclude that the recipient can no longer 
rely in good faith on the Bureau's approval as the safe harbor 
provisions require. By operation of law, no retroactive action premised 
on the described aspects of the product or service will lie under 
provisions within the scope of an approval. If the Bureau is also 
providing a No-Action Letter to the recipient, termination will be in 
accordance with the NAL Policy.
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    \92\ Such ground includes the materialization of consumer risks 
identified in the application, or the materialization of other 
consumer risks not identified in the application.
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    In accordance with principles of fair notice, before terminating 
any approval provided under the Policy, the Bureau intends to notify 
the recipient of the possible grounds for termination, and permit an 
opportunity to respond within a reasonable period of time. In 
appropriate cases, the Bureau intends to offer the recipient an 
opportunity to modify its conduct to avoid termination. The Bureau 
intends to allow the recipient to wind-down the offering or providing 
of the described aspects of the product or service during a period of 
six months before termination is effective, unless the described 
aspects of the product or service are causing Dodd-Frank Act actionable 
substantial injury to consumers, and a wind-down period would permit 
such injury to continue. If the Bureau terminates any approval provided 
under this Policy, it intends to do so in writing and specify the 
reasons for its decision. The Bureau intends to publish termination 
decisions on its website.

F. Alternative Application, Assessment, and Issuance Procedures

    The Bureau recognizes that the process described in sections B, C, 
and D (Standard Process) may not be appropriate in certain 
circumstances. These include applications by service providers that 
develop products or services for use by covered persons that offer or 
provide consumer financial products or services; applications 
facilitated by trade associations, consumer groups, or other third 
parties that are not themselves covered parties; and applications 
involving a consumer financial product or service that is substantially 
similar to one that is the subject of an existing CAST.
1. Service Provider and Facilitated Applications
    Service providers that develop products or services for use by 
covered persons that offer or provide consumer

[[Page 48259]]

financial products or services may use the Standard Process if they 
have secured an applicant that intends to use the service provider's 
product or service in connection with offering or providing a consumer 
financial product or service. Similarly, compliance assistance 
applications facilitated by trade associations, consumer groups, or 
other third parties that are not covered persons that offer or provide 
consumer financial products or services may use the Standard Process if 
the third party has secured an applicant that intends to offer or 
provide the consumer financial product or service in question.
    a. CAST Template. As an alternative to using the Standard Process, 
a service provider, trade association, consumer group, or other third 
party may apply for a CAST Template. A CAST Template is (i) non-
operative, i.e., it does not provide compliance assistance to any 
party, and (ii) non-binding on the Bureau.\93\
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    \93\ In particular, the Bureau may modify a CAST Template in 
light of the additional information provided in an application for a 
CAST under subsection F.1.b.
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    i. Application Information. Such applications should include the 
information specified in section B, as applicable and with appropriate 
adjustments given that the applicant itself will not be offering or 
providing the consumer financial product or service in question. In 
particular, for service provider applications the applicant should 
describe how it anticipates its product or service will be used by a 
provider of consumer financial products or services.
    ii. Assessment. In deciding whether to grant an application for a 
CAST Template, the Bureau intends to balance a variety of factors, as 
described in section C, with appropriate adjustments given the 
alternative nature of the application. 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.
    iii. Issuance. The Bureau expects that a CAST Template will include 
many of the elements specified in section D, with appropriate 
adjustments based, in part, on the non-operative, non-binding nature of 
a CAST Template. In addition, a CAST Template will include a statement 
that the Bureau intends to grant applications for a CAST based on the 
CAST Template, under subsection F.1.b, in appropriate cases.
    b. CAST Based on a CAST Template. A covered person that intends to 
offer or provide a consumer financial product or service using the 
product or service covered by a CAST Template (whether using a service 
provider product or service, or otherwise) may apply for compliance 
assistance based on the CAST Template.
    i. Application Information. Such applications should include the 
information specified in section B, with appropriate adjustments. In 
particular, the applicant should include: (i) A statement that the 
application is based on a CAST Template and an identification of the 
CAST Template on which it is based; and (ii) a statement identifying 
the aspects of the product or service for which a CAST is being sought 
describing how the applicant's offering or providing those aspects of 
its product or service is consistent with the framework described in 
the CAST Template. The application may cross reference any relevant 
information contained in the application for the CAST Template or the 
CAST Template itself.
    ii. Assessment. In deciding whether to grant an application for 
such compliance assistance, the Bureau intends to balance a variety of 
factors, as described in section C, with appropriate adjustments. In 
particular, the Bureau intends to include in its assessment the 
additional factor of the degree to which the applicant's offering or 
providing the described aspect of its product or service is consistent 
with the framework described in the CAST Template. The Bureau 
anticipates being able to process such applications in a timeframe 
shorter than that specified in section C given that the underlying CAST 
Template has already been granted.
    iii. Issuance. When the Bureau grants an application for such 
compliance assistance, it intends to provide the recipient with a CAST 
in accordance with the procedures specified in section D.
2. Applications for Substantially Similar Products or Services
    If an applicant offers or provides a consumer financial product or 
service that it believes is substantially similar to an aspect of a 
consumer financial product or service that is the subject of an 
existing CAST,\94\ it may apply for compliance assistance based on 
public information about the existing CAST.
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    \94\ Such an existing CAST may have been issued under the 
Standard Process or the alternative processes described in section 
F.1.b.
---------------------------------------------------------------------------

