New Action on No-Action Letters – CFPB Begins Accepting Applications Under Updated No-Action Letter Procedures

The US Consumer Financial Protection Bureau (CFPB) is giving no-action letters (NALs) a second chance. On January 8, 2025, the CFPB issued a policy statement setting forth new procedures for companies to request supervisory and enforcement relief through NALs. The policy statement (the “NAL Policy”) was issued at the same time as a related policy statement setting forth procedures for companies to seek approvals under the CFPB’s Compliance Assistance Sandbox (CAS), which would permit companies to rely on certain statutory safe harbor provisions. Both policy statements reestablish programs that had been established in 2019 and rescinded in 2022, following what the CFPB determined were potential abuses and other challenges in connection with the programs. The new policy statements incorporate updates that the CFPB indicates are intended to address those issues and to otherwise improve the effectiveness of the related programs.

Under the NAL Policy, the CFPB may issue NALs stating that the CFPB will not take supervisory or enforcement action against the recipient under the particular facts and circumstances that serve as the basis for issuance of the NAL. Although NALs represent an exercise of the CFPB’s discretion, the NAL Policy makes clear that NALs are not binding on state enforcement authorities or private plaintiffs seeking to enforce relevant provisions of federal consumer financial laws. Under the NAL Policy, the CFPB expects that any new NAL will, among other things:

• Be limited to the identified recipient’s product offering described in the NAL, and not to other offerings or aspects of a related product or service.
• Will state that the NAL does not express any legal conclusions regarding the meaning or application of the laws within the scope of the letter or constitute an endorsement by the CFPB of the product or service addressed in the letter.
• Require the recipient to consent to the CFPB’s supervisory examination authority, if the recipient is not already subject to such authority.
• Require the recipient to apprise the CFPB of material changes to information in the recipient’s application, or to information indicating that the aspects of the product offering described in the application are not performing as anticipated.
• Will state that the CFPB will not make supervisory findings or bring a supervisory or enforcement action based on the recipient’s offering of the product or service under the laws identified in the letter or seek retroactive liability for the conduct covered under the letter after its expiration or termination. If the issuance of the NAL does not comply with the Administrative Procedure Act or the recipient’s failure to substantially comply with the letter in good faith results in consumer harm, the CFPB indicates that it could bring an action to impose retroactive liability.
• Expire after two years, although the NAL may be terminated at any time by the CFPB and, as noted below, will automatically be rescinded if the recipient’s product offering changes so as to no longer fit within the description in the application and as described in the NAL.

Any new NALs issued under the NAL Policy will be subject to certain “Conditions to Promote Innovation, Competition, Ethics and Transparency,” which will be incorporated into each individual NAL. These conditions include:

1. Applicants must establish a market problem, in the form of an unmet consumer need (not including claims that the NAL would simply increase access to the applicant’s product or service), that the new financial product or service solves, and must articulate the benefit to consumers that flows from the CFPB permitting the product or service to be provided without compliance with the law at issue.
2. The CFPB will not approve a NAL on a topic for a single firm. In particular, the CFPB will reach out to the applicant's competitors and invite them to apply for a NAL on the same topic. As noted in the NAL Policy, “the NAL program must not tilt the competitive playing field by picking winners and losers in markets, or appearing to do so.”
3. NAL recipients will be prohibited from marketing or promoting the fact that their product or service received a NAL.
4. NAL applications will be posted publicly for a 60-day comment period. The CFPB acknowledges that it is bound by existing law restricting the disclosure of confidential information.
5. The CFPB will generally not consider applications from former CFPB attorneys representing companies as outside counsel.
6. The CFPB will not consider applications from companies that have been the subject of an enforcement action involving violations of federal consumer financial law in the last five years, or who are subject to a pending enforcement investigation by federal or state authorities.
7. NALs will automatically be rescinded when the recipient materially changes its product or service so that it no longer fits the description provided in the application and described in the NAL.

The Compliance Assistance Sandbox policy contains similar parameters and conditions for CAS approvals and related terms to those summarized above for the NAL Policy. 

The NAL Policy (and the related CAS policy) were issued as general statements of policy that are exempt from notice and comment rulemaking; both policy statements became applicable upon their publication in the Federal Register on January 10, 2025. In the two-year period when the CFPB previously accepted applications for NALs, the CFPB’s granted NALs addressed only four products and services, one of which the CFPB ultimately terminated. With the restrictions in the new NAL Policy—including those requiring supervisory jurisdiction, the requirement that the applicant establish a market problem solved by the applicant’s new product or service, the prohibition on marketing the receipt of a NAL, and limited two-year applicability, to name a few—it remains to be seen whether companies will place value on a CFPB NAL under the NAL Policy.

In addition, because the policy statements are not implemented through typical rulemaking processes, they may be rescinded by the CFPB at any time. While the NAL Policy and CAS policy are generally similar to the policies established in 2019, there is no guarantee that the incoming administration will continue these policies in their current form. Even if NAL applications are submitted prior to a change in CFPB leadership in the hope that quick application increases the chance of NAL issuance, it is reasonable to anticipate the CFPB under the new administration may pause and review any policies issued by the CFPB under Director Rohit Chopra before continuing those policies or taking action under them. Thus, it could be a while before we know the impact of this NAL Policy and the related CAS policy.