CFPB Proposes Disclosure Sandbox

Inside Subprime: Oct 22, 2018

By Grace Austin

The U.S. financial watchdog agency’s steps toward a streamlined trial “disclosure sandbox” process is receiving praise from consumer trade groups and criticism from left-leaning attorney generals. The new proposal from the Consumer Financial Protection Bureau would allow financial institutions to test out disclosures for services and products for a short period of time without government oversight.

The September shift to the new disclosure sandbox is designed to rework the old policy, which was first enacted in October 2013 but didn’t see a lot of use. The CFPB still hasn’t approved a disclosure program. It’s all stemming from the newly created Office of Innovation in the CFPB, replacing the former Project Catalyst.

Comments on the proposal were due in early October, with the idea of receiving positive feedback from trade groups like the American Bankers Association, according to a Law360 article.

Revisions include items like simplifying the application and evaluation for getting a waiver from the CFPB to participate in the sandbox. The application restrictions would loosen, and applicants would receive a yes or no from the CFPB within 60 days. The CFPB also highlighted the importance of the “quality and persuasiveness” of the application.

The proposed changes would also establish a 2-year timeframe for testing disclosures, and trade groups would be able to apply on behalf of members. Still, trade groups said they were weary of liability during the trial; the new proposal would expand some of the 2013 rules, but those groups would like those changes to go further.

Several Republican attorney generals from Western and Southern states sent comments supporting the new proposal, according to Law360. But Democratic attorneys general from Illinois, California and 10 other states were less enthused. They sent comments suggesting that the trial disclosure sandbox could be a way for companies to get around current disclosure requirements.

Consumer advocates also fought back against the proposal, saying it would exceed the scope of the CFPB’s jurisdiction and would weaken consumer protections from predatory products like payday loans. “The new leadership unfortunately has established a tendency to weaken and revamp procedures that undermine consumer protections,” said Christine Hines, legislative director of the National Association of Consumer Advocates, in an email to Bloomberg Law.

For information on predatory payday loans, check out all of our Subprime Reports.

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