    a. Application Information. Such applications should include the 
information specified in section B, with appropriate adjustments. In 
particular, the applicant should include (i) a statement that the 
application is based on an existing grant of compliance assistance and 
an identification of that grant; and (ii) a statement describing how 
the consumer financial product or service in question and the manner in 
which it is offered or provided is substantially similar to the 
described aspects of the product or service that are the subject of the 
existing CAST. The application may cross reference any relevant 
information contained in public disclosures on the existing grant.
    b. Assessment. In deciding whether to grant an application for such 
compliance assistance, the Bureau intends to balance a variety of 
factors, as described in section C, with appropriate adjustments. In 
particular, the Bureau intends to include in its assessment the 
additional factor of the degree to which the consumer financial product 
or service in question, and the manner in which it is offered or 
provided, is substantially similar to these aspects of the existing 
CAST. The Bureau anticipates being able to process such applications in 
a timeframe shorter than that specified in section C given that the 
existing CAST has already been granted.
    c. Issuance. When the Bureau grants an application for such 
compliance assistance, it intends to provide the recipient with a CAST 
in accordance with the procedures specified in section D.\95\
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    \95\ In unusual circumstances, the Bureau may utilize other 
procedures that diverge in one or more respects from the Standard 
Process or the alternative procedures described in section F, 
consistent with the purposes of the Policy.
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G. 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.\96\ 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.\97\ Such coordination includes coordinating in 
circumstances where other regulators have chosen to offer assistance to 
entities offering innovative products and services. One method of 
providing such assistance is through a State sandbox, or group of State 
sandboxes, or other limited scope State authorization program (State

[[Page 48260]]

sandbox).\98\ The Bureau is interested in entering into agreements with 
State authorities that operate or plan to operate a State sandbox, 
which may include a process to receive compliance assistance under this 
Policy in a coordinated manner with assistance from the State sandbox.
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    \96\ 12 U.S.C. 5495.
    \97\ 12 U.S.C. 5552(c).
    \98\ 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 uncertainty or other regulatory 
barriers to entry.
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    Furthermore, the Bureau is interested in coordinating with other 
regulators more generally regarding this Policy. To this end, the 
Bureau intends to enter into agreements whenever practicable to 
coordinate compliance assistance under the Policy with assistance 
offered by State, Federal, or international regulators.

H. Bureau Disclosure of Information Relating to Approvals

    Public disclosure of information regarding approvals under this 
Policy is governed by applicable law, including the Dodd-Frank Act,\99\ 
FOIA, and the Disclosure Rule. The Disclosure Rule generally prohibits 
the Bureau from disclosing confidential information,\100\ and defines 
confidential information to include information that may be exempt from 
disclosure under the FOIA \101\--including Exemption 4 regarding trade 
secrets and confidential commercial or financial information that is 
privileged or confidential.\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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    \99\ See, e.g., 12 U.S.C. 5512(c)(8).
    \100\ 12 CFR 1070.41.
    \101\ 12 CFR 1070.2(f).
    \102\ 5 U.S.C. 552(b)(4).
    \103\ 12 CFR 1070.20(a), (b).
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    Consistent with applicable law, the Bureau intends to publish on 
its website its final disposition of applications for approvals 
processed pursuant to sections B, C, D, E.1, E.2, F.1.b, and F.2. If 
the Bureau decides to grant an application, it intends to publish an 
order regarding the decision on its website as soon as practicable. The 
Bureau expects that the order will overlap with the CAST provided to 
the recipient, but will contain other information and will not include 
information protected from public disclosure under applicable law. The 
Bureau expects the order to include: (i) The identity of the recipient; 
(ii) the described aspects of the product or service to which the 
approval applies; (iii) the approval's specified duration, basis, and 
legal authority; and (iv) in appropriate cases, a version of the 
summary of the application.\104\ The Bureau also intends to publish 
denials of applications on its website, including an explanation of why 
the application was denied in whole or in part.\105\ When the Bureau 
grants an application for a CAST Template under section F.1.a, the 
Bureau expects to publish on its website the CAST Template and a 
summary of the application.
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    \104\ When a regulated entity receives an approval in a 
coordinated manner with assistance under a State sandbox, the Bureau 
may be restricted in its discretion to further disclose information 
obtained from the relevant State authority. Nonetheless, the Bureau 
anticipates that all the disclosures identified above would be made 
with respect to any approval provided by the Bureau under this 
Policy.
    \105\ The Bureau intends to publish denials only after the 
applicant is given an opportunity to request reconsideration of the 
denial. Upon request, and if disclosure is not required by 5 U.S.C. 
552(a)(2) or other applicable law, the Bureau intends to redact 
identifying information from denials published on its website.
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    Where information submitted to the Bureau is both customarily and 
actually treated as private by the submitter, the Bureau intends to 
treat it as confidential in accordance with the Disclosure Rule.\106\ 
The Bureau anticipates that much of the information submitted by 
applicants in their applications, and by recipients while operating 
pursuant to a CAST, will qualify as confidential information under the 
Disclosure Rule.\107\ In particular, the Bureau expects that 
information submitted that is responsive to subsections B.2, B.3, B.4, 
B.6, D.4, and D.5, and parallel information submitted pursuant to 
subsections E.1, E.2, F.1.a.i, F.1.b.i and F.2.a, will qualify as 
business information under the Disclosure Rule.\108\ Other information 
submitted by applicants or recipients may also qualify as confidential 
information.
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    \106\ See Food Marketing Institute v. Argus Leader Media, 139 
S.Ct. 2356 (June 24, 2019).
    \107\ 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.
    \108\ 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 to other Federal and State agencies of information or 
data provided to the Bureau under the Policy is governed by applicable 
law, including the Dodd-Frank Act \109\ and the Disclosure Rule.
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    \109\ See, e.g., 12 U.S.C. 5512(c)(8).
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    To the extent the Bureau wishes to publicly disclose non-
confidential information regarding approvals, the Bureau intends to 
include the terms of such disclosure in the CAST. The Bureau intends to 
draft the CAST in a manner such that confidential information is not 
disclosed. Consistent with applicable law and its own rules, the Bureau 
does not intend to publicly disclose any information that would 
conflict with consumers' privacy interests.
    Disclosure of information about No-Action Letters will be in 
accordance with section G of the NAL Policy.

    Dated: September 6, 2019.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-19762 Filed 9-12-19; 8:45 am]
 BILLING CODE 4810-AM-P